Let me begin by saying I’m not a Ben basher, on the contrary I like the Fed Chairman. But last month’s announcement that he intends to keep rates low for the next two years was nothing short of disastrous for the housing industry. Ask yourself this, what does, “For a limited time only”, “Hurry before this event is over” and “This is a once in a lifetime opportunity” have in common? Yes, car advertisements but what else? Urgency. Urgency is one of the cornerstones of selling. The ageless super pitchman and motivational speaker Zig Ziglar called it the “Fear of loss” close and it goes something like this: “If you don’t buy it today, it might be gone tomorrow…” Pretty simple, pretty basic, pretty effective.
So it is that the Fed Chairman who may understand economic history and theory better than just about anyone, inadvertently stalled the housing market at a time when we could least afford it. Think comeback football – your team is down by two touchdowns and doing everything they can defensively to stay in the game, only to have the quarterback fumble or throw an interception. It’s disheartening for sure and devastating to the effort at hand. When flawless play is required, you can’t drop the ball, and Bernanke dropped the ball by taking away the sense of urgency.
We have been hearing and saying that rates are at historic lows. I can tell you that I have personally told every buyer client for the past 3 years that a 1% rise in rates is equal to or even more costly on a monthly basis than the benefit of 10% decline in value, which is true. This is also the “Fear of loss” close; the lost opportunity to take advantage of historically low borrowing costs. “Fear the rise in rates, buy now!” I told my clients this because I make my living selling homes and “closing” is the final stage of selling. I also told my clients this because I believed it to be true.
In selling you begin by asking questions; identify the problems or needs, then find solutions (a true salesman is a problem solver, not a product pusher); you build a list of compelling reasons why a decision makes sense and finally you close the deal and urgency is a key component to closing the deal. Most people fear making a decision, especially one the magnitude of buying a home, and especially now when clearly there is concern that prices could deteriorate further before getting better. In this environment, many would be home buyers are electing to sit on the sidelines. But what if the risk of higher rates were greater than the risk of price deterioration? Buyers would have a greater sense of urgency. However if there is no risk of higher rates anytime in the near future, then there would be little risk in waiting to see if the market makes a move in either direction. If every buyer waits to buy, declining prices are inevitable.
So it is Mr. Bernanke, that with is no rate increase fears for at least two years, this important arrow in my sales technique quiver is gone and I am left with the pursuit of perfection. I have to find the perfect home, at the perfect price, or perfect timing because of school or job. And as we all know, the pursuit of perfection, no matter how noble, is often one of futility.