Dan's Papers - May 15, 2009

For a long time, people in real estate said, "The sky's the limit." Then, in 2007, when prices leveled off people in real estate said, "It's a correction." In the spring of 2008, when prices fell a bit, it was called "the bubble," which is a bit more complicated.

The bubble meant that the prices had gone up one side of the bubble and down the other to where they were before. So the top was called that, the bubble. But the other side was still pretty good, just on the other side of the top. Then the bubble popped.

At the present time, people in the real estate business are looking for "the bottom." The bottom is that place where prices stabilize, that is to say, they have come down to there on the bottom, and thus at the bottom, the only place they can go is back up. Finding the bottom is good. Finding the bottom is good even if it stays at the bottom for a while. Bottoms create confidence.

It is good for another reason too. And that is, the sheep that own the properties - yes they are sheep - are sitting on their hands (or hoofs) right now, unsure of where the bottom is. When the bottom is found, they will slide their hoofs out and, now with confidence, begin to cheer and write up listings for their houses and go out looking for houses and suddenly the market will come alive again. By definition, with the bottom meaning the bottom, it means that if you buy now you will be able to sell for more later. And if you sell now, then you could buy somewhere else now, maybe real quick, and be poised to make a sale later as the market lifts off from the bottom. That's if the bottom doesn't hold and we go down toward a new bottom.

Remember the good old days? Here was the café talk. "I bought my oceanfront house in 1971 for $25,000. Now it is worth $25 million. Smart, ain't I?"

Ever hear this? "I bought my oceanfront house in 1971 for $25,000. Last year it was worth $25 million. Shoulda sold. Now, it's bupkis. Or at best, who knows?"

You don't hear that. Which is another reason why we need the bottom.

"I bought my oceanfront house in 1971 for $25,000, last year it was worth $25 million and this year it's worth $12.5 million. Ain't I great?"

Yesterday, I went out looking for the bottom. I drove over to Lake Agawam, parked in front of the Southampton Cultural Center, opened the trunk, put on my scuba gear, flippers, flashlight and mask and belly flopped into the water.

How deep is the ocean? How high is the sky? I went down, down and down into the murky waters of Lake Agawam, hoping I could find the bottom. The flashlight was on, but it was not much help. I could only see three feet with it.

Finally, my feet touched, could it be? But no. It was just a ledge. Now I was going farther down and down and down. So then I got scared, turned around and paddled and flippered my way back up to the surface, and arriving there, ripped off my mask and let out a hoooo.

"You look blue in the face?" a friend on shore said.

"I thought I had it," I said, huffing and puffing out of breath. "But no."

"It's down there somewhere. I just know it is."

"We'll come back tomorrow."

Do the math. If there were 100 $1 million sales in 2007 and the commission was six percent, the brokers got very, very rich.

So now, if there were 100 half a million dollar sales for the same houses in 2009 and the commission is six percent, the brokers are not very, very rich, but just very rich. It's something. Especially in these hard times we've got to find the bottom to get the market back even if it's just half.