• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

A new definition of GROWTH?

Status
Not open for further replies.

Dee Dee

Thread Starter
Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Like the rest of you, I've been giving quite a bit of thought about the phenomenon of growth, particularly when it causes rapid home price appreciation. We've all pondered the 'housing bubble' theories, and the majority of us who are getting first hand experience in rapidly appreciating areas are trying to make sense of it all. The same question keeps popping up....what is driving this growth?

Traditionally, growth has been defined as the result of expansion within a given community. First there would be a broadening employment base, leading to new people moving into the area, then new homes and businesses are built based on the laws of supply and demand.

Now it appears that growth is an industry all by itself, rather than a result of traditionally recognized economic expansion patterns.

In the past 15 years or so, new and influential businesses have sprung up that promote growth. Commission driven mortgage brokers and real estate salespeople, massive corporate-owned home building companies, and large developers, to name a few. Along with these businesses come large coffers of promotional monies, which cover the expenses of large scale media exposure, political influence and, of course, shareholders expecting a return on their investments. Added to that is the fact that we have become a far more transient society than just a generation ago.

In a growth-driven economy, it appears that prosperity is everywhere. Homeowners are thrilled that their homes are appreciating, jobs are readily available due to the influx of newcomers, and the local media celebrates the community's vibrant new economy. There is no room for skeptics...money is growing on trees and the mere suggestion that perhaps the cart (growth) had gotten ahead of the horse (long-term job base) is swept aside and viewed as ignorant and old-fashioned.

About four years ago I took a good look around me and realized that nearly every single person I knew had in some way become financially dependant upon the new local growth industries that had sprung up in the Denver area. The question that kept popping into my head was, how long can growth feed itself? What will happen to all of these people when what has become a major job base, rather than a result of traditional motivating factors, comes to an end?

The answer is rapidly becoming clear. Nearly every family that I know has at least one wage earner who has been laid off or is struggling to keep an income flow. Unemployment figures aren't reflecting those whose unemployment has run out, or who are now working at jobs that are paying signficiantly less than what they used to make. Many are trying to sell their homes but finding that in little more than one single year it has become a buyers market. The number of foreclosures continues to grow. Finally, FINALLY, the media is starting to concede that the party is officially over.

More than a few of the growth industries have already pulled up stakes and moved on, or are in the process of closing out their businesses. Talk about collateral damage...that would be those who got caught up in the frenzy and didn't prepare for the possibility that it would inevitably come to an end.

For those appraisers who are in a rapidly appreciating housing market, it would be wise to pay close attention to what the true economic base is in your area. You can't do anything to change it, but know that if growth is the base industry bringing new people into your area, there will probably be trouble on the horizon.

The only historical precedent that I can think of to compare it to is the gold rushes. Even back then the headlines promoted the newly found wealth. Fortunes were made by the first to stake their claims, and for a period of time prosperous businesses sprung up to support those who flocked to the area. We all know what eventually ended up happening to those who arrived too late, didn't leave soon enough, or didn't recognize that it couldn't sustain itself forever.
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
DeeDee,

You need Greenspans job.
 
Joined
Jan 16, 2002
Dee Dee:

Well written and thoughtful disertation. The current "gold rush" here is over. RE agents here are still boosting list prices by at least 20% without any justification whatsoever. Sellers cannot afford to buy their own homes (which they just purchased 2 years ago). It's a simple matter of affordability. Re agents in areas outside the city (75 to 100 miles) are
telling me their area is now finally seeing a "boom" as people are leaving the city (e.g. Pocono Mountains of PA). The problem is that these people will still need to commute each day (that's a minimum of 4 hours a day just sitting in your car), due to a poor economic base in rural areas of PA.
I hate to see what will happen within the next 6 months.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Like my dear old dad has been saying for years: but what do we MAKE, PRODUCE, or even consume that we REALLY need?

And the small farmers are starving, the big ones are getting owned by Wal-mart via contractual clauses....

What do we DO, Make, build or invent these days?
 

Wally Jones

Senior Member
Joined
Jan 23, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Nice essay, Dee Dee. I especially like the analogy to the gold rush. Our local "gold mine" is furry, has big round ears and a squeaky voice. The power of Mickey is all too evident when I drive over territory that used to be orange groves and fish filled lakes as far as the eye could see. Now the groves have been replaced by sterile subdivisions of block and stucco with barely enough room to walk between the houses and the bass filled lakes have been turned into retention ponds with stagnant green scum floating on the top. The inflated property prices are propped up by selling to investors who lease large homes with pools to Europeans and Asians for three to six months out of the year. Many of the leasees catch on to the idea pretty quick and purchase the home for their vacation get away and lease it to a fellow tourist family the rest of the year. This segment of the market now supports itself and has developed into a huge data base which, if it were located anywhere else, would collapse under its own over inflated values. It's sorta like visiting the Disney World of real estate, where looking at the selling prices reminds you of Fantasy Land. But then I appraise the exact same floor plan back in the real world, blink a couple of times, and the dream is over. Hopefully, the dream will continue for awhile for a lot of folks in our country before the Big Bad Wolf comes a knockin' at the door.
 
Joined
Jan 16, 2002
Lee Ann:

Nothing but scams and shams to make more money. This country has been sold on the corporate idea to consume, consume, and consume no matter how much it cost you (and the cost only isn't in $$).

Sounds like you dad was a wise man.
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
All great points In 95 I said wish the stock market would CRASH so it would Re Adjust itself climbing way to fast to be a true gain, was almost ran out of Town Well if it had readjusted then not as many would be sweating now. I still believe things are gonna get worse before they get better. Happens every few years time for an adjustment. Follow the critters examples put a little away for the tuff times.
 

jtrotta

Senior Member
Joined
Jan 16, 2002
DeeDee

nice; and when the strock market hits 5000 (dow) we can begin to rebuild in all facets of the real life "monopoly game" - we'll all be back at;
START :wink:


8)
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Dee Dee, ...... One clear undeniable truth that fuels the "growth" is the 20% population increase in our state from 1990 to 2000, as per Census data. Went from 5 miliion to 6 million, and you know exactly how that relates when you envision the I-25 corridor from Fort Collins to Pueblo, with Boulder, metro-Denver and Colorado Springs in between. That's a lot of folks and most want a house to own or a place to rent. The mere activity of building and selling or building and renting is all sprinkled with the hype and optimism which has been the tinder fuel for the "growth" engine. --- Go to your local library branch and see if they get the C/S Gazette, look at last Sunday's (Sept. 22nd) business section and all of page 3. The theme topic is "Life in the Bubble", and it discusses prices being stable, inventory levels being high, home's listing for extra months and not getting the higher-dollar offers as "expected" (buyers' market) , and the $1/2-mill. places being "more house" than today's buyer is wanting. The basic theme of the article probably applies quite well in your market too. It is all cyclic....you're seeing it up there and we'll see our cycle here too. Hype, exaggeration and out-of-proportion ramblings affect the mind-set of many for whom we perform our services. I came back to my office to hear a message left from a first-time prospective client. I'll call back tomorrow morning and see what's up. He speculates on needing an appraisal in El Paso county (but leaves me no heads-up as to the address), states the loan amount, and then says property has "appraised-value" of $200,000. ----O.K., sounds like he's already got the job completed ! But, I'll call him anyway and find out what's cookin'. He stepped in it.....and the only way I can help is c.o.d. ! If he offered no appraised-at/estimate "target" to hit then maybe.....maybe, I could consider invoicing, but not now.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks