It’s natural to want to compare what’s going on in today’s economic climate to what happened during the fourth quarter of 2008. During our Cincinnati Best Ever REI Mastermind webinar, Peter Chabris, owner of The Chabris Group, joined us to give us his thoughts on this subject and he admitted that it’s scary.
“It was horrible. There was fear, for sure, just as there’s fear now,” said Peter. “I think the big difference is that in real estate, there were a lot of people who felt like it wasn’t going to impact real estate as much as it did.”
Since this is happening in real time, it’s difficult to make comparisons but Peter points to two very distinct differences between 2008 and today. Peter points out that since the recession, the country has had a completely different emotional mindset when it comes to real estate. The years leading up to the crash were filled with greed, from the loan originators all the way down to the consumer and there was denial in 2008. Furthermore, this time it’s different because inflation, interest rates, GDP expansion and other economic fundamentals had been strong up until the pandemic hit.
What Peter is paying closest attention to right now are lead indicators. Lead indicators are when someone expresses interest in real estate, gets qualified, and then chooses to enter the market at the moment. Lately, his lead indicators have pointed to a pretty steep drop off of activity.
“Our team’s conversion rate is about 4%, meaning, on average, for every 20 – 25 people we talk to, one will agree to work with us to purchase, sell, or invest in real estate. In the last three weeks that has dropped down to 1.2%. So, that’s a lead indicator of future demand.”
Peter also believes there is indication that buyer activity is waning and within 2-3 weeks, we’ll see a corresponding shift in prices throughout the market.
Check out this clip of Peter’s interview with our REI Mastermind host Slocomb Reed.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.