June 2009
Community Paper
copyright ©2009 by Community Paper College Park, Inc. All rights reserved.


Top 10 Reasons to Stop Reading Top 10 Lists
by Mike Derenthal, Derenthal Realty Group and College Park resident


I got a phone call from WKMG Local 6 a few weeks back. They asked me to comment on a recent magazine article entitled something to the effect of “The Top 10 Cities of Fastest Falling Home Prices.” The piece predicted Orlando housing values would fall by another 50%. Yes, you read that right – 50%, as in HALF. It got my attention too.
I don’t know what surprised me more - the extremity of the prediction, or the fact that someone felt my thoughts on it might actually be newsworthy. Oh well – nothing like a slow news day to give me my 30 seconds of fame, right?
    The article in question was from a recent issue of Forbes Magazine. Their analysis was based on factors such as the current inventory of available homes, availability of financing, absorption rates, and employment stats.
    These numbers were supposedly massaged in a way to predict how much further values would drop in major metropolitan areas across the United States. And not only does our own City Beautiful top the list at # 1 – but our once proud Sunshine State supposedly has the dubious distinction of being home to the other top three areas of “Fastest Falling Home Prices” (Miami, Jax, and Tampa came in at 2, 3, 4 respectively.)
My initial reaction to this kind of stuff? Hoooey!
    Don’t lure me in with a sexy headline of the latest, greatest, Top 10 List of… whatever it is you’re talking about… just to get my attention. After I did a little research, I realized that Forbes Magazine comes out with a new Top 10 list of something-or-other, just about every 10 days.
    As David Letterman figured out many years ago – people can’t resist a good Top 10 list. You can run an honest headline like “Statistics Predict More Uncertainty In Housing…” and Y-A-A-A-W-N…. it won’t cut the mustard these days when it comes to generating magazine sales or increasing click-through rates on websites.
    But we all ABSOLUTELY LOVE a good Top 10 list. This idea is as old as Moses himself. And have you ever noticed that when you read these Top 10 lists online, they never present a concise list (on one page) of whatever the heck it is they’re talking about? Instead – they’ll position it in a nice little “java-enabled” window that refreshes every few seconds with the next item on the list, along with… what do you know… a new advertisement immediately adjacent to what you’re reading.
    In other words, from the online media’s perspective, a Top 10 list is nothing more than a means of getting you to look at 10 times the advertisements that you might otherwise get with a straightforward article.
    Forgive me for this rant, but I think its important to remember that just about anytime you see “news” in the form of a Top 10 list, that it should perhaps be taken with 10 grains of salt, or at least 10 times as much scrutiny.
    But I don’t get paid the big bucks to ramble on about this kind of stuff (actually – I don’t get paid small bucks for it either). You are reading this article because you are either in my immediate family or you’re curious to get my thoughts on the idea that Orlando housing values could drop by another 50%.
    Here’s what I told Erik von Ancken at Local 6: I think values will continue to deteriorate in many of the extremely distressed neighborhoods on the outskirts of town. I think values here in College Park and other established neighborhoods could soften further, but nothing like what is happening in the distressed neighborhoods that hold no equity. And an across-the-board drop of 50% in values is simply too extreme in my opinion (but it does grab headlines and increase ad revenue).
    Keep in mind the things I repeat like a broken record: individual neighborhoods and particularly different price segments within these neighborhoods, often behave contrary to each other. We’re seeing that right now here in College Park. If you have a $250k house for sale (THAT’S PRICED AND MARKETED PROPERLY) you are seeing a ton of activity right now. If you have a $600k house on the market right now, you may be reading through your homeowner’s policy to figure out exactly what qualifies as insurance fraud.
    I’d love to tell you how to time the market, but if I knew how to do that I’d be writing this article from my yacht in Bahamas (and I ain’t got no yacht in the Bahamas…)
In the mean time my Top 4 pieces of advice remain: 1) obey the fundamentals, 2) don’t over-leverage yourself, 3) settle on a great location first, and 4) pay the right price for the house that suits your needs. That’s really all there is to it.

Feel free to drop me an email at mike@derenthalrealty.com.

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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