Seth Godin read the same New York Times article yesterday that I did (though it was syndicated to a different newspaper - the content is the same - Your home as a piggy bank? Not anymore) and came up with this insight - "it's up to the Real Estate Marketers to get us out of the SubPrime Mortgage Mess (see subprime lending, James J. Cramer's Bloody and Bloodier sub prime crisis)!
I don't believe that marketing will fix hundreds of billions of dollars (perhaps a Trillion Dollars worth) of almost worthless ARM Subprime Mortgage Securities that no one now wants to trade or buy?
I like the idea - but it's one thing to apply it to a Ferrari that people aren't defaulting on (in huge numbers) and a housing market where the value of the house is going to go down in California but close to 30%, adjusting for inflation.
"...The shared belief about real estate might be in danger. The facts changed this month for the first time. The question that those that market real estate have to answer is this: will people treat a bounce in real estate the way that they think about a drop in the stock market (a chance to profit) or will it lead to a long-term reevaluation of what it means to own a house?
It's interesting to note that insurance on a Ferrari isn't as expensive as you think. That's because fixing a million dollar Ferrari doesn't cost nearly a million dollars. It's the serial number that you're buying--the right to sell that car later for a profit."
I believe there's a role for real estate marketing - to make sure people still see the value of owning a home (it appreciates in value ...even if it does go down somewhat over the next 3-6 years) but it's hardly the solution to a much more complex problem - what are we going to do with all those worthless securities or the glut in real estate that now exists?
It's not like there's 50,000 more Ferrari cars than buyers for them - or the Ferrari value is going down daily because those who have Ferrari's took out loans whose interest appreciated too quickly for them to make monthly payments on it.
So, the idea is good, but how does the Real Estate Marketer make sure people think the houses are still a sure security blanket when ......more and more evidence is being produced to show they're not.
Not everything is a marketing problem. In fact, most often what are expressed as marketing problems are not. Sub-prime mortgage securities traded at only a few basis points above treasuries. People forgot how to price risk. We will all now be treated to a lesson in risk. Thank you for making a rational observation.
Posted by: Jeffrey Eisenberg | August 26, 2007 3:52 PM | Permalink to Comment