Our transparent real estate market is not perfect, but its efficiency remains the envy of much of the world, writes Beth Friedman.
As Warren Buffett famously said, “Price is what you pay, value is what you get.”
But what happens when the metrics that dictate value are hidden?
We are all consumers of things, and when we decide to spend our hard-earned money on a product, we have the right to know as much as possible before we buy. If you’ve ever considered buying a home, the first things you consider are price and the number of days the home has been on the market. These metrics reveal important information to buyers.
One real estate leader told me that he believes “days on market” and “price fluctuations” detract from value for sellers. Therefore, we do not need to provide that information.
Can that same seller accept that someday he might become a buyer and want this information, or is this short-term approach acceptable now without considering the long-term implications?
Market transparency is important
I contend that this is a big mistake because our markets work best when they are untethered and transparent, even if the indicators aren’t pretty. The number of days a home has been on the market shows that no one should have the power to hide. The market feeds on the truth, so you can’t lie to it and think everything will be fine.
Adam Smith coined the term “invisible hand” of markets, implying that markets work best when consumers are given good information and they act accordingly. Facts are funny little things that exist even if some people say otherwise.
This is a wake-up call for regulators and industry leaders. We need to be careful to be transparent about the lifespan of properties and, perhaps just as importantly, to ensure that everyone has access to properties for sale.
Of course, there are situations in which a house is sold secretly. In some cases, the seller may be in a difficult situation or may be a well-known seller. These transactions will be handled with care and exceptions. But this narrative that the strategy adopted by some housing developers, which emphasizes exclusivity and soft launches, should be applied to existing inventory is just comparing apples to oranges.
When a new building is announced for sale, you probably don’t know when all the units will go on sale, but you have a rough idea of where to look and how to inquire. With private listing networks, unless you’re active within the network, you don’t know what’s on the market, how long it’s been on sale, or even where to look.
With inventories tight nationwide, the last thing you want to do is further segment the market.
Exclusion and opaque metrics are taking us back to a time when consumers were deceived and discriminatory practices were tolerated. Although our transparent market is not perfect, it remains the envy of most international real estate markets due to its efficiency.
You can hide the days it’s on the market and increase your inventory, or you can pretend it’s “off the market,” but it’s still being sold. No matter how you interpret it, truth is non-negotiable.
