Recently, I have been searching for an automobile to replace my current 1990 Volvo Station Wagon. When I speak to people about this search I often hear about how “this is a great time to buy a car”, the economy is terrible and buyer power is at an all time high. Operating under this assumption, I made multiple visits to various auto dealers, assuming each time a great deal awaited me. But to my surprise and utter frustration, the fabled deals did not exist. Instead I encountered four letters which I thought would be of no value in this climate: MSRP.
In an economy where GDP is shrinking and unemployment is going up, how could MSRP possibly matter? As far as I understood, “MSRP world” went away about 2 years ago and we are now living in something called “discount world”. But this fact did not resonate with dealers; they were intent on getting close to their MSRP value.
When I mentioned this to a co-worker, he exclaimed that the same thing was currently hampering commercial real estate. Buyers and sellers were living on different planets, each with their own set of prices. For proof you can check out this report from CA Real Estate Journal. The divide between the two is eerily reminiscent of those middle school dance scenes we see in movies, where the boy and girls stand on opposite sides of the room, each waiting for the other side to come to them. Likewise, you can imagine buyers and sellers standing on opposite sides of a room, nervously eyeing each other, looking for some sign or signal that the other side may be willing to close the gap and concede to their price point.
Of course in the movies eventually some bold individual breaks the ice, causing a chain reaction whereby both sides meet nicely in the middle. So when will that happen for commercial real estate? When will we find common ground? Well of course if we knew that, there would be no issue, our situation would be resolved. As it is, we must linger in uncertainty, standing on opposite sides of the price spectrum, waiting for that mutual resolution. Until then, I’ll just keep low-balling dealers.
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In an economy where GDP is shrinking and unemployment is going up, how could MSRP possibly matter? As far as I understood, “MSRP world” went away about 2 years ago and we are now living in something called “discount world”. But this fact did not resonate with dealers; they were intent on getting close to their MSRP value.
When I mentioned this to a co-worker, he exclaimed that the same thing was currently hampering commercial real estate. Buyers and sellers were living on different planets, each with their own set of prices. For proof you can check out this report from CA Real Estate Journal. The divide between the two is eerily reminiscent of those middle school dance scenes we see in movies, where the boy and girls stand on opposite sides of the room, each waiting for the other side to come to them. Likewise, you can imagine buyers and sellers standing on opposite sides of a room, nervously eyeing each other, looking for some sign or signal that the other side may be willing to close the gap and concede to their price point.
Of course in the movies eventually some bold individual breaks the ice, causing a chain reaction whereby both sides meet nicely in the middle. So when will that happen for commercial real estate? When will we find common ground? Well of course if we knew that, there would be no issue, our situation would be resolved. As it is, we must linger in uncertainty, standing on opposite sides of the price spectrum, waiting for that mutual resolution. Until then, I’ll just keep low-balling dealers.
