The cheese is moving. Are you?

 

I’ve been having some interesting conversations with investors, agents and even appraisers about our current market. And I’d like to tell you some things I’ve gleaned from those talks. But before we get there, I want to remind you about a book I told you about in a column titled “My cheese moved … again” from 2024. Here’s an excerpt from it:

 

“Today I’d like to tell you about a little book that if you have never read, you really should. It’s called ‘Who Moved My Cheese?’ by Spencer Johnson. It’s a tiny book that packs a huge amount of insight into how people should deal with change, and it’s in the form of a fable.

 

The story starts by identifying four characters who spend their time exploring a maze trying to find cheese. The first two are mice named Sniff and Scurry. The other two are “little people” named Hem and Haw. To begin with, they spend day after day running the maze and only finding small amounts of cheese until one day, they all find a huge store of it at cheese station C.

 

At this point the story focuses on Hem and Haw. They view that store of cheese as ‘their’ cheese. They move their families to that location, set up their lifestyles around it and eventually begin to take its never-ending supply for granted. At this point they kind of get fat and happy, which leads to complacency and finally an entitlement-type mentality. Then suddenly, at least to them, the cheese is no more. When this happens, Hem gets upset, turns red-faced and even yells, ‘Who moved my cheese?,’ which is where the book gets its name.

 

Now, Sniff and Scurry do not get upset when they arrive to find no cheese. Instead, they realize the situation and adapt quickly, running off into the maze to find new cheese almost immediately. Hem and Haw, on the other hand, keep showing up to the same place day after day waiting for “their” cheese to show back up. They do this for so long that they started becoming weak from not eating.

 

Eventually, Haw suggests they go looking in the maze like they used to so that they can find new cheese. Hem, still clinging to his old ways, will not budge. He wants his cheese back. He “worked hard” for it. He deserves it.

 

Out of both fear and loyalty, Haw stays for a while, getting weaker and weaker until finally he decides he has to leave his friend, face his fears about change and inadequacy and go searching for new cheese.

 

As he goes along, he learns to laugh at his mistakes, that most of his fears were unwarranted and that he is actually having a lot of fun out in the maze searching for new cheese. And finally, he finds a new cheese station with a larger supply than the original one. And when he gets there, he’s greeted by his two friends, Sniff and Scurry, who had been there for a while.

 

The moral of this story is that change happens. You have to anticipate change, look for it to happen and adapt quickly once it does. And never get complacent because the cheese keeps moving, and you need to as well.”

This little story is important for us as real estate investors because our cheese has begun to move in the buy and resale markets. To quote one of the appraisers I was talking to this week, “Sellers are still wanting 2022 pricing and terms while buyers are wanting 2012 prices.” What the appraiser was explaining is that the resale market is shifting downward. Sellers are expecting to list at appreciating prices with quick closing and little to no seller concessions while buyers are now shopping for lower prices because of the higher interest rates, attractive terms with mint-condition houses. In other words, buyers are now shopping for a deal instead of fighting for what they can get.

 

This is causing longer days on market in our area as well as price reduction across the board as we move from a sellers’ market  — where the seller has the upper hand due to low inventory and high demands — to a buyers’ market where the supply of housing is higher but the number of buyers are lower.

 

Now, what do we need to do to get houses sold? Right now isn’t the time to stand still. The old way of pricing and selling isn’t going to be effective. I.e., you’re not going to be able to use 6-month-old comparables to figure out what your after-repair value (ARV) is going to be. Because it’s going to be lower than that.

 

If you are buying from wholesalers, be aware of that fact. Because they’re looking backwards to tell you what the ARV will be in the future. And they’re wrong. You’re going to have to keep your eye on trends to adjust for things as they move downward. That’s going to take some projecting, and you’ll need someone with local current knowledge to help you make that decision. Not someone behind a computer in another state.

And I’ll be honest, trying to project downward makes flipping sound pretty risky right now.

Next, you can’t keep doing things like you were doing 6 months ago. You have to adapt to make the houses that are sitting on market right now more attractive. That means better prices, better finishes and seller concessions.

 

From what I can tell things have been changing for the past three to four months. Are you standing still like Hem, or did you learn from Sniff and Scurry — or at least Haw — and start adapting quickly? I want you to realize the cheese is moving and ask yourself, “Are you?”

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.