This week, home prices are dancing the part of the White Swan, with the Standard & Poor’s/Case-Shiller index showing the average price of a single-family home in the 10-city composite index up 1.1% in May when compared to last year. The 20-city index also grew 1% year-over-year, beating S&P’s own forecast of growth in the 0.7% range. But it’s too soon to break out the dancing shoes. All one needs to do is drive through any newly-minted housing development to see price depreciation has  taken its toll on neighborhoods and lifelong investments. A few years ago, I started following home prices in an upscale North Dallas newly-built town home community. In 2006, the average two or three bedroom was selling for $270,000. Today, one of those homes is priced at $150,000. Another smaller, more lived-in town home in the same community is selling for as little as $127,000. When buyers see home values go from close to $300,000 to $150,000, they are likely to question not only the price today, but the price of yesterday. Was the image of how high in value the home really was illusory from the get-go? And how much further will it fall? I can only imagine the feelings of those who danced in the up market and found themselves almost $100,000 upside down. But when one makes a choice, they do assume the risk. And this realization that the wrong choice at the wrong time with no real balance in housing inventory is keeping consumers away — no matter how much more affordable the market looks today. Then again, can you blame the potential homebuyers? If they’ve been following home prices for the past five years, they have witnessed tens of thousands of dollars shaved off values. Some professionals in the market have thrown another wrench in consumer confidence by suggesting prices in certain markets could fall at least another 10%. It seems a dramatic crisis in confidence permeates the whole scene and has captivated the audience. In finance lately, everyone talks about the Black Swan – the unexpected happening that turns everything on its face, sending us scrambling to regain our balance. But we often forget the White Swan had a significant role in the famous ballet, Swan Lake. In real estate there also is an unseen, unspoken balance that must exist between building, buying and selling — just as the Black Swan balances out the White. The White Swan is not known for acts of brazenness or an uncanny ability to inspire through the illusion that every sale is a good sale and every newly constructed home has a buyer. A white swan, rather, is defined by precision, constraint, choice and wisdom. Was the market constrained when it overbuilt?  Was it concerned about the true demographics of the nation when upscale home after upscale home was constructed to meet the demands of a population that today seems illusory? The reality is the Black Swan is the star of every show – it’s the dangerous bird that flaps its wings, creating fear and awe at the same time. The White Swan is the voice of reason that constricts movement in the market not by regulation or legislation, but by the execution of financial principals that are implemented through the actions of wise buyers, sellers and builders. Many see the White Swan as boring, which is why there is not a movie named after her, but she is the safe bet that creates beauty and balance. Rather than chasing the Black Swan and seeing doomsday around every corner or waiting for the next illusory bubble, perhaps it’s time for the White Swan to take center stage … at least in mortgage finance. Write to Kerri Panchuk.

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