Think back to the last time you used a really great product or service. Perhaps it was your first encounter with an iPod, which buried forever the notion that you’d “click” a fast-forward button or “insert” a compact disc into something. Maybe it was the experience of sliding open a new Google G1 cell phone that caused your face to light up along with the touch screen. Recently, it was the all-wheel-drive system on my Acura RL. The day started out rainy and gray, but I was determined not to let it wear me down. Even with a light drizzle, I opened the sunroof and blasted the radio, and pushed the throttle to a fun-even-without-the-sun pace. The RL is one heck of a ride, so much fun, sometimes, that you frequently look in the side mirrors to see if it has wings. Of course, with that kind of power, it’s a good thing the navigation computer reminds you that your exit is coming up in a quarter of a mile. Usually, I wish it would tell me a half-mile in advance, especially when I’m driving at Star-Trek speeds. No matter, however, because even if you hit the exit curve at a “you’re gonna be in trouble” speed, the all-wheel drive system kicks in and takes you ’round the bend tighter than a roller coaster. It was one of those product moments that makes you yell, “That’s (Bleeping) Awesome!”
Peter Drucker noted that when the general perception of a situation switches from “the glass is half full” to the “glass is half-empty,” major innovative opportunities were possible. The change in perception usually starts with the consumer, not the industry. It rarely reflects a real change in the facts, more than what the facts have come to mean to the consumers. For example, today represents the best time in fifty years to purchase a home. The stars are perfectly aligned to purchase low, borrow low and maintain low monthly costs. Most consumers would be long-term winners with a real estate purchase today. Yet the perception of real estate in general has become “half empty” in the minds of both buyers and sellers. Consumers no longer associate real estate with happy thoughts, even if they recognize it as a sound financial investment. That perception change is profound. And it’s keeping them on the sidelines. What can the real estate industry do, then, when even if we lead the consumer to half-empty glasses of water, we cannot make them drink?
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It’s true that I’ve never agreed with the National Association of REALTOR’S Chief Economist Lawrence Yun. It’s nothing personal; but it’s everything professional. I just don’t understand why today’s economists can’t figure out why inflation is bad. Of all of the complexities of economics, inflation is pretty much the easiest to understand. We’re not trying to figure out the reasons for irrational exuberance or call the bottom on the stock market. Inflation is simply the slow and steady erosion of a currency’s value. And with a devalued currency comes devalued everything. Including housing. Yet for some reason, NAR’s chief money-thinker is still wishy-washy on whether inflation – triggered by 3 trillion stimulus dollars – would be good or bad for home ownership. I guess it depends on whether you want to turn American into a banana republic or not.
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Matthew Ferrara spent the morning with Michael Saunders and Company recently, helping this market-leading firm leverage the latest sales, marketing and technology tools to reach for the future. A prominent member of Leading Real Estate Companies of the World and a four-decade market leader in Florida luxury real estate, Michael Saunders brought more than 400 agents, managers and staff together for a “Re-Invent Yourself” event that featured a special version of our Secrets of Social Networking to launch the day.
Once again, as REALTORS converged last week for their MidYear meetings in Washington, D.C., the forces of stability and sameness were present, coming up with last-gasp-ways to protect the tattered vestiges of Real Estate, the Last Generation. New white-papers and shiny-Powerpoint presentations proclaimed the “we-can-renovate” mentality of Gen 2.0 MLS systems struggling to enter the 3.0 version of the industry. Much like Google and Yahoo – who refuse to admit their advertising model is crumbling in the face of social networks – MLS’s are trying one last time to burnish a brand that has already worn off the chrome. What’s left underneath are the mostly rusted pieces of a structure whose time has come and gone, even if some REALTORS still believe the Comparables Book will someday make a comeback.
It’s time for the real estate industry to implode the MLS model so they can build something better suited to the next generation of real estate practices. Read more…
Fans of Spencer Johnson’s book will recognize the theme in today’s column: Something has definitely moved in today’s real estate industry. For decades, the industry built by Baby Boomers for Baby Boomers has essentially run the same race through the maze, finding the cheese almost every time. Periodically, the cheese was moved or a wrong turn was taken, but never very far and never a dead end. Usually, within months, the industry figured out how to navigate new turns and once fattened themselves again on the rediscovered cheese. Yet could a recession have pose a different problem to this “re-routing strategy” for managing change?
What happens to an industry when it isn’t just the cheese that has been moved but the entire maze?
Why is it impossible for anyone – REALTORS, banks, media or economists – to accurately describe what is going on in the marketplace? If buyers are going to feel confident about moving back into the market, we should expect all of these groups to be providing clear, verifiable market facts that back up the “best time to buy” sloganism thrown at consumers. Yet most of the punditry has left consumers – especially skeptical Gen X’ers and impressionable Gen Y’ers – more confused than ever. And with a few trillion extra dollars sloshing around the economy and gas prices already moving higher nationwide, time is running out to make the clear-minded case that, by next year, real estate will be back to a “bad” investment once inflation roars back. Subtract the free-Federal-money for first-timers and add in a few million FHA loans that are about to default, and we’re actually on the verge of destroying the near-historic affordability levels once again.
Instead we’re left with “pay no attention to the man behind the curtain” proclamations from questionable analysts, partial data, a local appraiser and a journalist. We’d probably be better assessing market conditions with a Barney-Frank-roll-of-the-dice.
If it’s true that exceptions aren’t the norm, why is the real estate industry built around them? In almost any other endeavor, exceptions are considered undesirable: unintended effects, accidents, unexplained occurrences. Not part of the plan, and generally bad. Exceptions are usually damaging – to the business plan, the mission, the consumer experience. To the bottom line. Since the industrial revolution, most businesses have benefited not from lucky exceptions, but from planned consistency. Management itself focuses on creating consistency of outcomes to maximize resources. Profits come from maintaining predictable, repeatable, desirable outcomes. Consumers pay for an expected outcome, not a surprise ending.
No wonder, then, that real estate professionals struggle for profits, when their management strategies focus on outcomes as exceptions, rather than rule.
Real estate is a tricky business. At some point, you’d expect things to “mean” what they say. Yet we’re an industry that can’t even decide what exactly constitutes a “bedroom.” In some markets, it’s a broom closet; others extend the definition to unfinished attics. Of course, small dens and breakfast nooks in big-city condos qualify as bedrooms as long as a curtain divides them from the next room. Funny stuff, but it gets more serious when you try to apply these definitions to market data. If we can’t decide what certain market data means, how can we plan a business strategy around it? When current listing prices are sketchy, foreclosures skew sold data and “for sale by owner” inventory makes it impossible to determine meaningful absorption rates, wouldn’t it be nice if we could just pin down the meaning of something simple – like “Days on Market”?
Ironically, even that market metric is sorely misunderstood.
Yesterday, President Obama announced he was prepared to break the law. After blaming the senior debt bondholders of Chrysler for pushing the company into Chapter 11, he sanctioned a plan to abrogate their covenants and force them to take pennies on their loaned dollar. No matter that their bonds were secured by the company’s assets. The rights of “speculators” are easily swept aside in populist frenzies. Notice how the President didn’t blink a teleprompter-eye when he stood with the union workers, the families and the communities – while transferring to them 55% control of the company assets. American lenders filled with American workers who loaned American savings to Chrysler for decades were expected to simply take massive losses. Apparently it’s no longer American to repay one’s debts. The Bully Pulpit declared “needs” more important than “rights.” And since mere mortals barely understand all this financial jargon, especially REALTORS, the rule of law was quietly killed. Contracts, it seems, aren’t worth the paper they’re written on in America.
REALTORS had better beware.
