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It’s Not Over Yet: Housing’s Next Challenges

Posted by on Friday, January 27, 2012 with 1 Comment
Categories: Blog, Featured, rssfeed, Strategic Thinking

The housing industry is showing some small but smart signs of improvement. But could these green shoots get mowed down before they can blossom? Here are four things to keep an eye on.

Some good signs are emerging in the housing industry. Selected markets around the country are stabilizing or experiencing modest growth. Nationally, inventory continues to fall towards market equilibrium. International dollars are helping urban areas absorb inventory and upper-end properties. Investors are gobbling up good deals and mopping up the distressed segment. Baby Boomers are cashing out of suburban homes bought long before the bubble, and taking that money into cities and luxury communities. By many accounts, there are some good things happening.

Brokers and agents are putting the recession to work for them, too, fundamentally altering organizational structures, improving efficiencies and trying new models (like auctions or no longer paying for leads) to drive down costs and drive up value to . While some companies have closed their doors, others are springing up, without the legacy costs – and thinking – about how to sell properties. Little things – like improving standards, diligently pursuing leads and bringing an iPad to a listing presentation – are proving effective in creating opportunities in every market.

All good news. But let’s not let our guard down just yet.

First, significant headwinds remain. High unemployment continues to impede growth, especially amongst younger buyers: 18 to 24 year olds face 18%-plus unemployment, and carry high college debt loads. That is stalling many first-time buyers, even with today’s low prices. Foreclosures undermine many neighborhoods, not just in the sand states. New York will require 8 more years of red tape to clear the current backlog. Throw in underwater (but not delinquent) mortgages, and a usually more mobile workforce remains trapped, unable to move to improve wages and opportunities. Let’s not forget the Federal Reserve, who has announced its intention to artificially undermine interest rates and encourage 2% inflation targets for the next few years. The former keeps credit tight; the latter destroys consumer purchasing power.

These are all serious headwinds that aren’t going away soon.

Which means you have to keep them factored into your business plan for 2012 and beyond. There will be plenty of opportunities in the marketplace, but you must remain realistic even as you become more optimistic. That means keeping at least one eyebrow raised when you hear the media start repainting the picture. It’s an election year, after all.

Still, plenty of great strategies exist for this year: Targeting qualified Gen X move-up buyers, tapping into growing rental demand, building relationships with investors using cash, learning the language of foreign buyers, and targeting sellers with decades of equity.

It would be unfortunate if we gave up on our diligent industry innovations and restructuring, simply because a few trends are on the uptick. We’ve been over-optimistic before, if you remember. That earned us a dangerous bubble. If we relax too soon, it might earn us a quadruple-dip in housing.

Specifically, I’m concerned about lending more than anything this year. It could be argued that foreclosures have been baked into pricing already. It might even be argued that high unemployment and current inflation in energy and food prices have been baked into buyer wage expectations. That leaves as the biggest challenge lending options. That means keeping an eye on four things this year:

  • Home prices continue to fall, while jobless claims continue to rise. This will lead to natural reluctance on the part of banks to lend to anybody but the most solid credit, least risk borrowers.
  • Interest rates remain low and flat. The Fed’s interest rate targets are having unintended consequences. By keeping spreads low, banks see little profit in lending to a shaky housing sector. By promising to keep them low for the next two years, they encourage banks to look for better investments for the long term. Big Banks – currently 50% of all housing lending in America – can easily make money in higher return sectors around the globe, with less risk of political witch hunts, too.
  • Major banks are exiting the mortgage market. Bank of America is trying to shed its correspondent lending business;  GMAC/Ally did it last year in Massachusetts. MetLife exited the forward home loan business earlier this year. Credit unions and local banks are not ready to step into that space.
  • The Consumer Financial Protection Bureau is about to regulate the mortgage industry at unprecedented levels through its “Nonbank Supervision Program.” Essentially, the regulatory burden for mortgage brokers is about to get more complex and bigger. That means new costs for compliance, and guess who pays for those? Consumers, of course. Add in forced settlements for pseudo-scandals like robo-signing, and banks have less and less reason to make housing lending a priority.

The point is, we can’t relax our efforts to keep restructuring the housing industry. Especially if we get over-optimistic, and tell ourselves, it’s finally all coming back! It’s not, and it won’t. Even if money fell from heaven, the shift has already occurred in the fundamentals – of consumers, of demand, of debt, of finance, of regulation. If you’re only trying new strategies until things go back you’ve missed the point of the recession.

Stay focused. Keep on track to innovate. Be happy about successes that happen. Grab onto any momentum that’s building. But stick to your plan to work the market of the future, not return to the market of the past. There are real, measurable, specific opportunities in your marketplace. In fact, as the lending headwinds indicate, more structural changes are coming, complete with yet-to-be-discovered unintended consequences.

Most of all: Manage expectations. Your own, and your customer’s. Sellers must remain committed to sensible prices for buyers constrained for credit. Buyers must understand the risks of low-ball offers and further waiting on the sidelines: borrowing costs are prepped to soar. Agents must take the dangers of sitting on unsellable inventory seriously. Brokers must plan carefully for new and multiple revenue streams to thrive in the future.

Water the shoots. Nurture them. But keep an eye on the horizon, because there are still a few more storm clouds to come.

 

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Why Bold Works: Semonin Realtors Makes a Move

Posted by on Tuesday, January 24, 2012 with 5 Comments
Categories: Blog, Featured, Next Generation, rssfeed, Strategic Thinking

We love companies that make bold moves. That’s why the latest move by Semonin Realtors deserves a look by anyone in the housing industry that needs to move forward, if the want to help move in the future, too.

First, a disclosure: Semonin Realtors is a client. Now, let’s move on.

There’s a saying in : When a recovery is in the making, you start to see the green shoots. Little sprouts of growth, in different forms. An uptick in . A perceptible change in consumer confidence. An innovation.

A bold move.

That last one is our favorite, and exactly what we saw last week, when we heard that Semonin Realtors in Kentucky was throwing away the “traditional” real estate playbook for something new. Something so new, in fact, that it represents a very innovative look at the future of real estate. Here’s their plan:

Semonin will close down its “daisy-chain” model of offices throughout Louisville, and move hundreds of its agents and staff to one central campus in the middle of town. It will retain a few strategically placed, small but efficient, satellite centers, mostly for convenient meeting spaces. And it will empower its agents to maintain full market coverage by maximizing mobile technology, rather than office space.

Brilliant!

Don’t be fooled. This isn’t your typical cost-cutting reaction to a recession. They aren’t just shutting down offices to save costs. In fact, it’s probably fair to say that the money saved in leases will be reinvested in technologies, training and customer services. Nor is this simply a “brick and mortar” company going “virtual” because they aren’t simply sending all their agents home. Semonin plans a very active, very functional central campus. One in which technology and people work together, not work apart from each other.

Peter Drucker would be proud.

Actually, you can hear Semonin explain their reasoning for themselves, by watching the video. But if you want to know why we think this is brilliant, read on.

Semonin’s leadership is undertaking a very big mission. They aren’t just modernizing the physical structure of their company: They are modernizing the theory of their company. Specifically, they are discarding the old “outpost” model of multiple offices and creating a central, shared-knowledge-and-experience campus that is the hallmark of every successful business in the world. There’s a reason Microsoft, Apple and Walt Disney all have corporate campuses. Modern management understands this.

In fact, the new “central hub” approach to real estate is long overdue. Only rapidly cycling housing bubbles have sustained the wasteful, redundant and dysfunctional model of multiple office locations over the last thirty years. Except this time, it’s different. There won’t be a big boom to paper over the costs of office space expansion in the future. Moreover, the classic redundancy-model contributed to no end of waste, costs, and under-utilization of talent, and mostly still does.

Semonin’s move to a central campus dispenses with these costly trade-offs for “location” with one bold move.

Working from a central campus lets Semonin rewrite the rules of managing its company and empowering its agents. Now, each contributor can do their best for all of the agents, not just the ones who were assigned to their office location. The best coaches will coach, the best planners will plan, best troubleshooters will solve, and best supporters will help everyone. That’s how companies normally do it in America. (The housing industry has just taken an extra century to accept the division-of-labor theory.)

It will be a boon for agents. Now every agent can catch the infectious enthusiasm of new agents who join the company. Everyone can watch and learn from the best top agents, not just the ones who might have been in your old branch. They can share and support and nurture and grow each other – and act as a company. The rising tide really does lift all boats. Likewise, they can hold each other accountable, to contribute, show up, perform.

They can leverage the creativity of each individual, and channel it into the power of their collective efforts.

Customers should be delighted. Centralization has long proven to create desirable outcomes for consumers: the most important being consistency. Future customers will visually understand the power of an entire organization working for them, not just a single agent in a single office in a single corner of town. When they come to a meeting, they will experience the energy, technology and presence of the total brand. It’s no different than meeting a doctor at his hospital campus, even though they once came to the house with little black bags (yes, I’m old enough to remember).

Finally, let’s not forget that central to this campus model of management is the adoption of mobile technology at the heart of the organization. Semonin’s move doesn’t just encourage its agents to use an iPad, cloud computing and wireless tools: It commits them to it. While the campus itself will be bristling with tools and resources, the model will only work if the agents become proficient at mobile productivity. Having worked with them, I’m confident they can reach do this, and Semonin is clearly investing the time, resources and staff to making it possible for every one of their agents. But it sets a new bar for the industry, locally and perhaps nationally: mobile-empowered sales people are not only the wave of the future, but the standard at Semonin Realtors.

That’s a bright line in the virtual sand.

Is this model for everyone? Of course not. There are many ways to create efficiencies, economies of scale and consistent performances in multi-location organizations. Many will operate quite competitively with multiple offices, using other resources, such as massive scale or strict management structures, to compete in the future landscape. It’s not for everyone.

Yet it would be a mistake to dismiss Semonin’s move as centralization only. It’s more than that; and it holds a lesson for every organization.

It’s optimization. At the heart of the change is an understanding that the future of all companies requires organizations to be structured in ways that let people do what they do best, every day. That structure isn’t always the multiple-office model, which have traditionally asked agents, administrators and managers to do tasks they were neither good at or enjoyed (think: recruiting or training). Going are the days of “jacks of all trades” for managers and agents, not just because there are fewer, but because ultimately they are unprofitable on the scale of today’s industry. There’s a reason why teams are so productive: they understand the division of labor. Semonin isn’t just preparing its people for a more efficient way to sell real estate. It’s preparing them for a more valuable way to contribute to their client’s, their company’s and their own success.

Rather bold, we’d say.

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How Far do Most People Move, Anyway?

Posted by on Sunday, January 22, 2012 with 0 Comments
Categories: Blog, Featured, Opinion, rssfeed

With all the fuss over publishing listings in every nook and cranny of the internet, we thought it might be helpful to ask: Just how far do most people move, typically? I’ve been in the housing industry for more than twenty years. I remember the days when agents picked up their printed black-and-white books every two weeks at the board office. Back then, inventory was divided into tabbed sections of the book; today, it’s browsed with one finger on an iPad. Certainly, much has changed. But a question still remains in my mind: Do buyers in Boston really care what’s for sale in Boise?

Why do I wonder this, you ask? Because every since we started putting housing inventory online, everyone has argued that “buyers must have access to all of the inventory.” At first, I thought they meant “all of the local inventory” which made perfect sense to me. Yet these days, there seems to be some urgent, unmet need in the marketplace for in Seattle to see homes in Secaucus.

After all, isn’t that the huge argument behind having to syndicate your listings to every corner of the web?

Oh, I get it. If you’re a national company, you’d want national inventory on your national site. Certainly. Especially since that one site can attract people from anywhere and pass them along to your local brokers. But does that actually work in reverse? Do local brokers have to put their inventory on every national-scope site, in order to get potential customers?

The only way we can figure out how to answer this is to ask a more simple question:

Just how far do most people move, anyway?

To answer this, I looked at two sources of data. First, NAR’s 2010 annual survey of buyers and sellers, which indicated the typical buyer moved a median of 12 miles from their previous home.

Click to enlarge

It’s about the same as the year before, too. Admittedly, the survey only asked a small percentage of the people who moved last year. So I looked at a larger sample over a longer time period.

I turned to the U.S. Census data (no yawning). Two subsets of the data were instructive: The Annual Social and Economic Supplement (ASEC), which estimates geographical mobility in 1-year retrospective periods over the last 60 years. And the American Community Survey (ACS), a national ongoing study of mobility. ACS samples nearly 3 million households annually, and compares them to the previous year. (I promise, it gets better!)

To compare with the NAR data, I looked at ACS data from 2008 and 2009 (the most recent). Here’s what I found. Of the 48 million people who changed residences in 2009: 

  • 59% remained in the same state they were born in
  • 67.3% of  remained within the same county
  • 17% moved to a different county within the same state.
  • 40% of intercounty moves were less than 50 miles apart.
  • 21% of intercounty moves were 50-199 miles apart.
  • 24% of intercounty moves were more than 500 miles.
  • The total number of transfers between all states accounted for 6.8 million people
So, let’s summarize: the majority of people stayed in the same state, moved less than 200 miles and only 1 in 7 people moved from one state to another.
Let’s keep going: If most people are mostly moving locally, could there be any correlation with the sources of data they are likely to use. Once again, the NAR survey:

Click to enlarge

As you can see, we have a three-way tie. Arguably MLS websites can be considered both local and statewide, but none that I know of are beyond state lines. That would certainly take care of at least 60% of the buyers. A local agent’s website might attract buyers from afar with great SEO, blogging or social media, but NAR’s data also shows that most agents spent less than $200 on their websites, and only 50% used social media last year. So, not likely. We’ll stipulate an exception for dedicated relocation professionals. As for REALTOR.COM, it only attracted 45% of all buyers’ attention. All other websites – like  Zillow, Trulia, or the Wall Street Journal – where long-distance data can be found alongside local data, were used by less than 4 in 10 buyers.

Let’s say the 24% that moved more than 500 miles are still important, which we believe they are. The question is, how do they find homes? The ACS data showed that moving across state lines was highest in 1997 and has declined ever since. Ironically, there were no “national” websites in 1997. Nor is it just the the recession that accounts for falling migration because the ACS data covers plenty of strong economic years.

Arguably, that still leaves a good number of people who might be shopping for a new home in Boise from their current home in Boston. Certainly, they could Google a good local broker’s website in Boise, featuring all of the “local” listings without that site needing to include San Diego and Atlanta. There’s also the interesting fact that, while 40% of people found the home they bought on the web, 35% found it through an agent. The data accounts for both local and long distance purchases. Nonetheless, just about as many people found the home they bought from a person as from a website.

That number surely includes some of those long-distance movers who worked with a relocation agent when visiting the area. 

Peter Drucker used to say, the purpose of is to know the customer so well that your products and services fit them, and virtually sell themselves. These days that means knowing how many bedrooms, baths and dollars they want to spend, then showing that data conveniently online. But for an industry that like to chant “location, location, location” it might be helpful to factor in how far people are moving, too, and make sure it makes sense to worry about your Boise listings appearing alongside the Boston properties.

 


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Precisely Predicting Your Next Prospect

Posted by on Thursday, January 19, 2012 with 4 Comments
Categories: Blog, Featured, Marketing, rssfeed

If you don’t know exactly where your next customer will come from, you are in more trouble than you think. It’s not a matter of luck, timing or technology. Rather, it’s simple metrics and focus. And: It’s entirely predictable.

Last week I read it in a -themed email newsletter. Then I saw it again on a web- “guru’s” blog. Midweek, I heard it multiple times from some vendors at a prominent sales industry trade show. Each time, it was wrong, wrong, wrong.

“You don’t know where your next customer will come from. It could be anywhere! The web, print marketing, a walk-in, a referral. You just don’t know, so you better be prepared for anything.”

Ugh.

If you’re in the sales business and you don’t know precisely where your next customers will come from, here’s a little advice. Get. Out. Now. Moreover, if your marketing plan is more like buckshot than a laser beam, your budget will force you out soon, anyway.

Great salespeople know where their customers come from with great precision. They use marketing metrics. They study leads reports. They analyze their closed deals for patterns. They read . Their goal is to know where this business came from last time so they can make it happen again and again.

In our experience, it’s more important to know where your customers are coming from than what they want. If they don’t come, it doesn’t matter what they want.

What about this unsophisticated idea, proffered by so-called marketing experts (most with a solution to sell) that your next customer could come from anywhere? Research shows it’s exactly the opposite. Few customers come from random sources. Most come from specific, describable and most of all – predictable – channels.

Pick a sales business: Car dealers get most sales from existing and past clients. Amazon or Zappos target search engine traffic and repeat premium customers. Pharmaceutical salespeople focus on referrals between existing doctor clients and potential ones. Real estate agents generate more than 60% of their listings from referrals by friends and family and repeat business; a double whammy that producers sellers and buyers.

In every case, salespeople that use leads management data to identify and precisely focus on their greatest mesurable sources of business will win. 

Now, if you don’t have solid leads management data, that’s a challenge, but not too difficult. There are plenty of technology solutions, from complete systems to the sole spreadsheet. Just keep track of where callers, visitors, appointments and sales inquiries heard of your company. The top prospecting channels will emerge within a couple of weeks.

Still, do some prospects come from unlikely or unpredictable sources? Yes, but infrequently. Certainly not enough to say we don’t know or at least we should know. Worse, by highlighting the random lead events, we lose our focus on where the predictable (and usually more profitable) leads come from.

A marketing that tries to do it all usually achieves none.

Great sales people prospect their most likely sources of new business. They don’t flail about willy-nilly on every and any marketing, technology or lead-generating opportunity that comes their way.

Luckily, for most salespeople, the number of top sources is small. Service professionals like lawyers, accountants and realtors generate most business from repeat clients and referrals. Service-and-product industries like restaurants, hair salons and automobile dealers add one or two additional sources like walk-ins, radio or internet.

Which means they don’t use every marketing channel. Just the ones that work. Otherwise, they would just as well pick their marketing strategy by throwing darts at a board.

Unfortunately, in sales, the turnover rate is high, so there are always plenty of newcomers who don’t yet know where their business will come from. Their managers could do them a great service by providing market data showing where the business comes from generally in the industry and specifically for their company. It’s important to novice and veteran salespeople to spend the most time picking up quarters, and stepping over the nickels.

Maybe it was just coincidence that I heard the willy-nilly claims three times in the same week. Let’s hope so. Figuring out where your next customer comes is very, very predictable indeed.

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The Housing Market Came Back. Now What?

Posted by on Thursday, January 12, 2012 with 3 Comments
Categories: Blog, Company, Featured, Management, Opinion, REALTORS, rssfeed, Strategic Thinking

For five years, we’ve heard agents and managers say they were “waiting for the market to come back.” Well, it has, but funny, it doesn’t look anything like they expected. Now what?

For five years, we (and others) have argued the housing market wasn’t just entering a downward curve of the business cycle, but experiencing a fundamental transformation. Sure, a recession brought on by overspending and over lending has hastened the change, but real estate was destined to look differently by now because of many other long term factors. Demographics were altering the kind of homes needed, and the timeframe for buying the first, second and third times. Inflation, notably in energy, foodstuffs, healthcare and college tuition has been reshaping the credit position of for almost twenty years. Technology, and a run up in agent commissions, office space and costs, nibbled the profit margin of brokerage to historic lows.

Add it all up and the housing industry was destined to look different by today even if credit bubble hadn’t burst.

Still, there persisted a nostalgia (or delusion) amongst many real estate practitioners that the market would someday “return” to normal. True, many of those agents and brokers have left the industry while waiting for the return. But plenty of wishful thinkers remained  convinced that someday, “the market would come back” and they would be back on easy street.

Well, they were right on the first part. The market has come back. But surprise, surprise, it’s not Easy Street but Rocky Road that must still be travelled.

Let’s run the numbers: According to recent data, the housing market has returned to many “pre- and near-bubble levels. Inventory has fallen to mid-2005 levels as of December 2011, continuing a trend of less homes for sale month-over-month. Certainly, there are many foreclosures waiting to push that number up in 2012, but even in the states that have the most pending-foreclosure inventory, the bring-to-market rate will be slow as courts, banks, politicians and industry lobbyists slow up the process. That should help manage further price decline rates. In New York, it is estimated that it will take the courts 8-10 years of bureaucratic process to clear the foreclosures. So the impact of foreclosures might be considered a new fundamental market feature, not a short-term business trend. Nationwide, the overall months supply of homes, at 7 months, basically continues to fall.

Likewise, home prices, while down from bubble days, are back on track. Case-Schiller puts average price right about mid-2003 levels, which were at 16-year highs. If you chop the bubble out of the graph, today’s home prices are right where they should be, given multi-decade tends, and a severe global recession.

Some people might argue that while price is “back” it is still headed lower; that’s possible, and likely, in the states with lots of foreclosures yet to come. But that’s a concentrated set of markets, and many areas are experiencing flat or slight upticks in prices as natural equilibriums in supply and demand, as well as slight improvements in employment numbers have occurred. Appreciation is occurring in many places, too, such as the new energy-boom states and farm land regions, as food inflation and new technology create hotspots of growth. Still, it’s important to remember that even if we dropped back to pre-2000 levels in housing, they would all be “up” in the long-term trend of things.

Of course, the challenge for the housing industry isn’t that the market metrics are back to their slow, steady incline. It is that the fundamentals of that incline have changed. While plenty of single family homes are being sold, the credit conditions of those sales are significantly different. More all-cash deals and strict credit conditions require real estate brokers to be far better at pre-qualifying their customers and hyper-targeting their marketing efforts. Increasing demand in rentals has created opportunity for some brokers, but too few have prepared their organizations to efficiently (and profitably) handle the rental boom that is brewing. They might catch up, but they are losing out on the cash flow today.

The good news is that a lot of brokers did prepare for the return. They spent the last five years radically rewriting their playbook. Many killed newspaper marketing for good; others reinvested that money into building fantastic marketing channels. At least half of real estate agents, according to NAR numbers, have decided that social media is a great way to keep up with friends and family that can send them referrals. Brokers have taken control of their data (and its costs), refocused on target marketing, and eliminated redundant “lead generation” fees on their own listings. Some have even done the hardest work of all: closing expensive offices scattered across town, and invited expensive non-producing agents to go be non-productive somewhere else.

The question today is: now what? Where are we going now that the market has “come back” to pre-boom levels? There are many indicators already in the market. Brokerages are learning how to handle downward pressure on margins with new technology and techniques to move property faster (staging, auctions, video marketing). Agents are improving their skills with qualifying consumers and walking away from tire-kickers. Consumers themselves have come to terms with market and equity realities, and moved away from the investment-speak of housing towards a utility-value model, reflected in smaller homes with smaller mortgages.

The housing market is returning to a healthy state – albeit one that looks radically different than it did during the boom. In every market, there are plenty of consumers getting good deals, and brokers producing solid profits. Changes in the core sales, marketing and practices of the business have absorbed many of the lessons of  the recession and are ready for the next business cycle. Now its time to look at new challenges, in profitability, performance and predictability, that consumers want from the brokerage industry.

The market is back. Now it’s time to decide what we’re going to do with it.

Now, things are really going to get fun!

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33 Must-Know Stats about Modern Real Estate Customers

Posted by on Tuesday, January 10, 2012 with 6 Comments
Categories: Blog, Featured, Research, rssfeed

We love to remind our clients of Peter Drucker’s critical insight: Know the customer so well, that your products and services virtually sell themselves. So, here’s are 33 things you need to know about them if you want to grow your business!

Let’s talk real estate , not houses, for a moment. If you want your , and customer-relationship to be as effective as possible, make sure you’ve understood just who you’re trying to connect with this year. In fact, of the top 10 reasons people bought a home last year, most were “personal” reasons. So stop spending as much time worrying about housing inventory and make sure you have mastered the about the housing consumer. Here are some to get you started, courtesy of multiple sources, including the National Association of REALTORS, Pew Research, Nielsen, Morgan-Stanley and a few other pieces we’ve brought together.

Buyers:

  • 37% of recent buyers were “first time” buyers – a drop from 50% in 2010
  • They typical buyer was 45 years old – up from 39 a year ago
  • 37% of buyers were under the age of 31; 32% were over 55
  • While all buyers use the internet to search for homes, for 35% of them, it was the first step in the process; 21% started by contacting an agent
  • 21% of buyers were single females; 12% single males
  • 64% of all buyers had no children under 18 at home
  • Buyers found real estate agents (83%) slightly more useful than the internet (81%)
  • 92% said open houses were very- to somewhat-useful sources of real estate information
  • Buyers found the home they purchased in the newspaper 5% of the time
  • 58% of buyers wanted to see videos when looking at property online
Sellers:
  • The average seller was a Baby Boomer (45-65 years old)
  • The typical real estate consumer moved 18 miles from their previous home in 2011
  • 66% of sellers remained in the same state; 67% in the same county
  • 46% bought a larger home, 31% purchased the same size; 23% downsized
  • 25% of sellers sold their home within two weeks of entering the market
  • 63% of sellers had no children under the age of 18 at home
  • Job relocation and the need for more space were the primary reasons people sold their home.
  • Most sellers had been in their current home for 9 years.
  • 61% of sellers were repeat clients or referrals from friends and family
  • 66% of sellers only interviewed 1 real estate agent
  • Sellers found their agent through the internet 3% of the time; direct mail 2%; newspaper 1%.
Technology

  • Gen X’ers (35-45) have doubled their use of social media since 2008
  • 1 in 6 minutes spent online is on Facebook
  • $50,000-75,000 is the typical income range of a Facebook user
  • Single women use social media more than single men
  • 200 million consumers access social media on their smartphones
  • After Google, consumers search YouTube the most (2 billion streams daily)
  • Consumers spend 1 in 3 minutes watching on their mobile devices
  • 1 in 10 U.S. adults owns a tablet computer
  • 40% of iPad owners earned more than $100,000 last year
  • 44% of Gen Y’ers prefer texting to face-to-face meetings
  • The typical Gen Y’er sends 3,000 text messages a month
  • Gen X and Gen Y used web-based email 20% less last year

With this kind of information, it should be possible to customize and refine your sales, marketing and referral strategy. Decisions like where to advertise, how to communicate and whether or not it makes sense to spend time in social media become clearer once you realize how consumers themselves behave.

More importantly, perhaps these metrics will provide you with some ideas of information you need to know about your local consumers, which questions to ask and what behaviors to look for as you interact with buyers and sellers this year.

So, use the research to ask yourself: Am I running my business the way the modern consumer would like me to run it? It’s easy to tell, when you study the people you’re hoping will do business with you.

What’s your favorite stat from the list above? Do you have another stat to suggest? We’d love to hear it in the comments below!

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[VIDEO] Management in Action

Posted by on Friday, January 6, 2012 with 1 Comment
Categories: Blog, Featured, Management, rssfeed

Here’s a quick story of what happens when takes charge of a troublesome situation with a difficult customer. A good lesson for many different situations, too!

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Diversify to Grow Your Sales

Posted by on Wednesday, January 4, 2012 with 3 Comments
Categories: Blog, Featured, rssfeed, Strategic Thinking

Traditionally, many real estate agents turned their noses up at the rental customer. Had they diversified instead, they might have been better prepared to take advantage of the growing market today. And tomorrow. 

Name three segments of housing that are doing well. One: Luxury markets. Smart money buys low. Two: International markets like Miami. Smart foreign money buys when the dollar is weak, and the U.S. is the safest haven. But if you don’t work the upper-end or international, is there a third bright spot in the market?

Rentals.

Ewwwwww. I don’t do-ewww rentals! (Don’t forget the eyeroll and the hand-wave). 

Working with renters has suffered the eyeroll for decades. But snobbery has its costs, especially in an industry where overall margins have declined for decades. Whether it was dispensed in commission splits or lost in two-years-on-market listings, the margin has become a footnote to most real estate deals.

Whatever the reasons, most agents are still passing up a loud market signal to diversify. It’s 101 to us: Most people who rent today eventually buy. Why not build relationships as early in the customer-for-life cycle as possible? Keeping in contact with past clients is the least expensive , when you can capture the up-sell work over and over.

You don’t need a whole lot of data – even over-counted sales data – to know that when a country falls from record high ownership levels back to its trend-line values, all those owners have to go somewhere.

And that somewhere’s called an apartment.

Oh, wait! Don’t the surveys show that most Americans still believe in homeownership. Yes, they do. But not a single survey has ever asked: when they would believe in it enough to buy one.

You build a business strategy on what people do; not sentiment.

And here’s what they are doing today:

  • If they are under 30, they are graduating with so much college debt, they are destined for mom’s cellar or an apartment for the next decade. Since 1975, college tuition has increased tenfold; wages minus inflation haven’t kept pace. So the financial picture of most twenty-somethings makes them the rental generation for quite some time.
  • Household formation, aka starting a family, is down significantly for Gen Y’ers. Marriage rates have dropped to the lowest in nearly fifty years. Raising kids in your 20s has given way to waiting until your mid thirties. That adds in the Gen X’ers. Job scarcity requires mobility. Single people, in the global village, move a lot.
  • Renting as a form of general consumerism is bigger than ever. Companies rent software. City dwellers rent Zipcars for an hour. Travelers rent rooms in someone’s house. Cable boxes, cars, even voice mail is rented. Pay-to-use is a way of life for everyone. Even the rich fractionally rent jet airplanes.
  • Renting has become a strategic tool for underwater sellers. Frustration-induced renting is increasingly frequent amongst upper-end homeowners who must wait out the market (rather than take a significant capital loss).
  • Renting as recovery is vital to completing the foreclosure process. A few million households will need somewhere to live while they repair credit, recoup losses and save cash over the next 2 to 10 years.
The market signals couldn’t be clearer or louder. Demographic, psychological and economic changes have been brewing social acceptance of renting for years. Homebuilders have long heard Gen Y’s household desires: Small, efficient, walk-to-work and connected. All of which are easier to sell, or rent to friends if necessary.
And builders are putting their money where the is: According to the Wall Street Journal (Dec, 2011):

Much of November’s [new construction] increase came from the construction of apartments, town houses and other multifamily developments, evidence that rising demand for rental housing has encouraged developers to begin building again.

Starts of residential developments with two or more units saw a 25.3% increase, while starts of single-family homes, which make up about 65% of the housing market, rose 2.3%.

Finally, there’s the Federal reserve, which is artificially suppressing interest rates. As long as banks spreads remain small, credit will remain tight. Lenders will seek only the best-rated for the lowest rate offers. Most others will be priced out of borrowing, at least while wages remain stagnant and food and energy inflation erode purchasing power. The Fed just might turn the “buy-instead-of-rent” formula on its head.

While leads us back to diversification. Financial planning and insurance seem complementary enough to create multiple lines of business for real estate agents. But rental services seem like the most obvious of starting points. True, not every company needs to diversify: If you work in markets with Apple-like consumer demand, you can ask any price, even in a recession (say, Manhattan). But aggregate demand has fallen for nearly six straight years in housing. Even stable markets have seen per-sale margins thin infinitesimally.

Any deal that requires lender involvement takes longer, harder, lower-return hours than ever before. The brightest spots in the real estate industry today are in cash. That means luxury buyers, international investors and, ironically, the first-and-last payment check of the renter.

Are you prepared to do more than make a single-family sale?

 

 

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What You Didn’t Hear (But Need to Know) About Housing in 2012

Posted by on Thursday, December 29, 2011 with 22 Comments
Categories: Blog, Featured, Opinion, rssfeed, Strategic Thinking, The Market

Bloomberg Surveillance interviewed Jonathan Miller of Miller Samuel, Inc., last week. Too bad it was the Friday before Christmas, because Mr. Miller’s message should have been heard by everyone interested in the housing market.


As practicing contrarians, we’re fans of anyone who bucks conventional wisdom. In fact, the very fact that conventional wisdom is so, conventional, underlies the failures of so many policies that have tried to correct housing downturn. Mistakes like preventing foreclosures rather than letting the market clear, subsidizing house prices with buyer credits rather than letting prices fall to equilibriums. The conventional wisdom got us into this mess – a blind belief that housing prices will only go up – and we remained locked into such square-peg-in-round-hole thinking.

Thankfully, there are people like Jonathan Miller.

We’ve never met him, but we hope to someday, because his December 23 interview with Tom Keene and Ken Pruitt on Bloomberg Surveillance was excellent. Mr. Miller offered both an alternate narrative of the housing market since the crash, and a compelling paradigm for understanding why current policies and data aren’t helping. He even pointed out how the misreporting of volume by the National Association of REALTORS may be contributing to consumer mistrust and analyst confusion in the sector.

Listen to the interview. It’s some of the best 15 minutes you’ll spend planning for the next few years in real estate: Bloomberg Radio: Jonathan Miller

Here’s what you should listen for:

Characterization of the New York marketplace: Mundane. Fall sales not very robust, even though trophy property sales have captured our attention. The S&P downgrade in the summer may have caused mortgage rates to fall, but the uncertainty about overall housing and economic policy coming out of Washington is causing people to wait. Rates aren’t having the anticipated stimulative effect.

On Foreclosures in 2012:  2010 was the year of the short sale; 2011 was supposed to be the year of the foreclosure, but the robo-signing scandal stopped it short. So 2012 will finally be the year of the foreclosure. More foreclosures will keep credit tight, and drive rents higher in many markets. Housing starts are strongest in multifamily properties across the country. Expect at least 3 years of foreclosure activity before we get towards recovery.

On Housing Prices: Nationally, over the next couple of years, expect 5-10% further price drop as increased foreclosures continue to push prices lower, correcting for local market foreclosure inventory.

On Mortgage rates: Historically low mortgages – lower every month – aren’t changing the market. It’s not about interest rates. Low mortgage rates are keeping credit tight. Low interest rates create a low spread for bank earnings. Even with near-free money borrowed from the Fed, the fact that they have signalled they will keep interest rates (and thus spreads/returns) low until 2013 will have the effect of keeping credit tight. It’s about “spreads” not rates to the banks.

On what we can learn from Manhattan real estate: Coops are about 75% of housing stock in Manhattan and, ironically, co-op boards vetted the financials of buyers far better than the lenders did during the boom. It’s a lesson on how to reduce speculation and keep markets more stable (a lesson Manhattan learned from the 1980s).

On the NAR’s re-benchmark of home data: The “big oops.” NAR only captures about 1/3 of actual sales in the market by relying upon MLS data from its members. It then coordinates the data with Census info, to come up with their sales numbers. Effectively, their formula flaws overstated sales activity around 14%, perhaps more, for the last few years. Bottom line: The downturn was far worse than what people read about in the papers. Many people have been suspect of NAR’s research for a while; NAR’s announcements were rosier than reality. It should not be too much of a surprise, since NAR is a trade group trying to help their members make money. Unfortunately, everybody trusts them, when in fact their benchmark is not reliable.

On Case Shiller: The numbers that come out today are technically six months behind the point where there was a meeting of the minds between buyers and sellers. December numbers are really reporting on what happened in August, September consumption decisions. So CS isn’t really what’s going on today.

On Florida: Miami is supposedly the poster child for distressed real estate, but if you parse the market by non-distressed and distressed segments, there are two vastly different markets. Distressed is showing heavy price declines and huge volume, but the non-distressed is showing stability and even upticks in prices, mostly because of of foreign investors.

On Multifamily: Expect double-digit growth rate in rents and multifamily segment, for several years. Rents will remain robust and not a sign of a recovering economy.

 

From our point of view, Mr. Miller is a breath of fresh air. Better, he’s offered smart real estate professionals a number of strategic points to factor into their business plans. Get prepared for three more years of excess inventory in major markets like Arizona, New York, Nevada and Florida, but having a ripple effect across much larger areas. Integrate growth and strength of multifamily and rental sectors into your business plan. Target international investors in key markets. Lobby against subsidizing interest rates further. Promote serious vetting of credit-worthiness to protect both borrowers and lenders.

Most of all, it seems to us that these ideas should encourage real estate professionals from being single-mindedly committed to the “it’s a good time to buy” and “blame the banks” conventional party line. It’s a good time for a lot of things – investing, renting, sensible lending and foreclosing. Mr. Miller is a doing a great job with that message from outside the housing industry. We suggest the message start coming from the inside, as well.

What do you think? Is Mr. Miller on the mark?

 

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Three Ways Resolutions Can Reach for the Stars

Posted by on Wednesday, December 28, 2011 with 1 Comment
Categories: Blog, Featured, rssfeed

A New Year’s resolution is something that goes in one Year and out the other. Here are three ways to keep them around all year long.

The trouble with most New Year’s resolutions is that they rarely go beyond the wishful-thinking stage. It wasn’t enough for President Kennedy to simply resolve to go to the moon. There was a whole lot of work to be done before we could get there.

What does it take, then, to turn resolutions into realities?

First, the best resolutions build upon our existing strengths. They might involve trying something new or pushing our limits, but they must build upon a solid foundation. Think about something you know how to do, enjoy doing, then decide to turn up the volume. Do more of it. Do it better, or faster, or more consistently. If you can send a rocket around the world, aiming it for another planet isn’t that much harder. Set yourself up for success by leveraging your existing knowledge, skills and motivations.

Second, set a course and get a crew. Going to the moon required a lot of planning. It also required a lot of support personnel, scientists and crew. Thinking about how to get there, what it would be there, and who to go on the journey. The same is true for personal goals. Think about what it will take to liftoff, break free of gravity and head for your goals. You’ll need a big boost to get started – perhaps from a manager or colleague. You’ll reach orbit in stages – using training and support from your company. Then you’ll need to navigate to the right spot – something your customers can surely help you target.

Finally, take the first, giant step. And then another, and another! Getting to the moon was only part of the challenge; it still required leaving the lunar lander and stepping on the surface of a strange new world. Achieving your goals is not much different. It’s easy to purchase some new technology, take a class, build a web page. It’s another thing to put one foot in front of the other, every day, all year long. Integrating your goals into your day-to-day routine is the best way to make them real. Take that technology to every appointment, meeting, class, and make it part of the norm. Find ways to integrate your resolution into day-to-day conversations, language and customer experiences. No matter how much you imagine going to the moon, the reality doesn’t hit home until you’ve set your foot on the ground.

If you’ve given up on New Year’s resolutions in the past, try these three steps for turning them into reality this year. If you’re going to wish upon a star, you owe it to yourself to take the steps to reach them, too!

 

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The “We Suck Less” Strategy for Main Street

Posted by on Wednesday, December 21, 2011 with 12 Comments
Categories: Blog, Featured, Opinion, rssfeed, Sales

During peak shopping seasons, many people roll out the trite claim that online vendors are hurting local vendors. Truth is, most Main Street vendors are doing a fine job of killing their business, all by themselves.

There are four coffee shops on Main Street in my town. I pass by them all on my way to work. Two national franchises, one regional brand, and a local concern offer the usual: hot coffee, bagels and muffins. Each has a slightly different proposition: The Italian-style coffee, the home-brewed cup, the cheap-in-styrofoam, and bad coffee but great bagels.

Yet I’d rather have a root canal than shop at any of them.

The first shop I pass is a classic assembly line. Order by number at the register, pick up at the end of the counter. But the staff are so poorly trained that when you order a “Number 5, regular” you have to dissect it anyway. That’s a bacon-egg-and-cheese on a bagel with a medium, hot coffee with cream and sugar. And we all know who says Please and Thank you in that conversation.

The second shop is, I suspect, a secret place of torture. At least that’s how the two young ladies behind the counter act as they grudgingly, tediously serve their locally brewed coffee. Not even botox accounts for their inability to form a smile. Their robotic, eye-contact-less approach to starting your day has you wishing for another hour’s sleep.

Next comes the Mega Brand, where customers line up out the door regularly. Some might say that’s a good sign, that customers like the experience and desire the product. Actually, it’s the sign of monumental mismanagement and lack of training. The only reason the line is so long is that, of the four people working, only one is producing coffee. The others are over-stocking the napkins; sweeping; or re-writing the specials on the chalkboard. None seems to know that customers waiting for coffee are inherently impatient.

Directly next door is the regional brand. Here, the coffee is terrible, but the bagels are tasty. Unfortunately, the leaderless staff has someone decided that sickly sweet is an appropriate replacement for respectfully polite. The employees say things like, What would you like, honey? Do you want cream cheese on that, sweetie? Here’s your bagel, dearie.

Acceptable language, were it coming from a grandmotherly-type employee; but from a thirty-something, it’s downright creepy.

Ironically, none of these companies sell products that Amazon or Zappos can compete for, but we wish they could. The inventory isn’t rare, hard to handle, or dangerous to serve. Yet none do it in a way that customers enjoy the experience. In fact, my morning coffee purchase has become an exercise in the following calculation:

Which of the dreaded coffee shop experiences will suck less this morning?

Such calculations, we suspect, are rampant across all product categories these days. Which electronics store will feature the less headache-inducing lighting? Which supermarket feature the less dirty cashiers? Which cell phone store employs the less un-knowledgable staff? Which clothing store will have less blaring music?

Everywhere we turn, we’re looking for the places that suck less to shop.

Service shops aren’t immune either. Find an insurance agency where the secretary welcomes you to the office. You can’t. Call a real estate company whose administrator answers the phone using clear pronunciation. You won’t. Find an airline where the dread doesn’t begin at the first thought of travel. Not in America, at least.

None of which is to say that online vendors don’t have their troubles, too. Some websites are insane to shop. Others won’t stop emailing you after the purchase. Remote vendors can make returns a nightmare. There are plenty of opportunities for customer experience failure online and off.

If you’ve been shaking your head at our little description of local shops, you’re not alone. Which is to say that blaming online companies for the downward spiral of Main Street is the wrong diagnosis. Even with the notably good exceptions in retail, in air travel, in electronics.

Instead, our story suggests other reasons why online shopping is so popular. It’s not just the free shipping (a trade off against instant gratification) or expanded inventory. It’s more, but simpler. The ability to avoid a bad shopping experience appeals to most of us. The opportunity to get what we want, without getting everything we don’t: the eye-rolling, sighing, frowning, mumbling, un-thanking person we’d have to deal with on Main Street.

Online vendors certainly pose a challenge to local vendors’ pricing, selection and convenience propositions. But I’m not alone in going out of my way tofrequent the local tailor, whose service is impeccable and experience relaxing, yet pricing and selection limited. I love browsing the pale blue box jeweler’s store; a place of solace in the noisy city mall. My local real estate broker’s office is a fun place to enter, it’s energy and enthusiasm encouraging.

So maybe Main Street’s problem isn’t that it’s losing the fight on pricing, selection or taxes. It could be that today’s Main Street shops are becoming ugly, brutish places to visit. If Amazon’s experience is better when served by a computer than the local bookstore’s shop staffed by people, then can we really say it’s tax-free shopping that’s taking the business away from Main Street?

 

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Over 2 Billion Videos Served

Posted by on Thursday, December 15, 2011 with 1 Comment
Categories: Blog, Featured, rssfeed, Sales

Continuing our recent theme on the power of to engage , Comscore noted this week that more than 200 billion online videos were watched around the world in October. The only question is, were any created by you?

It’s not news that online video is fun, engaging and popular amongst consumers. From educational to advertorials, nothing captures people’s attention like the moving screen. Certainly, people found something compelling in the Old Spice Guy commercial to watch it more than 37 million times. Maybe it’s the towel?

It’s not all just sex, cats and rock-and-roll that makes online video so popular. According to Comscore, YouTube accounted for only 88.3 billion of the 200+ billion videos. The next biggest video websites were China-based Youku, the site VEVO, and of course, Facebook, which served nearly 3 billion videos to 750 million members (not a lot per person). Canadians watched the most videos by minute-volume, while people in Turkey watched the most videos per-person. So video consumption is far, wide and deep.

By industry, video usage varies widely; less than 60% of real estate websites feature video tours of their properties; and few feature them on every single property. Zappos, by comparison, has a far higher proportion of videos for its inventory, which includes hundreds of thousands of shoes, shorts and shirts. Automobile companies have been using video since the introduction of broadband, because nothing sells cars like a top-down roadster racing down the ocean highway. Audi’s A7 website features 11 videos of just a single model. Even our specialized Learning Network features almost 300 training videos on , , technology and .

But when faucet manufacturer Kohler features 54 videos demonstrating – um – kitchen and bathroom faucets, the game is on.

How do you join the video revolution, and do it fast? Amazingly, it takes a little less than $500 in hardware. A typical flip-style camera such as the Kodak Playtouch costs about $120. A quality wireless microphone set will probably cost more. Tripods are cheaper than a weeks’ worth of cappuccinos. Your YouTube account is free.

Some salespeople, however, resist adding video to their marketing repertoire for fear of making the video. Certainly, writing a script, planning the storyboard, lighting and staging, then rehearsing and shooting the takes some training and practice. There’s plenty of great help out there, though. Martha Webb’s online Certified Home Marketing Specialist course has excellent training on how to write better copy and prep the home for the video. YouTube has a specialty site for content creators, packed with tips, techniques and how-tos from some of their most popular contributors. Even – ahem – our Learning Network has a few dozen videos on how to shoot, produce and promote with video in real estate.

Of course, there’s always outsourcing, too. As Martha Webb recently reminded me, there are thousands of wedding videographers who are doing nothing on a Tuesday or Wednesday; they’d certainly love to pick up an easy shoot like a house, a personal promotional video or even a couple of hours in which you can shoot a half-dozen 2-minute video blog posts. It will likely cost far less than the time and money wasted in postcard and refrigerator magnet mailers. It most certainly will be more effective in grabbing people’s attention.

Last year, Wired magazine noted that more than 50% of all internet bandwidth is video content. Comscore’s 200 billion number simply confirms that trend. All that remains is to decide whether or not you’ll apply the power of video to your own business. You watch videos yourself. Now you must start serving them as well.

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[VIDEO] The Best Real Estate Property Video Ever

Posted by on Wednesday, December 14, 2011 with 32 Comments
Categories: Blog, Featured, Marketing, Opinion, rssfeed

Play at the end of this article.

Forget the fish-eye lens and the muzak. This video has set the bar so high for video , the classic “room-by-room” virtual tour won’t ever catch up. See it!

When is marketing not marketing. When you use video to do the work of text. That, unfortunately, is how most real estate agents are using video marketing for their websites: essentially “spoken word” room-by-room tours of the property. With, of course, the obligatory toilet shot.

Most real estate property videos are simply awful.

We’ve been encouraging real estate agents to use video for years. We killed slideshows in 2010, offered some examples of creative video in 2011, and even recorded a 45-minute WebTV broadcast on great video techniques for you to follow. Needless to say, we love video. But the challenge is no longer what cameras to buy, how to light the scene or how to use YouTube.

The next big challenge in using video to sell properties is learning to tell a story.

It’s time to stop narrating tours of the properties and start telling the story of their unique value propositions. That’s how commercials work on TV. In thirty seconds, you have to tell the viewer how she’ll be smarter, faster, thinner, sexier, richer or simply better for buying your product. You don’t pop the hood of the car commercial, but watch it zoom down the road. Technology commercials don’t mention how many ports on the television or buttons on the remote: they show stunning movies to a stunned family in their stunning home theater. Even Viagra commercials don’t show the product “in action” (ahem) but certainly convey the benefits of their product.

All of which has been missing in most real estate property videos online until now. Oh, sure, there have been the compelling scripts, filled with nonsense words like luxurious, spacious, charming. About as useless when spoken on video as they are when written. Then there’s the crazy camera shots – at pet level, thru doorways, spinning around in circles. But even if the video is shot sensibly, and the script is written well, the real killer in real estate videos has been the sole focus on the specifications of the property. As we wrote years ago, it’s like selling the Mona Lisa by pointing out her eyes, her nose, and her mouth.

Mr. Potato-head video marketing must end!

How to do it then? Simple. Watch this video. It’s the embodiment of the easiest but most effective marketing technique: Find a single, compelling proposition about your product, and draw as much attention to it as possible. Sell the benefit, not the specs. Sell the outcome, not the parts. Sell the desire, not the square footage. Oh, you get the idea.

Without further ado, here’s what unquestionably is the most wonderful, smart and effective real estate property marketing video I’ve ever seen. It has raised the bar for real estate marketers world wide. After you watch it, you’ll have to agree: your slide show with muzak makes you look like a wally. 

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NAR Loses Nearly 1 in 5 Home Sales; Confidence Next?

Posted by on Tuesday, December 13, 2011 with 6 Comments
Categories: Blog, Featured, rssfeed

Maybe the National Association of REALTORS should have spent less time driving a bus around the country, and more time counting home ?

Every organization makes mistakes, but some are worse than others, not the least because of timing. We’re too deep into a five year housing recession for these kinds of barrel wisps. And when data is having so little effect on consumer behavior, all that’s left is emotion. Trust. Confidence.

It’s all psychology in the housing market today.

Even the good data is already struggling to overcome buyer reticence to act. Negativa data – wage stagnation, high college tuition debt – are slowing household formations to the lowest pace in two generations. Today’s consumer is worried its leaders engage in fuzzy math on every topic: environmental science, medicine, social security, public debt.

Now it seems we can’t even properly report how many houses sold last year. Or the year before, nor the one before that.

The news that the National Association of REALTORS may have – most likely has – overestimated housing sales since 2007 is deeply troubling. The Voice of real estate has been telling one story, while the Abacus of real estate has been mis-carrying the one.

A couple of months ago, CoreLogic, who analyzes real estate market data, blew the whistle on this. According to MSN Real Estate, CoreLogic thinks “NAR’s home-sales numbers could be as much as 20% too high.” Even when NAR looked at its own data again, plus data from home builders, the Federal Reserve and the GSE mortgagors, it concluded that, “[our] numbers were too high and some sales were counted twice.”

Is it just another in a long tradition of playing with public trust? Enron. Madoff. Fannie Mae. Corzine. Now NAR?

Lots of factors could have contributed to this situation. CoreLogic analyzes property records, verified by lawyers and town record-keepers; NAR analyzes MLS data, entered and verified by its members. NAR also used a methodology that did not change when the market crashed; or accounted for new data in the Census. Sure, it wasn’t “on purpose” but should it be the purpose of the trade group to be accurate on perhaps the single most important metric of its industry?

If you were off by 20% on a high school math test, you’d get a C, not an A.

Beyond the math, there’s possibly a focus issue. Somehow, the bean counters at NAR can add $40 to every member’s annual dues – and spend $7 million per quarter – to lobby Washington. NAR has always lobbied Congress; but could the more aggressive approach lately have caused the organization to take its eye off the ball?

We’ve noted many times that Trulia, Zillow and other industry players are quoted more often than the National Association of REALTORS on a typical news day. What if journalists conclude that NAR’s data isn’t exactly better than anyone else’s data – or worse – suspect the under-reporting may have played a purpose? Many REALTORS themselves complain that Zillow’s zestimates are inaccurate, but a 20% credibility gap in NAR’s numbers puts that argument to an end.

What does this mean for the local REALTOR, or the local homeowner or buyer? Confidence problems. When a noted authority’s numbers fall into question, an air of skepticismsettles over everyone associated with them. For the local real estate agent, it will become harder to demonstrate the validity of their own local market data, simply because the ’ don’t feel like anyone is being truthful any more. Consumer emotions will get in the way; right or wrong. Even those who recently completed transactions might be reviewing their decisions in their heads.

Agents can argue that their data is local; but consumers’ perception in national. And irrational. And this news doesn’t make it any easier for the local agent to sit across a table from a buyer or seller.

Five years into a prolonged recession, we’ve seen the results of consumer un-confidence in the housing market. Buyers wait. Younger buyers head to their parents’ home after college. Sellers are staying nearly 50% longer in their existing homes than just 5 years ago.

Confidence matters. It’s psychology, not finance, that will turn the market around.

What creates consumer confidence? Honesty. Integrity. Commitment to excellence. Truthfulness. You don’t need to be perfect. Mistakes are understandable. But when you’re sitting across the table with clients, you can’t be making suggestions from a data set that’s missing 20% of what actually happened. It’s almost as bad as sitting across the table from Congress testifying you can’t remember where you put that 1 billion dollars in customer funds…

In neither case, even if we find the right data, it’s the consumer confidence that might not come back soon. Or ever.

 

 

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[VIDEO] Modern Real Estate Consumers, 2011

Posted by on Monday, December 12, 2011 with 0 Comments
Categories: Blog, Featured, Next Generation, rssfeed

Here’s a quick that combines the latest real estate consumer data with the big trends in technology, social media and . Enjoy!

 

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