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With our sensors on full, we’ve scanned the real estate metaverse online to find some of the latest links to research, industry thinkers and opinion that can help you chart a course to success in 2010.
There are two basic reasons why companies fail: unwillingness to embrace the obvious changes of their day, and a smug rejection of customer feedback. At Barnes and Noble, you can get both.
On Screen – a new weekly “launch” of news, commentary, resources, bloggers and other information you can use to get your week started – from Matthew Ferrara & Company.
According to a new survey by NAR, by a factor of 4, most buyers think open houses are far more useless than they were just a year ago.
Real estate is essentially a research industry: trouble is, most agents and brokers think the most important research is about houses, prices, square footage and such. Considering the data that sits in most MLS systems – unverified and incomplete – you’d think they would know better by now. In fact, the best research for any sales industry isn’t the commodity data but the customer specs and competition capabilities. Knowing everything there is to know about the consumer – and the competitors who are trying to beat you to their door – is far more fascinating. And given the state of the housing industry, also more revealing.
For some time now, I’ve been asking myself if I’d missed the point about Twitter. Give it some time, I told myself. Sometimes these new technologies just need to shake themselves out. Originally, Motorola shelved the mouse as an input device, only to have someone dust it off years later and make it the tool of choice for personal computers. So I gave Twitter a chance. I tried it myself, and even started to “follow” some people online. Alas, with the release of a new study, I now know that I should have stuck with my initial reaction. Twitter is really dumb.
Yesterday found me on the 15th floor of the New York Times building in Manhattan, part of a trio of industry thinkers including Mike Staver and Steve Harney. Joining us for three hours of ”ask anything” discussion were some of the city’s finest brokers and managers. The host, Leading Real Estate Companies of the World, had brought us together for a second time (the first in Phoenix) in a brainstorming session that had audience and panel each doing equal work. And unlike one of the usual presentations you might attend, the learning flowed both ways, from industry experts both on stage and in the audience. And what learning it was!
In one of the cruel ironies of the housing market today, the total number of units sold this year isn’t that far from historically normal volume. According to the National Association of REALTORS, the seasonally adjusted annual rate for sales in May is around 4.77 million – generally trending the pre-bubble long-term volume for a typical year. Some segments continue to decline – such as housing starts – but it makes sense to stop adding more units to the million-plus excess inventory units available already. Clearing the excess inventory remains an important goal for the market. Only when supply and demand level off will prices stabilize. Yet real estate companies find themselves doing the same (or more) work for less results. Even selling historically normal units prevent a revenue decline; and nobody’s picking up “extra” units these days. With median home prices down 30% to around $173,000, volume strategies alone cannot sustain most brokerages. Thankfully, the consumer has provided real estate professionals with a ready-made solution. It’s up to brokers and agents to start selling it. Just like they used to.
What one phrase has done more damage to the housing industry – consumer and practitioner alike – in the last two years? “I’m waiting for the bottom.” Buyers have been sitting on the sidelines, waiting for prices to hit their lows. Those REALTORS who didn’t just quit (200,000-plus of them did) similarly stuck their heads in the sand, waiting for everything to just blow over. “When the market changes,” was the favorite phrase of meetings, workshops, articles and convention speakers. A few out there – the Harneys, the Stavers, even yours truly – continued to plead for sanity. Nobody has ever called the bottom of anything on time: from Tulips to Tech, market bottoms have consistently eluded all of the experts. So it should come as no surprise that the REALTORS missed the housing bottom this time as well.
Let’s help sellers make better decisions by leveraging their emotional intelligence. Not market intelligence, but emotional. For the first half of the listing presentation, let’s take sellers for a ride. Drive them around the neighborhood to see the other homes they are competing against. Get them inside, to see with their own eyes, smell with their own nose and feel with their own emotions what they are up against. Let them experience the newer, older, better, worse – firsthand. Almost like a buyer again.
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.
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.
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.
Everyone knows about the 90/10 rule: 90% of the business is done by about 10% of REALTORS. Translated to a consumer experience, this means that most buyers and sellers have about a 1-in-10 chance of getting the “best performing” agent to sell their home or represent them in a purchase. Even a generous assessment of the business – quartiled for the top 25% of agents who generate more than $200,000 in commissions annually – leave the underperforming-bottom 75% of the business to muck up the works. And while banks, lenders, Fannie, Freddie, Frank and Dodd all share some blame for causing the current crisis, could it be that the “other” broken real estate market is the soft-underbelly of the brokerage industry itself? Do we really need to answer that?
