Monthly Archives: March 2012

Calling the Housing Market Bottom? Not So Fast…

Courtesy of NAR Research — one of the more valuable things on Facebook — comes this CNBC article on how investors are flooding the residential real estate market:

The number of homes sold to investors more than doubled last year, as rising rents and low-priced distressed properties fueled demand. Investors, half of them using no mortgage, bought 1.23 million homes in 2011, a 65 percent jump from 2010, according to the National Association of Realtors. Half of the homes purchased were distressed properties, that is, foreclosures or short sales (when the bank allows the home to be sold for less than the value of the mortgage). [Emphasis added]

The video above references this explosion in investor interest as well, but goes well beyond that.

This new information from NAR, which the CNBC story references, answers a couple of questions for me on the hot housing market of the past couple of months. As a result, I’m not ready to call the bottom on housing, nor do I think that Renter Nation will pass us by.

Quite a few of my friends in real estate have already called the bottom, and are embarking on a round of marketing to consumers that this is a once-in-a-lifetime opportunity to buy real estate. I would urge them to tap the brakes just a little bit, since credibility is the coin of the trustworthiness realm.

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Online Advertising and Content Ownership: In Which I Have Questions for Patrick Healy

Patrick Healy, of Phacient

Patrick Healy, the proprietor of Phacient, is a longtime friend from benighted Onboard days, through doing Lucky Strikes Social Media Club (which he has taken leadership of), and general camaraderie. He posted his thoughts on the whole syndication brouhaha on his blog, which was then picked up by GeekEstate.

His point is that real estate brokers and agents shouldn’t fight the portals, since the portals are providing online advertising for free… with an option to upgrade. And he reasons that if realtors should be upset at anyone, it should be at themselves for not doing enough to compete with the portals.

The money grafs:

The fact of the matter is, these sites are not the bad guys. They built an environment where consumers come to where they can learn, interact and shop. And they are doing it well. There is nothing wrong here. You are not really upset that these guys are selling leads. That’s what they set out to do. Should they be providing these sites as a public service? Of course not. You are not upset with these folks that are buying the leads off your listing pages. You probably do it too, on that site or somewhere else in some way shape or form. Who you are really pissed off at is yourself. You’re mad because these sites have created a more open and free market for your competition to better compete with you in your market. You’re mad because you either don’t get the technology, don’t want to spend the money, or don’t want anyone competing in your space. None of these reasons are valid in my opinion because you reap the same benefits in the other direction.

I have some questions on this.

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Craftsmanship in Real Estate

The perennial discussion around “what makes an agent bad, good or great” has taken an interesting turn. Some sixty odd comments into the thread, which featured numerous adjectives, we get this exchange between two brilliant people who know of which they speak.

Josette Skilling, a REALTOR from Maryland, wrote:

Great is in the eye of a beholder who does this once every 10 years of so. It’s a lot easier to understand great when you do it over and over again and recognize the difference between bad and good, and even good and great. I’ve had a million cups of coffee and know instantly which one is right…

Most people spend $1M once and may not know until much later on that what they thought was great actually sucked. Yet there was a referral. Ooh rah.

Today someone walked in to an open and talked to me. She bought a house in the path of a light rail project and her agent didn’t tell her. She referred that agent and found out later that the trail would be going through her back yard. She lost a lot of money on the resale.

Really? Get a referral and you’re great? Nah.

Sustain referrals for years and years. Have the respect of the industry. Do the right thing from your gut every day. Yea, maybe then you’re great. Learn your craft and be very good at it so the effortless referrals just happen. Yea, maybe then you’re great.

To which Marc Davison, of the kilowatt fellas, responded:

Even great agents make mistakes and I wouldn’t be so quick to believe that person’s story about her agent. I’m not an agent but I know you guys know all too well how you bend over backwards, kill for a client and then they turn on you anyway and blame you for things that are unwarranted.

But regardless, given all that has been written on this topic, and how all it does it lead us around a maze with no finish line, can someone remind me of the point of trying to define this thing? Maybe Josette’s last paragraph above is all we need as the final answer. It works for me.

I know what Marc is talking about. We’ve been around this topic of “agent quality” for years now, without much progress being made. After all, it was over three years ago that I asked What Makes An Agent Good? and got not much of an answer then. I made the same point that Josette Skilling makes above over a year ago in suggesting that only other agents can rate the quality of an agent, that consumers don’t have enough experience or background to judge an agent’s performance. And I don’t know that we’ve gotten very far.

So Marc is wholly justified in feeling frustrated with this topic; I know I can get frustrated with it. But as he said, maybe Josette’s last paragraph is all we need as the final answer. But it doesn’t quite work for me, because of this:

Learn your craft and be very good at it so the effortless referrals just happen.

Okay… what is your craft?

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Three Questions on the NAR/Bipartisan Policy Center Paper

The Bipartisan Policy Center — a think tank based in Washington DC once described as the place “where moderate Republicans go to embrace their inner liberal” — has released a new study in conjunction with NAR, the Urban Institute, and USC that is worth reading in full if you’re interested in topics like future of housing. Entitled “Demographic Challenges and Opportunities for U.S. Housing Markets“, it is a thoughtful academic treatment of the impact of demographics over the next couple of decades.

The key takeaways:

  • There will be a lot more old people in the next 20 years.
  • Old people sell houses
  • Young people buy houses, but current crop of young people (Millenials and younger) are suffering
  • Black and Hispanics hardest hit

Most of the paper, actually, is restatements of the obvious, such as “Over the next two decades, the U.S. housing market will depend on Echo Boomers”. You don’t say! Since Gen-Xers like me are in our 40s, 20 years from now, we’ll be in our 60s and looking forward to retirement (if such a thing exists by then). Who knew that the largest cohort since the Baby Boomer would be important to housing?

Nonetheless, the study concludes, “Notwithstanding predictions of a coming “rentership society,” however, none of the scenarios indicates a reduction in the overall U.S. homeownership rate below 60 percent before 2030.” (p. 18) The authors project that somewhere between 21 million and 25.5 million new households would form between 2010 and 2020:

The range of estimates in these scenarios can be attributed to different rates of household formation for Echo Boomers. Under the low scenario, people between 15 and 34 years old in 2010 (a span that includes Echo Boomers plus five years of the Baby Bust generation) would form 15.6 million new households between 2010 and 2020. Other cohorts would account for the formation of an additional 5.4 million households over the same time period (Figure 1). The medium scenario would result in 17.1 million new Echo Boomer households and 6.1 million other households. The high scenario, finally, yields 18.8 million new Echo Boomer households and 6.7 million new households from other generations. (p. 15)

And homeownership rates among these new households, the authors figure, would range from a low of 40% to a high of 67%, adding anywhere from a low of 3.8 million new homeowners to a high of 10 million from 2010 to 2020. (p. 16)

Although the authors do not make any recommendations for policymakers, it does seem to me from the overall narrative — the elderly will need lots of help, the young are being crushed financially, and black and Hispanics were hardest hit — that the paper is intended to spur government action to subsidize housing. Which, as a fan of the industry and all, I’m happy to consider, of course.

But there are three trends and factors that are simply not discussed in the paper, all of which have been much in the news of late. That glaring oversight makes me wonder if these projections are not wildly optimistic. Since I’ve been dabbling in the whole demographics angle — especially of Millennials — I figured, I should point those out and see what people thought.

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Ask Not What Your NAR Can Do For You…

Could this man even be a Democrat today?

For whatever reason, there’s quite bit of chatter going on around the about the future and role of the REALTOR Association. This Facebook Group is more or less ground zero of the discussion. But I saw an interesting take on the topic from Victor Lund, the influential proprietor of the WAVGroup. Here is his post, worth reading in full:

Remember this leadership statement?

“Let every nation know… that WE shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, to assure the survival and the success of liberty.”

More than any political speech, this was the voice of a committed leader.

Who the hell is that crazy neocon Bushitler-sounding warmonger? It’s patently obvious that the Rethuglicans are a danger to global peace.

Anyhow, Victor then goes on to quote Jeremy Conway:

Today Jeremy Conway, my most highly respected industry mentor answered the question.

Is everything NAR does perfect? Certainly not! Is everything NAR is currently doing supportive of everyone in the real estate space? Certainly not! However:

For those who perceive a threat in the present situation, NAR is a suburb [superb?] lifeboat.

For those who perceive the opportunity begging to be discovered in the present situation, NAR is one of the most powerful battleships afloat.

For those who deny any situation exists, NAR is a great insurance policy.

Most importantly, NAR and its local association system are a magnificent action resource that can, with a little effort, be ready, willing and available today with tools that can affect the best result.

As I read these words, I recalled the words of one of our Nations’ greatest leaders once again.

“The world is very different now. For man holds in his mortal hands the power to abolish all forms of human poverty and all forms of human life.”

These are words of empowerment. These words told a nation to contribute to fighting hardship. These words that told a nation that the future was in their almighty hands. Surely, at nearly 1 million strong, REALTORS® have the potential to create their destiny. “Let the word go forth… that the torch has been passed to a new generation” of REALTORS®.

Stirring, indeed… if you’re into all that warmongering Republican rhetoric, anyhow. Wait, what? That wasn’t some Reagan-worshipping Tea Partier? That was John F. Kennedy? That guy who dated Marilyn Monroe?

Okay, smartassery aside, I don’t know if Victor meant to get so close to the heart of the question that confronts the REALTOR Association today, but he did. All he had to do was to use the more famous quote of one Jack Kennedy:

Ask not what your country can do for you, but what you can do for your country.

I agree with Jeremy Conway that NAR is a “powerful battleship”; I disagree that it is a lifeboat. And in that difference lies the key question of the future of the REALTOR Association. Let me explain.

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