Category: The Industry

Crystal Ball

I was reading a fascinating article about Venture Capitalists and what they are pouring money into right now.  It’s a good clue about the tech advances we can expect to see in coming months.  A couple of things caught my eye.

First there is Apple’s SIRI voice recognition program.  I’m not an Apple person, but I understand it is far superior to anything else on the market.  Supposedly you can get your IPhone to do almost anything by simply speaking to it.   Right now SIRI is proprietary – only Apple can work with it.  But speculation is that they will open it up to App developers soon.  Already people are tinkering with it to interact with all kinds of other things:  televisions, thermostadts, appliances.  Imagine sitting in your living room saying, ‘Set temperature to 72%’ and having it simply happen!

Another key area is education.  Just as Amazon made bookstores irrelevant and ITunes drove record stores to extinction, so technology will at least change the way education happens.  I don’t think brick and mortar schools will go away entirely, but what happens inside them will look very different in a few years.

As evidence, the article I read referenced M.I.T.s’  OpenCourseWare program.  Right now, M.I.T. has over 2,000 of their courses online and available for anyone to take FOR FREE.  Soon, every class they teach at the Institution will be online, so essentially, you will be able to get a complete M.I.T. education gratis.  They won’t be awarding degrees for the work, but it will be possible to get a Certificate.  As  someone dealing with distance learning all the time, I wanted to check this out.

I went to ocw.mit.edu and looked around a bit.  T’here are courses in all kinds of things.  I checked out Spanish.  A year ago I bought the full Fluenz Spanish program and I can’t say enough about how good it was.  I’m not conversational (yet) but I’m comfortable in places where English is not spoken.  My quick scan of the free M.I.T. program has me believing it might be superior in some ways.  It’s designed to be done in four hours a week for about two months.  The whole program is built around a little movie with a plot, suspense, characters.  You learn by listening and watching the interactions and then completing exercises and reading.  The quality looks outstanding.

This kind of stuff gets me very excited.  I love the way our electronic world is changing.  Things that once seemed beyond the horizon are now almost within our grasp.  And the speed at which new ideas move from the horizon line to our fingertips is getting faster and faster.  Is there any doubt that, soon, the right technology, mixed with the right consumer offer and operating system will completely change the real estate business?

Of Steve Jobs, the Music Business and Real Estate

Jose Perez of PCMS Consulting is on RISMedia today talking about Steve Jobs and the music industry.  What’s that got to do with us? you ask . . . quite a bit, I’d say.

Before we go there, however, let’s drop into Wall Street.  We often look at the history of the securities business in the last 15 years and draw parallels to real estate.  Remember?  Used to be, we had to contact a broker to trade a stock and we paid a percentage based commission for the privilege.  Stock trading was mysterious, complicated, beyond the grasp of most people and the commissions were, well, just the reasonable cost of entry.  Then along came Charles Schwab with $15 flat fee trades.  Consumers loved it and the industry took note.  The forward thinkers not only shifted to the new model, they enhanced it by putting powerful analytic information in the consumer’s hands on the Internet.

Sound like the real estate business?  You bet.

Perez is saying the same kind of change happened in the Music business.  Remember when we used to go to the music store to buy vinyl LP records, and then CDs?  That’s how music was distributed.  The whole industry was built around the idea of making and marketing these plastic objects called ‘records.’  But then, technology made it possible for people to take the records, digitize them and then share them (often illegally) over the Internet.  The industry reacted not by looking forward at how they might capitalize on this,  but by looking to the courts, suing the most prolific pirates.  Meanwhile, Steve Jobs – a music industry outsider – quietly invented the Ipod – nothing more than a solid state drive with a simple user interface – and the ITunes store for making digital music accessible to consumers.  For 99 cents you could buy a song . . . and, today, that’s what we do.

Just as in real estate, we had a music industry fighting to preserve the status quo . . . and losing; because you can never preserve the status quo.  It is impossible. In both cases we have industries struggling to keep information out of the consumer’s hands . . . and losing.

Want another example?  How about the Travel industry.  Not too many years  ago we used to call a travel agent to book a plane trip or a vacation.  They had all the information:  schedules and fares and so on; and they earned a nice commission for helping us navigate this mysterious process.  How many travel agents do you know today?  Really:  they have become largely extinct!  And how do we book travel today?  We go to the Internet where all the information is housed and make our decisions for ourselves.  Unfortunately, the pricing model for travel has not changed significantly . . . which makes me wonder:  whose getting that commission today?

And here we have real estate:  an industry that justified its percentage based commissions for decades largely by hoarding information.  Then along came Don Taylor (and by the way, he came along a good ten years before Charles Schwab had his epiphany).  He saw a way to do the real estate business not for a nonsensical percentage based commission, but for a Low Set Fee.  He saw all of this hoarding going on and decided that Information Without Obligation would be one of his new company’s core values.  The maturation of the Internet twenty years later put that value on steroids . . .

And how did the Industry react?  It ran in terror for the hills, dug foxholes, locked up the valuables (the information), put its fingers in its ears and refused to hear what consumers were saying.  Even today, with a real estate market undergoing complete upheaval, with change swooping down around us like a Tsunami, how many of the big national brands are talking about their pricing model?  Um . . . none.  Even today, when consumers can (with the click of a mouse) get all the information REALTORS used to hoard, how many are talking about how we can use that fact to streamline the process and make the experience better for the home buyers and sellers?  Um . . . none.

All I can say is:  get ready.  We’re about to witness a magnificent collision.  The vision of Don Taylor is about to come to full fruition as it collides with the reality of today’s consumer, the Internet and the upheaval in the marketplace.  Five years from now as brokers collect their Set Fee at closing, they’ll scratch their heads, look back and wonder:  ‘Did we ever really do business that old fashioned way?’

 

Six Reasons Why A Housing Shortage Could Be In Our Future or . . .

WHY I THINK THINGS ARE LOOKING UP!

1.  We’ve really built nothing new (or nothing much) for five years.  Inventories of new houses are way down and little is planned for the near future.

2.  Millions who navigated a short sale and went into rental housing will be re-entering the market.

3.  Many millions of  ‘fence-sitters’ will flood the market when a tipping point of confidence and activity occurs.

4.  Lenders are becoming increasingly rational, more predictable, more systematic.  They are slowly becoming workable again.

5.  Prices have stabilized in most markets and actually risen in some.  Cue the trumpets!  Buyers tend not to buy when prices are falling.  They tend to return to the market when prices begin to rise.

6.  Investor activity in the lower price ranges is fairly frantic, and has been for some time.  Multiple offers and bidding wars are common.  Investor’s always signal the bottom of the trough.  They come out first – consumers follow.

I think 2012 is going to be a whole lot better than 2011, and I believe 2013 could be a break-out year.

How does the Prudential sale stack up?

The Canadian franchisor who operates the Real Living network is buying Prudential Real Estate and Relocation Services for $110 million.

When I read that the first thing that struck me was the price.  $110 million?  Really?  For 1,700 offices?  That’s less that $1,000 per franchise!

HFS bought Century 21 in ’96 for $200 million.

They bought Coldwel Banker the same year for $710 million.

Heck, in 2004, they bought Southebys’ 1oo offices for $110 million!

Everybody knows Pru never made a dime on the real estate side of their business and after 20+ years of operation, they have a brand that the consuming public still does not equate with real estate.  But $110 million?  Really?  What am I missing?

Anticipating What’s Next

If you believe the media’s packaging of economic news you’d expect America to be on its last legs, soon to be a second class province of China.

That’s the news biz for ya.

They’ve discovered that we love to be scared nearly to death (that’s why we go to see horror films), so anything they can slant in the direction of gloom and doom, they will.  It’s just packaging;  and come on –  we’re all in sales: we know you can package or spin almost anything any way you want.  The info-tainment people (what we used to call “the news”) want as many viewers and readers as possible and they believe spinning the economy into the dirt will do that for them.

Walter Cronkite would not be pleased.

I don’t buy the vision that it can only get worse from here.  I believe positive change is already occurring and will only accelerate in the months ahead. Instead of devastation in the housing market, I’m looking for (gulp!  dare I say it?) a housing shortage!

For six years, we’ve barely added any new housing units at all.   Each year we’ve created less than 50% of the new homes and condos we have historically needed just to keep up with the demand of new buyers coming into the market and obsolete units being demolished.  Today, while we have substantial inventory of resale homes (including REOs) , we also have a home building industry at a near total stall.  Nobody’s building anything.  When the tipping point of low interest rates and rising consumer confidence is reached (and it will be reached), I expect buyers to flood into the market, quickly deplete the resale inventory that is there and clamor for more.  Honestly:  we could suddenly be in a sellers’ market!

Let’s define a couple of time issues.  First off, when.  I don’t know?  Late 2012?  mid-2013?  Nobody knows when homebuyer collective consciousness will give the signal and the multitude of people with jobs and credit will emerge.  The other time issue is the word, “suddenly.”  How “suddenly” will we roll from an inventory glut to a sellers’ market?  Relatively quickly compared to the six years it took to get us to this point.  A year, maybe.

I posted a NAR Research piece from Lawrence Yun documenting recent declines in inventory on Facebook earlier today and chimed in with my housing shortage prediction.  Steve Vincent from Help-U-Sell Triad in North Carolina responded with a street wise perspective:

James Dingman:  At Summit, I talked about the potential for a pending housing shortage. For six years we’ve created very little new housing and when the tipping point is reached and buyers flood back into the market, a shortage could develop quickly. Mr. Yun adds fuel to that fire.

 

Tom Burdine:   That is probably true, but it sounds amazingly impossible right now!

 

Steve Vincent:   I’m concerned that at the first hint of good or improving news there will be a rush of new listings from people who have postponed marketing their home. No one talks about that potential ‘shadow inventory.’

 

James Dingman:   Don’t you think we’d have to see a 10% or more increase in values before fence-sitting sellers came back? My guess is most are waiting because they don’t think they can get enough for their properties. What they’re waiting for is for values to return, but that’s going to take YEARS.

 

Steve Vincent:  Certainly truth in that, but my day-to-day experience makes me think there are plenty of sellers just avoiding the long, slow market for reasons other than current value. Many just don’t want the hassle in what they perceive to be a losing situation. In our market the “move-up buyer” has largely disappeared. Combination of reasons: job insecurity, waiting for the market to bottom before purchasing, avoiding marketing their current home. I think there are lots of these would be sellers who are just waiting for good news – a better mood. My guess is the election could turn the tide for these folks.

 

James Dingman:  Ah – so the real world (that’s you) sees a lot of sellers in ‘Hibernation’ during this economic winter. When the thaw begins, and when they rush in, we’re going to sputter and lurch like a cold Model T. Ok, I get that. Sometimes, up here where the rubber meets the clouds, we can miss the nuances.

Steve Vincent:   I think hibernation is the exact right term. When these folks return to the market it will have a supressing result. Hopefully, their numbers are less than I fear.
I can see Steve’s point and agree:  an improvement may create new challenges as well.  But the key is, there will be movement in the market place.  Movement creates momentum and opportunity.

 

We’re heading into Thanksgiving in a few days.  I love the Holiday because I love food.  I also love it because it’s all about Gratitude.  If you believe we create our own reality, if you buy the idea that we attract what we think about, you know positive change begins with gratitude.  Good things rarely come to people who are obsessed with what they don’t have.  Good things rarely come to people who are unhappy with what they do have.  (As I’ve said before:  Money Loves Happy).

 

So this Thanksgiving, let’s be grateful for a housing market that is better than it was, for buyers who can buy, for sellers who can sell and for lenders who can lend.  Let’s rejoice that we are doing better – even if it’s just a little better – and set up the Universe to create that buyer tipping point soon.

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