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Industry: The REALTOR and the hairdresser

A REALTOR walked into a salon and asked a hairdresser "How's business?" "Terrible", replied the hairdresser, "I'm getting half as many bookings as last year." "That is terrible", said the REALTOR, "Maybe you should think about lowering your prices."

A hairdresser walked into a brokerage and asked a REALTOR "How's business?" "Pretty good", replied the REALTOR, "despite what you read in the papers." "Really?", countered the hairdresser, "I thought I read that you were only selling half as many homes as last year?" "Technically that's true", said the REALTOR, "but home prices have remained pretty consistent. WE HAVE NO IDEA WHY MORE PEOPLE AREN'T BUYING HOMES."

Why is it that organized real estate, which understands economics in the real world, can't understand the obvious economics at work in their own industry?

Frank Jewett

Posted by Frank Jewett on 04/02/2008 02:43 AM

Comments (8)

industry, pricing, economics, denial

Post is included in group: Realtors®
Post is included in group: The Ninety-ninth Percentile

8 Comments on Industry: The REALTOR and the hairdresser

APR

2008

Frank, Great illustration of the market! Thanks for posting it!

Great story and post, Thanks Frank.

Cheers-

Mike

Frank, that is great! How come economics is always for somebody else? Maybe because we have an association?

Nice post. BUT a service carries costs of labor which painfully can be reduced. The home has more sticks and bricks overhead. Now yes the Hairdresser pays rent and electric etc but her costs are less. Having said that people need either to get realistic with their selling prices or hold for a better market

Frank,

I guess you might call it a hair-brained response to the situation!

Steve

Frank, thanks for the chuckle.

APR

2008

Frank: When I first read your post... I thought it said... "A realtor walks in a saloon and asks a hairdresser... how's business. I was wondering what that hairdresser was doing... taking a lunch break and having a few margaritas. I'd hate to see her next haircut... LOL.

Actually though, your post could be taken two ways... 1) should the sellers lower their asking prices ? or 2)... like the hairdresser lowered the price of her haircuts, I wondered if you were going in the direction of suggesting Realtors drop their commissions.

Karen Anne, that's a fair question.

The point of the story was that when inventory isn't selling, it's probably overpriced, especially when we are talking about something as practical and useful as a home. I'm sure Realtors understand that concept when it's someone else's product (or service) that isn't selling, but when their own product (homes) isn't selling, they muddy the waters with a lot of nonsense about unfair media coverage and a lot of wishful thinking about price stabilization. If transactions are 30% below average, the market is failing.

Price is the problem that fixes most other problems.

That's an industry motto. We need to remember that.

Looking at prices in my market, if every Realtor immediately renounced their commissions and worked for free, most of the listings still wouldn't sell. Whether the Realtor gets $15,000 or $10,000 or zilch doesn't matter when the property is listed for $50,000 more than comparable market value. You could donate your time and advertising costs and still have no takers. This problem isn't related to Realtor commissions.

Who controls selling price? The seller? The media? The agent? No, no, no. Buyers set the market.

We need to read the writing on the wall. Transactions are way down. Prices are clearly too high.

We need to stop overbidding for listings, stop trying to reinflate the bubble with vague positivity, and get back to basics.

Who educates the seller? We do. What are we telling sellers today? Prices are stabilizing, i.e. dig in your heels and hope for the best.

What should we be telling them? You've missed the peak. Take it off the market for a year or two or price it to move quickly because you may lose even more equity over the next twelve months.

Commissions aren't the reason transactions are down by more than 30%.

Price is still the problem that fixes most other problems.

Frank

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