A Message to Prudential Fox & Roach Sales Associates
From Larry Flick
August 4, 2010
An Invisible Wall
There are many conflicting signals about the direction of our economy. We have entered into a challenging, fragile time and I expect we will remain here for the next few months. Summer 2010 began without fanfare, but marked an important milestone for our real estate market: it’s been one year since it hit bottom. During this time more buyers and sellers came together as each tax credit expired. But now activity has dropped off quite a bit. It seems as if our market has hit an invisible wall.
It’s always been predicted that the recovery would be slow and choppy; however, it’s clear our economy is in recovery. In the past year, we’ve experienced:
· Employment growth Six out of last eight months
· Private sector employment growth Past six months
· Personal income Seven consecutive months
· Wages and salaries Seven consecutive months
· Real estate sales Twelve months of improvement
The data supports that we are in a recovery, yet many consumers believe we are still in a recession. They are paying down debt and spending less. Businesses are still feeling the sting from the worst downturn since the Great Depression. Their caution has resulted in slow job growth, and banks are lending less.
The benefits of the federal economic stimulus package and real estate tax credits are dwindling. While the financial woes of Greece and other parts of Europe are not a direct threat to us, they have contributed to a significant drop in our stock market. It’s no wonder consumer confidence dropped two months in a row!
Our Local Real Estate Market
As mentioned, we’ve had 12 months of improving real estate sales:
We anticipated that real estate sales would drop after the expiration of the tax credit, but in June and July the decline was more than anticipated. There is a silver lining, however. It appears that the pressure on the high end market has started to ease:
In preparation for my next Chairman’s Report, I’ve asked some of our most successful sales associates to tell me what has been working for them. Their answers include relationship building and business development. While their replies come as no surprise, I was not expecting the level of intensity that they are putting into each of these areas:
§ Our best sales associates are spending more time than ever building relationships by educating consumers from the very beginning, before the point of an offer. Because buyers and sellers often receive inaccurate information from websites or hear generalities about real estate, they may initially be skeptical about your advice. These conflicting views can create tension. One sales associate has weekly meetings with sellers about pricing; another shows buyers the additional costs of a home at a 5.5% mortgage rate instead of the 4.5% currently available.
§ Business development requires us to help buyers and sellers understand the opportunity which exists
o Our best agents are proactively working their spheres, asking for referrals
o While they are keeping in touch, they constantly educate their contacts and encourage those who would like to make a lifestyle change to take advantage of the current market
o They are making greater use of internet content to move potential buyers off the sidelines
o Price and condition are what matter: it is a value driven market
A few of our sales associates describe the market as conflicted or neurotic. I can see why — the conditions are great for buying a home, but too few buyers are taking advantage of the opportunity; the economy is improving, but consumer confidence is down; sellers are unrealistic about the value of their homes, yet expect a deal when they buy. It’s amazing we aren’t going crazy ourselves!
But this market will not last forever. We will get through this rough spot. I anticipate we will bump along the bottom for the next few months, and then start to see increased growth in 2011 and 2012. But don’t expect a return to “normal” market conditions until four or five years from now.
These are difficult times. Every transaction is difficult and fraught with emotion. On top of this, you are working harder and earning less. You have my word that Prudential Fox & Roach/Trident will support you so that, even with fewer transactions in the market, your share of them will grow. We will continue to take advantage of a flight to quality and outperform the market as we have been doing so far this year. It’s because of each of you that this is happening!
Thank you for your hard work and dedication to your clients and our company. And, thank you for your continued support of The Trident Group. With your help we are breaking capture ratio records and will continue to do so!
Sincerely yours,
Larry
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