Are you busy? Great. Are you aware of what's coming around the corner? Is something happening outside of your sphere that might impact you?
In the real estate and construction business, we all have to have our ear to the ground and be aware. Sometimes we stare at what is coming at us but cannot comprehend what is about to happen. We are comfortable, we are secure. It's been that way for a few years...
I was living in Austin, Tx in the mid-80s and Texas was considered the 'energy capital of the world'. The OPEC oil cartel started selling oil at $10/barrel. Texas was selling it at $30/barrel. Total disaster ensued. Little by little. At first, no one thought that real estate would be affected. It was an oil thing. We had real estate to back up the oil deals. Oh no...
In three years Texas was devastated and most young firms of any kind were leaving the Titanic. I was too late and completely unaware. I was young and I was drinking the kool-aid, I had no idea a statewide recession would hit not only Texas but every oil-producing and refining state in the country.
In scouting around for a new business location, I was on Braniff and the gentleman next to me asked: "Do you know why pigeons fly upside down over Houston?". I looked at him blankly.
"Because it ain't worth shi___ing on". Inc. magazine had Austin on its cover two years in a row. The second year the issue came out there were thousands of FOR SALE signs all over the hills.
After that debacle and 'safe' in Orlando, I vowed never to bear the brunt of something like this again and thought things were doing just hunky Dorito around here.
A huge build-up, lots of cash floating around, many cars in the barn, a personal house in the ground, and BAM! The Great Recession of the mid-2000s hit me without realizing what was going on. I didn't believe it. I didn't believe that such devastation would rock the entire country.
Like many others, we lost our shirts being overextended in so many ways. Oh yes, I bought my house at the height of the market. Still underwater.
SO... what can we learn about such catastrophes to protect ourselves from future debacles??
- You must be aware of local trends. Local markets sometimes survive national downturns, but not always. If a large retail or storage company is leaving town, you will see some unemployment. If a national chain is going to relocate, then you will see a hot market. In Austin, many California high tech companies have been moving there for the last 15 years. Now Idaho, Nevada and Oregon are looking good due to the street crisis in several large cities in California. Austin is still a booming market. If you lose a major local business that employs thousands, the repercussions will be negative, at least temporarily. Being totally immersed with a limited focus will not save you from a national incoming tsunami though. You cannot survive on your own island. You may be the last to fall, but you will.
- You must understand what national businesses are researching and bringing to market. An electric tractor might displace workers in an area with a gas or diesel manufacturing plant. What are the national market leaders reporting and experiencing? If there is a mortgage crisis, for example, your area might be immune due to several factors but it will eventually affect you as well. The stock market, real estate, the price of oil, etc. all tend to move and mirror a coming future, imminent or a few years away. A national economic downturn can be a result of internal factors or external ones. The last recession had little to do with outside forces.
- You should be politically aware of national movements and elections, social changes, etc. Elections matter and those who win want to push the agendas they promised to their constituents. Certain policies will definitely affect business and real estate in particular. You may not feel it immediately but ideology manifests itself in rules and local zoning and other legal changes. Some people may feel compelled to move to a different state to escape policies that affect them negatively. The states and cities that these 'national migrants' move to will flourish. The places they leave will suffer to some degree.
- You must be on top of international politics and economics. If there are tensions between superpowers and a possibility of conflict, your local area may be affected by events occurring thousands of miles away. International politics may involve movement and influx of people into your community which will affect local real estate values, jobs, etc. A tariff war affects certain industries and their communities may suffer, at least temporarily. The price of oil and gas affect states that rely heavily on energy. The value of corn, steel, aluminum, coal, etc. depends on scarcity and availability. The import of steel for years has devastated the now rusting belt. Entire communities have been frozen in time with real estate values dropping. A war may be positive for shipbuilding and the states that produce military materiel. It may negatively affect other cities and states.
- Is life and business really a toss of the dice? If you are a risk-taker then you might benefit in this high stakes game or get burned badly. Can you afford to blindly 'go with the flow'? Do you milk everything dry and then start again in a different location? Do you know how to time the stock market? Do you know how to hold 'em and when to fold 'em? We need to be aware constantly of market trends based on local, national, and international politics and economics. Just working your 'farm' with blinders will leave you susceptible to larger forces and impinge on your business. Take some time to evaluate the news.
While it may seem we have things under control, the fact is that nearly everything is out of our control.