Do you SEE and UNDERSTAND the 'writing on the wall'? 5 takeaways

By
Services for Real Estate Pros with John Henry Masterworks Design International, Inc. 13013

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??

  1. 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.
  2. 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.  
  3. 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.
  4. 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.
  5. 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.

 

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Rainmaker
1,054,309
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

In looking for a place called home, one should never live in a place that has 1 major employer. If Seattle only made Boeing, will the last person please turn off the city lights?  This 737 disaster is going to cost America at least 0.5% GPD. If there is another element we will be heading for a recession.  FAA got to act quick.

Jan 19, 2020 09:03 AM #20
Rainmaker
87,686
Kris Collis, Associate Broker
Smart Way America Realty - East Stroudsburg, PA
Professional Results you Expect 702-574-8102

Thanks for the history lesson John Henry.  Staying informed of the local market involves many factors as you pointed out.   For keeping up to speed on national and economic implications, one must be careful about which news and info sources to select.

Jan 19, 2020 09:10 AM #21
Rainmaker
545,697
Melinda (Mel) Peterson
Real Estate Cafe LLC - Bend, OR
The Blessed Realtor - ABR, CRS

I lost my skirt in two recessions and vowed never again.  Then, I took a page out of my Dad's book (who was born in the Great Depression) and started paying cash for everything.  I opened my boutique brokerage at the worst possible time (2008), when all of my colleagues predicted I'd never last.  Many of them have since gone under.  What they didn't know is what I'm made of... pure determination to survive and thrive, and be the last gal standing.  No more lethal lullabys for this gal.  I'm building my future with second hand bricks and a whole lotta prayers... on a solid foundation nonetheless.  Love this wise post John Henry, Florida Architect!

Jan 19, 2020 09:55 AM #22
Rainmaker
697,308
Laura Filip
Laura Filip Broker , Opening doors for All Seasons of Life - Whitesboro, TX
What can we do for you today?

John Henry, Florida Architect one day at a time, keep an eye out of what is going on around us. Although I stand on Psalms 91 All that is going on around us is there we see it and stand strong in our faith. Be wise in choices, be thankful for what we have. Change is always going to happen. Be prepared as much as one can. Blessings sent to all. 

Jan 19, 2020 11:38 AM #23
Rainmaker
2,113,309
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

John Henry, Florida Architect - No Siree! We really don't know what's around the corner. We must keep our ear to the ground. Don't put all your eggs in one basket. Pay attention to your gut and to the signs. Take care of your health!

I wasn't living in TX in the 80s. Illinois was doing great at the time! Massachusetts got hit bad. The Civil War in Afghanistan (1987-1992) Today, I don't think anyone is safe. It's definitely complicated and if there was a crystal ball that was 100% guaranteed, we'd all be whistling to the bank and living on beaches or wherever...

You survived! Somehow, most people do. Awareness is the key. You spelled it out well!

Jan 19, 2020 02:35 PM #24
Ambassador
4,123,057
Jeff Dowler, CRS
eXp Realty of California - Carlsbad, CA
The Southern California Relocation Dude

Hi John:

There is lots of wise advice here. Sometimes even when you try to pay attention you make decisions that don't work out as planned, but you do your best with the cards you are dealt.

Jeff

Jan 19, 2020 04:25 PM #25
Rainmaker
3,324,303
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

Great post “guts” can be wishful thinking !

Jan 19, 2020 05:50 PM #26
Rainmaker
3,263,428
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

Congrats on being Kathy highlighting your post this week!  Well deserved!

Jan 20, 2020 06:58 AM #27
Rainmaker
1,250,353
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Thought provoking post, John Henry, Florida Architect ... and one that pushes me to (once again) assess my outlook and positioning.  I think that's very important .... constant vigilance and education ...

Gene

 
Jan 20, 2020 07:38 AM #28
Ambassador
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Anna Banana Kruchten Broker/Owner, CRB, CRS
Phoenix Property Shoppe - Phoenix, AZ
602-380-4886

John very good post. I'll start with I got my PHD is something back in those very down market days and I didn't even want a PHD in something. As I mentioned to Candice I knew exactly when our market was shifting, exactly. That's when we began planning to get rid of as many expenses as we possibly could for the business and personal and somehow try to shore up the dike and make it through the whole mess.  Thankfully we recovered after quite a few years but we still lost a ton of money.  That's when I started paying more attention to the fox business channel.... and that's when I started my next PHD....I pay attention every single day. I don't worry, I enjoy working on this new PHD (joke intended)! Watch Varney and Co a couple of times and you'll see that he's so darn funny and has a lot of very smart folks on every day. I think I should graduate in a year or so LOL!

Jan 20, 2020 11:13 AM #29
Ambassador
2,267,630
Wanda Kubat-Nerdin - Wanda Can!
Prado Real Estate South - St. George, UT
So Utah Residential, Referral & Relocation REALTOR

Good points John Henry! Paying attention to what is happening around us is important and knowing when to adapt and adjust even moreso. Too many people rode the FUN wave before the last downturn, thinking they were immune.

Jan 20, 2020 06:45 PM #30
Rainmaker
1,533,414
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

I'm ready, bring it on.  I worry for the young people in this world though.

Jan 20, 2020 06:49 PM #31
Rainmaker
492,597
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

In every venture, like real estate, or starting any business there are risks.  I remember when I first got into Real Estate one of the things my teacher said was, one of the key words that describes real estate is an R WORD. Do you know what that is?  It was RISK.  So with this RISK or gamble ... the slogan is perfect:

Do you know how to hold 'em and when to fold 'em

Jan 20, 2020 07:00 PM #32
Rainmaker
3,277,190
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

John yes it is about seeing the trends, I used to lease cars every two years and then in 2003 I said to Diane I anticipate we will have a big crash and I do not want to have a car payment to worry about... so we paid all cash for my Lexus RX 330 in 2004.... needless to say I was anticipating a US crash... I did not realize that the whole Globe would have a melt down:)) the better you see the big picture the more you can plan... sadly idiots who kept saying in 2019 that there will be a recession have negatively effected my business that I did not anticipate... go figure....Endre

Jan 20, 2020 07:46 PM #33
Rainmaker
154,772
Raymond Henson, SRES, GRI
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA
Realtor

I certainly can not see into the future and have no idea what the markets will be like in a year, let alone 5 years.  As markets go up, I do believe it is wise to become more conservative, pay off debt, raise a little cash and be prepared, just in case.

BTW, my wife and I are part of the escaping movement you described.  Life does change and we need to be able to change with it. 

Jan 21, 2020 03:55 AM #34
Rainmaker
201,699
faye schubert
Branson, MO
Living the Branson Lake Life

I was in the oil business for 30 years and yes the 80's were brutal. I've been through maybe 20 layoff cycles in that time period ( I never was laid off). I did have to turn down a move to Houston and start with a new oil company.

New Orleans was an oil center, but the 80's cycle caused a lot of mergers and companies out of business. The trend moved to Houston. People were moving to Houston or lost their jobs. 

Those people who bought big houses, lots of cars, vacations did not make it. Those of us who lived tight, made it.

Jan 21, 2020 05:09 AM #35
Rainmaker
3,277,190
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Melinda (Mel) Peterson  it has been ages nice to see you on the platform and I am all about paying cash:)Endre

Jan 21, 2020 10:10 PM #36
Rainmaker
545,697
Melinda (Mel) Peterson
Real Estate Cafe LLC - Bend, OR
The Blessed Realtor - ABR, CRS

Hello my Friend!  Yes, it has been ages... life kicked me in the batootie so I needed a much welcomed break.  It's good to back among friends Endre Barath, Jr.! 

Jan 22, 2020 10:42 AM #37
Rainmaker
8,021
Pam Rumley Branson Realtor
Branson Edge Realtors 417-243-0100 - Branson, MO
Exclusive Buyer's Agent for entire Branson area

I watched my son live through Florida in 2008.  Not a pretty sight.  With retirement being right around the corner - we have trimmed way down to where we can live on very little income.  And yes, I can see the handwriting on the wall.  Thanks for sharing!

Jan 22, 2020 10:43 AM #38
Rainmaker
993,774
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I can really appreciate your post since I've lived in 4 states, starting in Kansas where I worked for a time at Koch!  My first mortgage was in '84 at probably 14%.  And now living in Arizona where we are a test market for I-buyers.  We do have a very good economy and we have no signs of slowing down, beating national averages, but I'm still cautious, not taking on any new debt, staying put.  We'll see!  Excellent post!

Jan 23, 2020 05:06 PM #39
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John Henry, Florida Architect

Residential Architect, Luxury Custom Home Design
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