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This Isn't Just a Bad Market...

By
Home Builder with CSR

This is a paradigm shift. Think about it. Interest rates went up on many ARM loans, but what else happened? Did everyone who is in or near foreclosure lose their jobs? Was there some massive layoff? No. Many people are just walking away from their bets. The bet that they could get a loan on an asset that would continue to appreciate. Now interest rates are relatively low again,  and still foreclosures are at all time highs. I am sure many of those ARM's have gone down now or at least stabilized. Why are so many people losing their homes?

I can surmise that we are witnessing a paradigm shift that is partially eclipsed by the housing bubble bursting. The shift is in how real estate is thought of and handled in this country. As real estate professionals, we are most affected by this shift. I have written before in my other blogs about how certain websites have changed our business. That is certainly part of the shift, but the real shift is in the value we, as professionals, bring to the transaction and how the public perceives that value. 

Whether deserved or not, we will be watched much more closely than before. Our fees will be scrutinized. Our methods will be questioned.  Our competition will be considered more by our clients. We will not only be competing with each other but with whole new alternative methods to buying and selling a property. Flat fee pricing, deep discount brokerages, MLS only services, online searches, online pricing engines, internet valuation/brokerage sites, do-it-yourself sites, and many more new methods of finding and buying a home are available today that weren't available just a year ago. There is much talk about putting more information and power into the hands of the consumer. Gone are the days of the monopoly that Realtors had over the MLS and the information it held. The power is with the people. Will they use it? I think so. 

Many of my rants like this one elicit the same response, "A true professional is always valuable and personalized service is always preferred by John Q. Public." While this statement may be true today it is not absolute and it is changing drastically. Most people are consulting the internet when buying a home. That wasn't true just a few years ago (shift). By the time my twelve year old son buys a house, he may never need to or want to pay to use the services of a human. I think part of the resistance to acknowledging this shift is real fear. I know that I question my own value and place in this new paradigm.

This paradigm shift is not new to America. Many industries have already been completely changed or even wiped out by innovation. Does anyone  remember the stories of the old ice companies before the refrigerator was invented. Goodbye ice industry! Some other industries, like our own, have been forced to initiate change because of public sentiment (energy). This shift is happening just as we are in the midst of a very bad market, but this shift and this bursting bubble are mutually exclusive. One did not cause the other and both had to happen. 

I have no idea how many people are employed in this country directly in the real estate transaction business, but for fun let's say it was 5% of our working population in 2000. Since I am throwing out random numbers, let's say that in 2004 that percentage jumped to 7% and then capped out at 8% in 2006. I don't know the numbers but I know the rough trends, I am saying that based on these fictitious numbers, I believe that when the dust settles the amount of people directly employed  in the real estate transaction business will drop to around 3%. That is the shift in a nutshell. Technology, public opinion, and value perception have, and will, continue to force people out of the business.

At the onset of this bad market, the consensus among my colleagues was that this market would put the faint of heart and the rookies and part timers out but that the real pros would last. I really believed that. I am seeing now that that was not accurate. Some of the pros are having to find employment elsewhere now too. There is that shift again. It's not just the bad market, it's how we do business and most of us are going to have to redefine our roles and our value in this new industry. The opportunity now is that we can all be pioneers. Maybe it will only be the pioneers among us that are left standing when this market picks back up again. 

Where are my cowboy boots?

Comments(8)

Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

There are good parts of the market in this country.  Not every market is the same...and splashing gloom and doom and negative just brings everyone down.  There are deals out there...there are parts of the country where you can still buy a quality home for under $50,000 with local community quality of life and old fashioned values. Folks in Maine save money for the ups and downs...but thy don't stop, complain and whine...Promote the positive!

Jul 02, 2008 10:07 PM
Faith LaRosse
Springer Realty Group - Limerick, PA
Serving Berks, Chester & Montgomery Counties

Yikes...putting on the positive attitude is alittle tougher this morning after reading that!  We just have to keep putting one foot in front of the other; stay informed and aware of what's happening around us.  A good professional attitude and a willingness to do your very best for your client will NEVER come out of a computer! No, Idon't have blinders on-by any stretch...I just have a true belief that people will ALWAYS need people-be it in a different capacity? Maybe. But real hard working, smart professionals will never go out of style.

Jul 02, 2008 10:24 PM
Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission.
Florida List For Less Realty, Inc. Broker/Owner. - Cooper City, FL

Yes, the economic numbers do worry me as well.

Unless we end the war the economy will remain in the doldrums.

This is choking our nation...

Jul 02, 2008 11:30 PM
Joe Virnig
RE/MAX Gold Coast REALTORS, Ventura County, California - Ventura, CA
No Ordinary Joe

Everything changes and we will adapt.  Your doom and gloom scenario will not come to pass.  Buying a home is not like buying an airline ticket, or stock.  Will there be pressure on commissions?  For certain.  Will good agents survive and prosper?  They are doing it now.

Jul 03, 2008 02:06 AM
Es r
CSR - Huntington, TX

I appreciate all your comments. Scott, I agree that the war is "choking our economy". I knew that I would get similar comments to what I have recieved saying that a true professional is worth their weight...

I think that is a lazy argument. It is easy to just sit back and have faith that a hard working professional will prevail. It is comforting too to know that there are absolutes  like that one too. I don't think it is true though. Our auto making industry was and is full of hard working professionals. It is still getting decimated by foreign competition. Washing machines work hard too. Hard work and professionalism won't cut it anymore. You need those two attributes plus ne more, vision.

Also, Faith, if it cost $1,000 to use a human and $100 to use a computer and the results were very similar which would you use to search for a new home?

I love it that you have taken the time to read my winded blog. It goes to show that we are not all apathetic. We care and we want the best. I don't mean to be doom and gloom, but hope doesn't change things. Change changes things.

Jul 03, 2008 04:08 AM
Glenn S. Phillips
Lake Homes Realty - Birmingham, AL
CEO, Lake Homes Realty / LakeHomes.com

Great post!  I agree, the real estate agents and Realtors used to "own the process."  Now, the process is available to anyone willing to put forth the effort via the Internet.

Of course, knowing the process (which the public can do now) does not necessarily mean understanding or being fluent in the process.  This is the new area Realtors must show their value.

To simply take a listing, post it on MLS and wait for contracts is the old way.  Basically, "for sale by owner + MLS."   Realtors do not own that exclusively any more.  And perhaps that is for the best.

Yes, the jeanie is out of the bottle.  As with all markets, and even in nature, the strong will adapt, survive and even thrive.  Those that don't, well, no one said survival was mandatory just for showing up.

Our company offers services that did not exist just a few years ago in the combination we offer.  This works (we are growing even in the current market conditions) because we are thinking different and providing something new and of value to the real estate market (well not to everyone... just those that are looking to be more efficient and genuinely grow their business).

The market didn't really change... it will always expand, contract, expand, contract.  Those participating in the market, however, are facing a changing customer and explosion of information that was formerly kept to the few.  That, indeed, is a paradigm shift with enormous implications!

Jul 12, 2008 08:53 AM
John Ford
Security National Properties - Eureka, CA

I have always told some of my peers that chnage is on the horizon!

Aug 01, 2008 07:14 PM
Trent Dalrymple (248) 854-0625
Home State Bank - Bloomfield Hills, MI
Allowing Mortgage Professionals to Lend Nationwide

My family has been in real estate for years, as realtors, brokers, an appraiser, lenders and investors, watching the changes, some good, some not so good.  The appraiser in our family saw her business changing several years ago and made her shift before the HVCC took over the industry, shifting right out of the business.  What's the saying... change is good?  Not so much this time, nor have I seen much depth of thought in the appraisals that are coming out lately, again literally killing the market, as if we need more hurdles to jump.  Hey, I'm in Detroit, the Motor City, we've fought the shift for years and look where it got us.  Luckily the forward thinkers have finally looked back to realize we need to lobby for the battery business and now we are on the cutting edge, years later. 

There will always be a need for the human factor in real estate, maybe more computerized assistance at times but most people want people involved when it comes to their home.  The worst part... I hope all of this doesn't weed out the cowboys in the white hats. 

Oct 12, 2009 06:01 AM