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?
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