REALTOR, Beware! - Part 1 (International Focus)

By
Real Estate Agent with Prudential CT Realty

It wasn't that long ago as a realtor that you just needed to watch the local market to see what homes were selling and at what prices.  International focus?  I want to make it clear that I am not an expert in this area but I did finish half a PhD degree in International Business and Economics. Even if you do NOT buy or sell with international clients ignore what is going on internationally at your own peril!

Why?

There are a number of key reasons but they all have to do with confidence in the local market and the ability of individuals to buy homes.

The American press has focused on what has happened to our stock markets, the fall of a number of significance financial corporations, our weakening economy, and the almost total lack of available credit.  With a crucial Presidential election around the corner, what other little space the media has it is taken up with U.S. elections. 

What has nothing received much (if any at all) is #1 - The U.S. government has decided to move from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards starting next year (for large corporations) and must be adopted by all U. S. companies by 2015.  GAAP was developed after the Stock Market crash in 1929, and has been in continuous use since.  Published yesterday in several articles was a report by Protiviti (a global business consulting and internal audit firm) that 48% of U.S. companies are not prepared for this change citing cost and education as the leading barriers to change.

#2 - Many of the world leaders are calling for a summit (to be held in about a month).  Many leaders (especially Brown of the UK, Merkel of Germany, and Sarkozy of Russia) are calling for major reforms; two key topics will be exchange rates and IFRS. Many journalists around the world are calling this Bretton Woods II (in reference to the meeting in 1944 in a New Hampshire town called Bretton Woods by 44 allied countries which established the post-War World II exchange rate system).  There are also statements being made by these leaders that the International Monetary Fund (IMF) and World Bank (WB) need to take a more prominent role in the global financial markets.  There are even stories appearing that a number of world leaders will seek at this global summit to create a "Global Financial Regulatory Body".

#3 - The recent financial events have led to a total financial meltdown in the country of Iceland and the European Central Bank (ECB) has had to loan the Ukrainian government $5 billion dollars to keep it solvent.   I have read articles from journalist outside the U.S. writing about businesses within their own countries expressing views that the convoluted, complex nature of the international deals done by Lehman Brothers, AIG, and key banks will take months to unravel and to know the full extent of the impact of their failures. Here, in the U.S., these stories are barely getting press (if at all), yet their impact will be significant over time and directly effect the attitudes of world leaders at this summit.

 

So why should you as a realtor need to beware?

If almost half the U.S. companies are not prepared to make a change to IFRS and this summit changes the rules, how many more will become unprepared?  If they change the exchange rate system the value of the dollar will change and although the value of one house versus another will not change it could adversely affect American businesses, especially those that are international.

Having spent more than a dozen years within large corporations and watching it from afar (through my wife's business consulting), I know that in uncertain times corporations very much tend to be conservative in their expenditures. If they don't know what accounting rules to follow, if they don't know what their inventory is worth, if they can't peg exchange rates they can't put together sales contracts, hire people, or create an annual business plan with much certainty. People will be laid off but than re-hired as consultants.  The effect will lower overhead for businesses, allowing them more maneuverability if they have to cut back. The former employees may even see a bump up in pay (so they can pay for medical expenses) but their change in employment status will affect their ability to get mortgages.

Overall, these changes could adversely affect consumer confidence.

Recommendations:

Don't stop doing real estate business! Do pay attention, especially to the World Summit. Carefully read anything from that meeting.  Listen to the news (or get Google Alerts) concerning corporate layoffs. You need to be able to advise your buyers and your sellers what to do.  Like never before, they need us to be professionals and to know what is going on.  Unfortunately, events have truly made the world shrink and we need to "see" beyond our local markets!

Comments (1)

Larry Story ALC
Total Care Realty - Greensboro, NC
Beneath it all is the Land, Covering all of NC

Excellent post and very well received.  I do quite a bit of international business.

Oct 21, 2008 09:17 AM