It's not just the weather that's unusual these days. The state of the real estate market is abnormal as well. Generally speaking, real estate leads into a recession and out of a recession, with commercial real estate following residential trends nine months to a year later.
This time, we did lead into the recession, with the peak of prices and demand coming in about 2005, and falling every year since then. The big dip in the financial markets didn't happen for another three years, and, while the banks look as though they've come roaring out of the doldrums, real estate has not recovered. In fact, many economists say that only real estate has not begun to recover.
Why was this cycle different? For one thing, it was in many ways the perfect storm. One thing after another conspired to keep real estate from improving. More importantly, the one thing the government did do--the homebuyer tax credit--didn't work enough, and sent things crashing back down. Think of a ball that rolls uphill, but not quite to the top, and the speed with which it then comes back down, and replace that image with real estate. The most important factor, in my opinion, is that the government did help everybody else with actual cash--the banks, the insurance companies, and the automakers--leaving us essentially to fend for ourselves. As a result, we suffered even more than we otherwise would have, since the pain was not spread evenly.
If I sound as though I think that it was all a little unfair, that's true. And I'm more than a little tired of this market, as are all of my coworkers and industry compatriots. Instead of leading the country out of recession, we're still lagging. It looks as though we're in for another year of glacially-paced improvement, and maybe a couple of more years of slow progress before we really see good, or at least normal, times. The spring buying season will tell us a lot more, and, this time, I hope I'm wrong about the pace of recovery!
Wednesday, January 26, 2011
Tuesday, January 18, 2011
Independent Contractors
Yesterday I explained to a client that real estate agents are independent contractors. I know that most people realize that real estate agents, and companies, only get paid when someone buys or sells a piece of property. But sometimes I doubt whether they know the full extent of what that means. It means that agents don't get paid for their time. Or their gas. Or the lunch that they might buy you when you spend a long day looking at houses. Or their cell phone. Or their car, car insurance, and repairs. Or their real estate license, continuing education, Board fees, and MLS fees. Or the extra advertising and marketing that they may do on your property (while our firm pays for postage, advertising, and training, many firms charge agents for those services). It's expensive to be a real estate agent, and even more expensive to be a real professional, with all the tools.
Indpendent contractors, who don't get salaries or benefits, deduct their business expenses themselves. In effect, they run their own small businesses. They affiliate with brokers, and use the branding and offices of those brokers, but they don't work set hours. We aren't even allowed to carry worker's comp insurance on them. They assume the costs of working, and, as I often say, they "eat what they kill" in terms of compensation. They get paid for what they do, when it goes well. When it doesn't, they bear the risks.
Why, you may ask, did I decide to blog about this now? The simple answer is that, when I was told by this client that he understood that an agent only got paid when he bought, and that those were the breaks, I'm not sure he really got what he was saying. I guess it gets down to the Golden Rule, as most things do. How much time would you spend doing work for someone and not getting paid, before you felt that it was unfair?
Clients didn't create our compensation system in the real estate industry, and I'm not asking them to be responsible for changing it (although I would certainly love to change it!). I just want them to understand that, if they aren't serious, or they aren't willing to stay with someone until the transaction is completed, then they are really asking for services for free. And the way you treat someone who is doing you a favor may be different than the way you behave if you think it's someone's paid job to help you. It's that simple, and that complicated.
Indpendent contractors, who don't get salaries or benefits, deduct their business expenses themselves. In effect, they run their own small businesses. They affiliate with brokers, and use the branding and offices of those brokers, but they don't work set hours. We aren't even allowed to carry worker's comp insurance on them. They assume the costs of working, and, as I often say, they "eat what they kill" in terms of compensation. They get paid for what they do, when it goes well. When it doesn't, they bear the risks.
Why, you may ask, did I decide to blog about this now? The simple answer is that, when I was told by this client that he understood that an agent only got paid when he bought, and that those were the breaks, I'm not sure he really got what he was saying. I guess it gets down to the Golden Rule, as most things do. How much time would you spend doing work for someone and not getting paid, before you felt that it was unfair?
Clients didn't create our compensation system in the real estate industry, and I'm not asking them to be responsible for changing it (although I would certainly love to change it!). I just want them to understand that, if they aren't serious, or they aren't willing to stay with someone until the transaction is completed, then they are really asking for services for free. And the way you treat someone who is doing you a favor may be different than the way you behave if you think it's someone's paid job to help you. It's that simple, and that complicated.
Wednesday, January 12, 2011
Snowed In
When my children were little, and excited at the prospect of a snow day, I taught them that the sound of the phone was the sound of people cancelling their real estate appointments, thereby dampening slightly the joy of the day. Now that they are grown and gone, a snow day is entirely different. Today was a non-stop round of phone calls, lasting at least ten hours, preceded and followed by emails and paperwork. Since we're still not plowed out, it's been 24 hours since I've put more than a foot out the door; and yet, work went on all day. It began in the wee hours of the morning, when I left my warm bed to check the radar maps, to see whether I needed to cancel everything in our offices. I did. But most of us were busier than usual, handling crises and referrals, tied by Blackberrys and cell phones to our home offices.
It made me nostalgic for the "olden days" of my early years in real estate, where, once you had checked the daily mail, you knew that nothing much would happen until the next day's delivery. That was followed by the Fed Ex age, after which ensued the fax stage. Voice mail came next, and then everything changed with the arrival of email. Even though I realize that many of our clients are in different time zones and countries, where snow may never fall, it still seems surprising that I didn't even have time to read the morning paper (which I didn't even go down the driveway to look for, since I don't have boots that high!).
I know it's good that activity is picking up, and I was certainly grateful for the peace and quiet that allowed me to take my time doing things that had been put off earlier in the week for meetings. Now, however, I'm ready for an old-fashioned snow day!
It made me nostalgic for the "olden days" of my early years in real estate, where, once you had checked the daily mail, you knew that nothing much would happen until the next day's delivery. That was followed by the Fed Ex age, after which ensued the fax stage. Voice mail came next, and then everything changed with the arrival of email. Even though I realize that many of our clients are in different time zones and countries, where snow may never fall, it still seems surprising that I didn't even have time to read the morning paper (which I didn't even go down the driveway to look for, since I don't have boots that high!).
I know it's good that activity is picking up, and I was certainly grateful for the peace and quiet that allowed me to take my time doing things that had been put off earlier in the week for meetings. Now, however, I'm ready for an old-fashioned snow day!
Wednesday, January 5, 2011
Update from Arizona
It's 37 degrees here in Scottsdale as I write this, so it doesn't seem all that much warmer than at home, but it will get up to 60 by the time I finish my run. My daily path takes me past lots of For Sale signs, and the morning paper gives me news about the real estate market in Arizona.
The good news here is that the number of pre-foreclosures is down from what it used to be last year. That's sort of the silver lining on the cloud, since the total sales went down from 2009 to 2010 in Scottsdale, and the average price declined as well. The experts who were surveyed in the year-end wrap-up in the newspaper expressed a consensus that the big news was their surprise at a lack of improvement in the real estate market. Our driver when we landed said that there are still several thousand bankruptcies a month in the county. Commercial vacancies are sky high, and there are no new buildings planned or under construction.
The surprise at the anemic sales and loss of gains made during the tax credit months is true across the country. None of us expected that the second half of 2010 would be as bad as it turned out to be. The good news, however, for those of us in the snowy Northeast is that we never saw the boom that Arizona did in building. That means that we never got the spike that is now causing the abrupt fall out here. We had steady gains, and some inflated prices, but it was small potatoes compared to sun country.
Even here, there are signs of hope. On my daily running route, I see half as many For Sale signs as I did last year. And it's heartening for me to note that they are almost all local independent companies--another harbinger for us in Connecticut, I hope!
The good news here is that the number of pre-foreclosures is down from what it used to be last year. That's sort of the silver lining on the cloud, since the total sales went down from 2009 to 2010 in Scottsdale, and the average price declined as well. The experts who were surveyed in the year-end wrap-up in the newspaper expressed a consensus that the big news was their surprise at a lack of improvement in the real estate market. Our driver when we landed said that there are still several thousand bankruptcies a month in the county. Commercial vacancies are sky high, and there are no new buildings planned or under construction.
The surprise at the anemic sales and loss of gains made during the tax credit months is true across the country. None of us expected that the second half of 2010 would be as bad as it turned out to be. The good news, however, for those of us in the snowy Northeast is that we never saw the boom that Arizona did in building. That means that we never got the spike that is now causing the abrupt fall out here. We had steady gains, and some inflated prices, but it was small potatoes compared to sun country.
Even here, there are signs of hope. On my daily running route, I see half as many For Sale signs as I did last year. And it's heartening for me to note that they are almost all local independent companies--another harbinger for us in Connecticut, I hope!
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