Black Friday has shocked us out of our Tryptophan induced comas which was brought about from massive does of turkey and other Thanksgiving goodies. Right now many of you are probably filled with war stories of dealing angry crowds and fighting over the Xbox 360. The Grunt has decided to engage in these activities at a later date after the crowds have died down a bit.
The New York Times has had a hot bed of articles that I feel foreshadow certain developments in the industry
In So Few Properties, So Many Brokers
, the lovely Nadine Brozan writes about how new brokers are having a hard time gathering listings and buyers. This is due in part that more established brokers have already set up a pipeline of referrals and there are just too many agents in the field.
One of the frustrating things that agents experiences is that it requires a tremendous amount of patience and effort in creating a referral base. But it is all worth it since all it takes is one listing for an agent to setup their own pipeline. When that closes the agent proudly shows the spoils of their hunt and that attracts the attention of other sellers. There are other ways for brokers to get listings but this most well known and reliable.
Ms. Brozan states the following:The listing broker is the gatekeeper for the property, able to control viewings and, more important, get a cut of the commission even if another broker brings in the buyer. A listing has marketing and promotional benefits too. The name of the listing broker goes in the ad or on the Web site with the property, meaning potential buyers will start phoning and clicking, making contact with that broker.
Ms. Brozan is completely on the money. As I have stated on my craigislist entry, craigslist ads also serve as a way to generate leads. Since it is highly unlikely for buyers to purchase the apartment they contact an agent about it gives the agent the opportunity to find them something else. Also having a high amount of listings featured on an agent’s site gives the impression that they are well qualified to take care of your housing needs. That’s why some agents are slow to remove old listings from their sites.
Ms. Brozan’s article touches upon an issue that I have beaten the war drums over which is the impact of the Internet.The Internet has made it easier for buyers to connect directly with sellers or their brokers, keeping brokers without listings from potential clients. "The Web has changed our business for people coming in," said Paula Busch, a managing director at the Corcoran Group (where 46.7 percent of agents lacked listings). "Buyers in the below $1 million market go there first and then directly to open houses, and they say they don't need brokers."
I realize that Ms. Busch is making a reference to buyers brokers however I feel what she says also applies to listing brokers. As Ms. Brozan has stated in her article there is a select group of agents that have the privilege to gorge themselves in the exclusive listings trough. However I feel that their days are numbered. Craigslist and Google Base have already established there are other alternatives for sellers and buyers without the use of brokers. And they are not alone. As I write this Zillow is one of the many e-commerce real estate services that are gearing up for their D-day onto the shores of the real estate industry. It is only a matter of time before the e-commerce community carves up these listing hogs.
Marketing an apartment for sale is not brain surgery. And when sellers realize they can get the same type of service and traffic by going FSBO or using an alternative that does not charge the full commission, there will be a significant migration to those e-commerce solutions. There will be a need for brokers but they will be forced to work harder to justify their commissions. Those who will are unable to perform will be left behind.
Another article that has caught the Grunt’s eye was Jennifer A. Kingson’s Wireless Moves the Cash Register Where You Are.
According to Ms. KingsonPlumbers, limousine drivers, flea market proprietors and merchants of all sizes and stripes are beginning to take credit and debit cards in odd places, often using nothing more than an ordinary cellphone and a card swipe attachment, or a handheld device with a built-in swipe slot. Now that wireless networks span the nation and devices that tap into them are cheap and reliable, expectations for the technology are running high outside these niches.
I foresee this as the next evolution into the paperless real estate transaction once it is applied into the real estate industry. For instance landlords will eventually be able to process a rental application on a Blackberry and instead of having tenants running their asses to the bank for certified checks they can simply deposit the money with their credit or debit cards by swiping it on the Blackberry.
Buyers will be able to put a down payment through their wireless devices, which could also setup escrow accounts. A wireless system would also lower closing costs since a title search could be done online. Not only would these advances lower closing costs be lower since it would all be automated but also it would make the sales transactions conclude in a quick efficient pace.
All aspects of the real estate sales transactions will eventually go paperless since the overhead is lower with wireless and the profit potential is much higher.Cellphones are slower and cheaper than more sophisticated wireless systems that rely on Internet or satellite technology, but some merchants find bigger investments worthwhile. "If you run a sandwich shop in downtown New York and you have a two-hour period during the day where all your business happens, it matters to you if it takes 30 seconds for a dial-up credit card transaction, and it's important to you that wireless can do it in 2 seconds," Mr. Rasori said.Some retailers are already experimenting with hand-helds as a way to do what they call line-busting: making sure that people waiting in long lines for a cashier do not give up and abandon their merchandise. Apple Computer, for instance, started using them just this month in some of its retail stores to help reduce some of the holiday crush at cash registers.
"If you're buying a couple of dresses, a retail store wants the ability to walk up to you at that time, read the tags on the clothing items and create a sale right there," said O. B. Rawls IV, president of the North America region for Hypercom, a company based in Phoenix that sells payment card terminals and technology. "In a wireless mode, you can take advantage of impulse buying and line-busting, and I think that's pretty slick."
As Ms. Kingson has shown the capital outlays for wireless commerce is more than reasonable considering the amount of revenue it will provide. And much to the chagrin of those who work in real estate it will allow consumers to outsource aspects of the transactions including title searches and contracts.
For instance when a board package is completed it needs to be physically delivered to the parties involved that requires a messenger, which costs money. It also requires time for the messenger to be called upon to pick up and deliver the package.
With the wireless transaction the use of the messenger is eliminated and the board package can be delivered via wireless without the usual encumbrances that are attached to the physical document itself. What I have touched upon is only the beginning of what will happen to the real estate world.
In my previous entry Don’t be a grasshopper
, I expressed my dismay at people in the real estate industry who were only setting themselves up for a fall by relying on the good times of the market. Daniel Gross most recent article As the McMansions Go, So Goes Job Growth
presents some grim yet unsurprising news.THERE'S a growing consensus that the housing market is cooling off. This month, Toll Brothers, the luxury home builder, warned that sales of McMansions were falling, and its highflying stock fell to earth. Last Thursday, the Commerce Department reported that housing starts, a reliable gauge of present activity, fell 5.6 percent in October from year-ago levels, while building permits, a reliable gauge of future activity, fell 6.7 percent. These data points are potentially worrisome, and not only for the legions of real estate brokers and Sheetrock layers toiling in offices and job sites across the country. In recent years, economists from Alan Greenspan on down have been discussing the way rising home prices and the growth of home-equity borrowing have fueled consumer spending, the piston that drives the country's economic engine. But in recent years, housing, real estate and the related industries have become a huge factor in another crucial economic area: employment growth.
It is the dot com bust all over again. People who ran out to get their real estate licenses or pooled money to buy lots to go into development we’ll be in the same boat as those who people who went out to get Microsoft and web design certifications during the tech boom of the late 90’s.If the frothy regional markets go flat or if prices simply stop rising at the rates of recent years, there will surely be wide-ranging economic effects on consumer spending and on jobs. "Housing and the job markets are joined at the hip," Mr. Zandi said. "And if housing cools, so too will hiring and the job market more broadly, particularly in the more juiced-up housing markets."
Greeeaaat! Is Starbucks hiring?If housing prices are flat in 2006 and residential investment falls 5 percent, there could be a direct loss of a few hundred thousand jobs related to real estate, Mr. Hatzius said. And the indirect effects will certainly be larger, Mr. Zandi said: "Housing is going to go from being a key contributor to the job engine to being a significant drag on job growth."
When the stock market popped back in the late 90’s, it was like a huge ball and chain wrapped around the neck of the economy dragging everything down. It appears it will be real estate’s turn.
But there's some good news. Ms. Bangalore notes that while housing's contribution to job growth has declined in recent months, "other sectors are picking up the slack."
Well at least that is some comfort. We will all have a place to go. Perhaps it will be hedgefunds.
Good people, it looks like the s**t is going to hit the fan on this one. We have two choices. We can give up or we can figure out what to do next. I am going for the latter.