Are you confused yet? Headlines may proclaim that real estate sales are up, but reading further gives one pause in trying to interpret some mixed messages. Indeed, home sales have started to rise, and may rise further as "shadow foreclosures" emerge from the shadows. Yet the housing market continues to be a drag on the entire economy. According to the AP Economic Survey, home values have fallen an average of 30% since 2006. While there has been some price and volume recovery at the low end, driven in part by investors and incentives, there has been continued pressure in the high-end market, which is strongly affected by fear of continuing equity erosion and a related low availability of jumbo loans. And the second home market suffers from the altered outlook of Boomers, who are nearing retirement with smaller nest eggs. The financial markets are still in turmoil, with over 200 banks having failed since the beginning of 2008 and FDIC seizures continuing at a rapid pace. The loss of 8 million jobs is a continuing drag, and slow improvement is expected. As a result, household formation has changed, with families moving in together and friends more likely to share housing.
One might ask, "Have we at least turned the corner?" To quote the National Bureau of Economic Research, "A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough." Most economists think we are about at the trough. Common wisdom, however, says, "when you lose your job we are in a recession; when I lose my job we are in a depression." But that crisis ends only with job recovery. Likewise for most of us, the real concern is economic recovery, and we want to know how that recovery will affect us. While detailed projections are fraught with peril, even for economists, it is increasingly clear that recovery will be U-shaped--that is, extended economic doldrums with a slow improvement. But that is a broad generalization. We need to look in more detail to discover how the recovery will affect each of us. That is, how can you make it a "you-shaped" recovery?
Even in a slow recovery, there are opportunities for savvy real estate agents. Businesses are beginning to hire again, and the economy is now generating nearly 200,000 new jobs per month in a population that continues to grow. And these new wage earners need places to live. Since new single-family housing starts have not yet begun to recover, these buyers will be shopping the existing inventory, both new and resale. In any housing recession, housing prices are slow to recover, but sales recover faster. However, the market that emerges will be different. And understanding that market will be key to your recovery.
The Great Recession has been a jolt to the nation's collective psyche. People have become more conservative in their personal finances. Expect people to be careful shoppers, no longer seeking McMansions, looking instead for houses that have and will retain affordable value. The age of the Internet continues to advance, giving shoppers more information, and making it harder for the agent to be accepted as the expert. And the way buyers communicate continues to change. Look closely at your email messages and you are likely to see that they were sent from a Blackberry or an iPhone." People may not even check their home phones for voice mail messages. Even among adults, texting is increasingly common. This is not yet the communication mode of older clients, but it is for younger Gen Xers and older Millennials who are the peak buyers today and whose world is fast paced.
The question for a real estate agent who has lived through this dismal market is, "how do you shape your business recovery; and, what can you do to determine it?" Will you be in tune with buyers, understanding how the recession has affected them and what they are looking for? Will you be armed with answers to those concerns? And can you keep up with their fast-paced communication style? Each generation has been affected by the market. The agent who learns how to address their concerns by understanding how each peer personality makes life style, investment plans, and problem solving decisions differently will be the first to achieve that "you-shaped" recovery.
Carmen and Lloyd Multhauf are the founding developers of the Generational Housing Specialist™ Council, a national real estate designation that focuses on the unique impacts made by different generations in establishing housing trends, financial products, negotiating skills and reaching a successful closing.