According to Warren Buffett, CEO of Berkshire Hathaway, "When the tide goes out, you find out who’s been swimming naked." Well, watching the shoreline we have been seeing a lot of national home builders standing in the wet sand in their birthday suits. While others are feeling the cold wind of exposure it’s this group that has really taken a hit.
The implications of "The Hangover" described in the 2007 Swanepoel Trends Report are destined to impact business well into 2008 and 2009. In that trend it was predicted a year and a half ago that "we may very well be heading into a recession." Well all the talk out of Washington has certainly been centered on "recession" – are we in one, will there be one, how bad will it be? These are all very timely questions for our industry and certainly ones that are being asked by the major home builders.
One subject of concern for builders and the industry at large relates to the recent report from the Census Bureau that the number of vacant homes being offered for sale in the U.S. hit a new record high in the first quarter of this year. The bureau reported that 2.9% of all U.S. homes (not including rental units) were vacant and up for sale – that’s 2.28 million properties. Add to that the facts that, according to the Commerce Department, new home sales plunged in March to the slowest pace in 16½ years and homeownership remained at 67.8% for the first quarter (down from its peak of 60.2% in 2004) and you have some real concern.
The pressure on these builders to unload inventory is directly affecting the inventory levels of re-sales and directly impacting their pricing. It is affecting all segments of the industry: agents, title companies, lenders, appraisers, support services, etc. And most reports indicate that we are going to ride this train well into 2009; some saying 2010.
All this points to just how critical it is to stay on top of what is happening in the industry.
It is worth noting that during the run-up of this subprime problem, some folks ignored its impact completely, for example:
David Lereah, former Chief Economist of NAR predicted on January 10, 2007 said "The steady improvement in [home] sales will support price appreciation … [despite] … all the wild projections by academics, Wall Street analysts and others in the media."
Ben Bernake, Federal Reserve Chairman, five months later on May 17, 2007 said "We do not expect the significant spillovers from the subprime market to the rest of the economy or to the financial system."
So, be weary of what you read and who you take guidance from. Base your decision on as much research and facts as you can get you hands on.
In different chapters the 2008 Swanepoel Trends Report discusses numerous strategies brokers and agents can follow to increase their income and maximize the opportunities created by the shifting market conditions.
Five strategies suggested in chapter 5 are:
1. Maximizing Technology and the Internet to the Fullest
2. Participating in or Building a Team
3. Creating and Following a Well Conceived Business Plan
4. Using Virtual Assistants to Assist with Less Critical Tasks
5. Diversifying and Assisting Home Buyers on Numerous Levels of the Home
"This is a great time to reengineer your business and lay a solid foundation for the next boom," says real estate visionary and author, Stefan Swanepoel. |
