I have worked in the housing industry for more than twenty years. My company is in Chicago where we are known as "The American Dream Builder". We have repeatedly won customer satisfaction awards from JD Power & Associates and others. We are highly respected both within and outside the homebuilding industry.
Over the past two years I have watched our company shrink from over 250 full-time employees to less than fifty. I have seen competitors who were once strong and vibrant...whither away...taking good people with them. Our neighborhoods stand half completed and our homeowners are suffering in a market where their new homes are worth as much as 20% less than what they paid for them a few years ago.
The collapse of the housing market has been at the center of our current economic crisis. While it is a matter of conjecture as to what caused the collapse, it cannot be argued that housing must be stabilized before (or while) we address the systematic issues that caused such a massive failure.
Our government does not serve us well by ignoring the economic impact that housing and homebuilding have on our economy. According to a report by the Sacramento Regional Research Institute (SRRI) in 2007, new housing construction contributed nearly $40 billion a year to the state of California’s economy and it supported in excess of a quarter million jobs. As impressive as those numbers are…they are nearly 40% less than those measured in 2005.
When related activities were included into the equation, new home construction generated over $350 billion in economic output, supported approximately 1.2 million jobs and was the single largest industry in California accounting for 11 percent of all economic activity.
While this study deals only with our largest state economy, one can imagine that the impact is proportional throughout the United States. This study only measures new construction and does not measure other housing related industries that are affected by the collapsed market.
It can be argued that no recovery will be possible without a housing solution. The home builders are proposing a package at www.fixhousingfirst.com . While I believe there are worthwhile ideas presented in that proposal I do not believe it is going to aid in repairing the systemic issues that led us into the over-supply that proved to be a housing bubble. We need to stimulate the market while not creating an incentive to fuel speculative building. We need to bolster a sagging market without creating a reward for risky business practices. Housing must be fixed if we are to create jobs, preserve household financial stability, and create a better economic future for our country. The old economic aphorism…Housing leads the economy to recovery…may be proven true again.
My suggestions are simple and are a hybrid of several policy ideas being floated around right now. My proposal will focus on:
• Saving homeowners from foreclosure.
• Stimulating the housing market so as to decrease existing inventory.
• Rewarding “Green Building” and sustainability from both the producer and the consumer side.
• Putting skilled workers to work on “Green” initiatives that will create employment now and energy efficiency for years to come.
Number One:
I suggest that the Housing Stimulus bill of 2008 needs to be revised in order to address the inadequacy of the $7500 first time buyer tax credit. This credit should be increased to $10,000 and not paid back annually. The $7500 credit was inadequate to stimulate first time buyer activity and the annual repayment actually became a disincentive for many potential buyers.
Instead the repayment should be required when the purchaser sells the home or transfers title. This mechanism already exists in the current bill. It should be the solitary means for recapture. This would prove to be a disincentive to “flipping” a property while mitigating the impact on buyers who are looking to settle into a neighborhood for the long term.
This action alone would greatly improve the efficacy of the Housing Stimulus bill already approved by Congress. I would go one step further by extending a $5000 tax credit to all purchasers using the same repayment proposal. This change would have the benefit of allowing a liquidity cushion for homebuyers who have become too accustomed to HELOC’s and Home Equity Loans as a means for furnishing their home or paying for unexpected emergencies. The government would simply issue the equivalency of a HELOC or Home Equity Loan and it would be repaid when the property is sold.
I would also monetize the tax credits. I would put that money directly into the purchasers account at closing. This would have the greatest single impact on driving demand. This immediate stimulus would certainly be felt on Main Street and would have a far greater impact than mailing stimulus checks to households who are inclined not to spend them.
Lastly, I would make these credits available for homes that are currently built. I would not allow these credits to directly fuel a new housing boom. I would use this stimulus to whittle away the existing inventory. Homes with a certificate of occupancy dated no later than April 1, 2009 could qualify for this program. Reducing the existing housing stock to a more manageable level would have the greatest single impact on future housing growth.
These revisions to the existing Housing Stimulus Bill would certainly improve its impact and get stimulus directly into the economy while strengthening the housing market almost immediately. It would also focus the stimulus on decreasing housing inventory which would prove to stabilize neighborhoods and likely reduce the pressure of households on the brink of foreclosure.
Number Two:
I would provide stronger incentives for “Green Building” practices for new home construction moving forward. LEED certification is one metric which could be adapted for evaluation the energy efficiency of a new building. Energy Star or NAHB Certified Green are two more means of measuring “Green Building”.
As we emerge from this housing collapse and start building homes again we should take this opportunity to transform the way we build our homes. The homes built today are 30% more efficient than homes built 30 years ago. We could increase the average efficiency of a new home by 50% more by simply requiring certification and rewarding compliance.
A federal tax credit of $2000 is already available to home builders who build homes (including both site-built and manufactured homes) projected to save at least 50% of the heating and cooling energy of a comparable home that meets the standards of the 2003 International Energy Conservation Code, including supplements. A $1000 credit is available to manufactured home producers for homes that save 30% or that qualify for the federal Energy Star Homes program. These credits are already available for buildings or systems placed into service from January 1, 2006, through December 31, 2009.
I propose that we need to increase this tax credit and extend it through 2011. We need to increase the amount of the credit to help offset some of the cost associated with greater energy efficiency. In a healthy market these costs could be passed on to the consumer more directly but today the costs would simply make high efficiency a costly choice for builders. Without greater support, more costly energy efficient home building would likely be abandoned as builders struggle to reduce costs in order to compete.
The federal tax credit should be increased to $5000 for two years and then phased out over three more years. This would allow enough time for stabilization in the housing market and allow for greater access to the technologies and products that will create sustainable energy efficient building practices. These green building materials, technologies and products will also add to the green industry demand of the future.
This stimulus would be aligned with President-Elect Obama’s stated policy to put people to work and to increase our nation’s energy independence. It would create green jobs and it would increase the demand for green technology. It would decrease our energy consumption today and for the future. It would revolutionize the way we build homes and it would be the new American Green Dream.
Number Three:
I would improve the implementation of the “New Hope for Homeowner’s” program already available through the FHA. I would untangle the process and make the application and acceptance process more streamlined. This program has real merit and thus far it has been underutilized. This program, in conjunction, with the initiatives outlined earlier should stem the tide of foreclosure.
One possible modification would include Governmental approval of revisions to appraisal rules for refinancing. It seems fairly simple to allow refinancing to homeowners who are in trouble. One obstacle is the declining market status for appraising home values. A homeowner who purchased with 5% down three years ago would certainly have a negative equity position in most markets today. I propose an allowance to give owner occupied properties the ability to refinance to 110% LTV. at 30 year fixed rates equal to the prime rate or 3.99% whichever is less. (Note: The Treasury Department is already considering an option to create a new source for funding Fannie & Freddie loans at 4.5% using a Treasury Bond offering to create the funding…great move!) I would treat this as a “Rate Buy Down” and I would have the IRS recapture up to $10,000 from the proceeds of any future sale as compensation for this rate reduction.
This would offer immediate relief for homeowners in trouble. It would also allow for a recapture of tax payer funds.
Number Four:
I would invite home builders and remodeling contractors to work as energy efficiency contractors on public housing, public buildings, foreclosed properties, schools, libraries and hospitals. Any stimulus package will need to have employment opportunities and sustainable energy policy at the forefront.
The housing industry has seen employment drop by more than 50 percent in certain regions. This underutilized capacity could be part of a private sector/public sector partnership to improve energy efficiency in public spaces. This partnership could stabilize a very vulnerable industry in our economy while helping to improve our energy independence as move to a stronger future.
These programs would work best through a grant program that focuses on using the private sector to keep people working and viable business afloat while the greater economy becomes stronger.
My proposals are not revolutionary. They are pragmatic. The government cannot solve the problems but they should stimulate the market and allow it to heal itself. The proposals do not create future problems while addressing the past problems. Housing is likely where this crisis began and housing will have to be healed in order to cure the systemic problems our economy now faces.
I would estimate that these changes alone would halt the quarterly reduction in construction payrolls. Over time these changes would likely result in at least a few hundred thousand new jobs at the very least. Most importantly we could stabilize this critical segment of our national economy and the single largest source of personal wealth in our economy. I have confidence that our government will act swiftly, decisively and effectively. We have new leadership and a mandate for decisive action. We are anxious to get back to work.
Wednesday, December 3, 2008
Wednesday, November 26, 2008
Housing Market...Signs of Improvement?
This is an article from "Real Money by TheStreet.com". I don't know about you but for me...any glimmer of improvement is worth taking a look at!
RealMoney by TheStreet.com
Housing Could Bottom Sooner Than You Think
Tuesday November 25, 10:00 am ET
ByDavid Sterman, RealMoney Contributor
If you took a snapshot of the current housing market, you would find little reason for cheer. A flood of "for sale" signs blight many a front yard in neighborhoods all across America, and buyers looking for foreclosed properties seem to be the only visible signs of support. Also, as Jim Cramer recently noted, it is not helpful that homebuilders keep adding to supply.
Nevertheless, the total supply of unsold homes is steadily dropping. As Tony Crescenzi points out, the rate of new household formation handily exceeds the amount of genuinely new homes on the market. (Some construction is the result of tear-downs or storm-damaged properties.)
Importantly, a number of indicators suggest that the worst of the housing slump may have passed. For starters, the steady drop in home prices is beginning to moderate. Home prices had been slumping 2% sequentially for a good portion of 2007, but those drops are now in the 0.50% to 1.00% range. While home prices may fall a bit more over the next few months, they may finally flatten later this winter.
In addition, mortgage rates are on the decline. After hitting 6.63% last July, the average 30-year mortgage has fallen to around 6%, and rates could head yet lower: 10-year T-bill yields have plunged to around 3.15% (at the time of this writing), which implies that 30-year mortgage rates could fall toward the 5% mark.
More telling is the historical relationship between owning and renting a home. From 1975 to 2000, that ratio was fairly constant, but in recent years, it has been far cheaper to rent than buy a home in many markets, as home prices shot up and rental costs rose only modestly. Now, the stunning drop in home prices has pricked a hole that bubble.
As recently as 18 months ago, the cost of owning was far above historical trends (more than 20%) in 16 out of the 20 cities surveyed by Case-Shiller. Now, only four out of the 20 markets surveyed show a 20%-plus gap. In the other 16 markets, the cost to own has reverted back toward the historical mean and, in some cases, is even below the cost of renting.
So many people insist that there are no buyers out there ready to pounce, but that's not the problem. There are plenty of potential homeowners waiting in the wings, most of whom simply want to see some stabilization in housing prices. When sentiment turns among these folks, the housing market will show real signs of life. We do not need to wait for the glut of unsold homes to fall to zero; we just need buyers' confidence to return.
To be sure, rising unemployment does not instill confidence, and this thesis may not play out until unemployment appears to have peaked, which may not happen until later in 2009. Before then, however, the combination of low mortgage rates and a continuing increase in the economic merit of owning vs. renting is bound to start bringing some buyers back into the housing market.
Of course, the latest read on existing home sales wasn't exactly encouraging, and that's likely to be the case for the next couple of months. That being said, investors should closely scrutinize subsequent readings for clues that this ultra-important segment of the economy begins to show signs of getting off the mat.
Following the old saying "it's always darkest before the dawn," sector share prices have been hitting new lows. The S&P Homebuilders Index hit new lows last week after having fallen more than 75% in the past three years. Many of the stocks in the index are selling not far above tangible book value at this point. For example, Pulte Homes sports a market value of about $2.2 billion yet has tangible book value in excess of $3 billion.
The question for many investors is whether that book value will erode further. That may happen if real estate carried on the books needs to get written down even further, which, again, relies on home prices finding a bottom. As a result, a floor in home prices may bring this sector back into the spotlight in the context of impressive price-to-book-value ratios.
Net-net: While many think that the housing bottom is several years away, it could come within the next two to three quarters.
RealMoney by TheStreet.com
Housing Could Bottom Sooner Than You Think
Tuesday November 25, 10:00 am ET
ByDavid Sterman, RealMoney Contributor
If you took a snapshot of the current housing market, you would find little reason for cheer. A flood of "for sale" signs blight many a front yard in neighborhoods all across America, and buyers looking for foreclosed properties seem to be the only visible signs of support. Also, as Jim Cramer recently noted, it is not helpful that homebuilders keep adding to supply.
Nevertheless, the total supply of unsold homes is steadily dropping. As Tony Crescenzi points out, the rate of new household formation handily exceeds the amount of genuinely new homes on the market. (Some construction is the result of tear-downs or storm-damaged properties.)
Importantly, a number of indicators suggest that the worst of the housing slump may have passed. For starters, the steady drop in home prices is beginning to moderate. Home prices had been slumping 2% sequentially for a good portion of 2007, but those drops are now in the 0.50% to 1.00% range. While home prices may fall a bit more over the next few months, they may finally flatten later this winter.
In addition, mortgage rates are on the decline. After hitting 6.63% last July, the average 30-year mortgage has fallen to around 6%, and rates could head yet lower: 10-year T-bill yields have plunged to around 3.15% (at the time of this writing), which implies that 30-year mortgage rates could fall toward the 5% mark.
More telling is the historical relationship between owning and renting a home. From 1975 to 2000, that ratio was fairly constant, but in recent years, it has been far cheaper to rent than buy a home in many markets, as home prices shot up and rental costs rose only modestly. Now, the stunning drop in home prices has pricked a hole that bubble.
As recently as 18 months ago, the cost of owning was far above historical trends (more than 20%) in 16 out of the 20 cities surveyed by Case-Shiller. Now, only four out of the 20 markets surveyed show a 20%-plus gap. In the other 16 markets, the cost to own has reverted back toward the historical mean and, in some cases, is even below the cost of renting.
So many people insist that there are no buyers out there ready to pounce, but that's not the problem. There are plenty of potential homeowners waiting in the wings, most of whom simply want to see some stabilization in housing prices. When sentiment turns among these folks, the housing market will show real signs of life. We do not need to wait for the glut of unsold homes to fall to zero; we just need buyers' confidence to return.
To be sure, rising unemployment does not instill confidence, and this thesis may not play out until unemployment appears to have peaked, which may not happen until later in 2009. Before then, however, the combination of low mortgage rates and a continuing increase in the economic merit of owning vs. renting is bound to start bringing some buyers back into the housing market.
Of course, the latest read on existing home sales wasn't exactly encouraging, and that's likely to be the case for the next couple of months. That being said, investors should closely scrutinize subsequent readings for clues that this ultra-important segment of the economy begins to show signs of getting off the mat.
Following the old saying "it's always darkest before the dawn," sector share prices have been hitting new lows. The S&P Homebuilders Index hit new lows last week after having fallen more than 75% in the past three years. Many of the stocks in the index are selling not far above tangible book value at this point. For example, Pulte Homes sports a market value of about $2.2 billion yet has tangible book value in excess of $3 billion.
The question for many investors is whether that book value will erode further. That may happen if real estate carried on the books needs to get written down even further, which, again, relies on home prices finding a bottom. As a result, a floor in home prices may bring this sector back into the spotlight in the context of impressive price-to-book-value ratios.
Net-net: While many think that the housing bottom is several years away, it could come within the next two to three quarters.
Monday, November 17, 2008
Fix Housing First?
The economy is on everyone's mind. It is the universal challenge we all are forced to confront right now. The banking industry...the insurance giant "AIG"...the investment banks...now the auto industry...everyone is being crushed by this recession and they are looking for government to lead.
While economists will be arguing for decades as to the root cause(s)of this economic crisis, right now we should be focused on stimulating growth. The housing industry is pushing for a "fix housing first" initiative that is focused on stabilizing the housing industry and the real estate markets.
I believe the general premise is valid and potentially viable...if we can bring stability to the housing market, we can provide a base from which growth could begin. I do not know if this proposal is the best way or the only way to achieve that goal. Take a look at the website "Fix Housing First". I would love to get some feedback or even some better ideas!
While economists will be arguing for decades as to the root cause(s)of this economic crisis, right now we should be focused on stimulating growth. The housing industry is pushing for a "fix housing first" initiative that is focused on stabilizing the housing industry and the real estate markets.
I believe the general premise is valid and potentially viable...if we can bring stability to the housing market, we can provide a base from which growth could begin. I do not know if this proposal is the best way or the only way to achieve that goal. Take a look at the website "Fix Housing First". I would love to get some feedback or even some better ideas!
Monday, September 29, 2008
We're gonna need a bigger boat...
The past week has been akin to being in a slow speed ship wreck. We have been sitting on the deck of the Titanic arguing over whether or not we should bail out the first class cabins. Meanwhile the band played on...
Do I endorse a $700,000,000,000.00 government welfare program for Investment Bankers and Corporate Fat-Cats? Of course not... Do I endorse free markets where the risk of loss is the ultimate means of keeping the system honest? Of course I do. However, we are not dealing with a "zero sum game" in this case. Nothing in life is ever as simple as "yes or no".
We can argue about blame and credit...regulation and deregulation...until we are blue in the face. The essential truth is more nuanced and ultimately less satisfying. We need to decide whether or not we will save ourselves to "fight" another day. The ship is sinking...let's save the ship before we fire the crew.
$700,000,000.00 is an incomprehensible amount. 25% unemployment is an unfathomable possibility. If we can save the ship before we all drown...I promise we can go back to fighting over taxes, guns, religion, culture, proximity to Russia, flag pins, and war. Until then...let's grab a bucket and start bailing.
Do I endorse a $700,000,000,000.00 government welfare program for Investment Bankers and Corporate Fat-Cats? Of course not... Do I endorse free markets where the risk of loss is the ultimate means of keeping the system honest? Of course I do. However, we are not dealing with a "zero sum game" in this case. Nothing in life is ever as simple as "yes or no".
We can argue about blame and credit...regulation and deregulation...until we are blue in the face. The essential truth is more nuanced and ultimately less satisfying. We need to decide whether or not we will save ourselves to "fight" another day. The ship is sinking...let's save the ship before we fire the crew.
$700,000,000.00 is an incomprehensible amount. 25% unemployment is an unfathomable possibility. If we can save the ship before we all drown...I promise we can go back to fighting over taxes, guns, religion, culture, proximity to Russia, flag pins, and war. Until then...let's grab a bucket and start bailing.
Thursday, June 26, 2008
The American Dream: The Green Solution?
American automakers are suspending production on low mileage vehicles. Inventory levels of SUV’s and Light Trucks exceed four months. Gas is selling at $4.25 a gallon. Americans have reduced their mileage driven by over one billion miles per month. Meanwhile hybrid cars are selling above list.
Americans want to do what is right for society, the environment, the trees…but more importantly they want to save energy and energy costs. It makes good sense. But in the new home building business we simply trudge onward…reducing prices, increasing incentives, hoping to find the bottom of the market.
Take a look at this video...it spells out the challenges and the opportunities pretty clearly.
We need a new building boom but a sustainable and responsible boom. We need the American Dream business to be part of the American Green Solution.
I would like to propose that Senator Obama suggest an enhancement to the federal tax credits for energy efficient new homes as is contained in the federal Energy Policy Act of 2005. I would suggest that this program could also be combined with a tax incentive for consumers that purchase an energy efficient new home as well.
Currently the 2005 Energy Policy Act limits the tax credit to builders at $2000. It is estimated that making a new home “energy efficient” enough to qualify for the tax credit would require as much as a 4% to 7% increase in direct cost. This cost would be passed on to the consumer and would have a direct and negative effect on the pricing elasticity relative to less efficient new homes. I propose increasing this credit to a maximum of $5000 per home. The credit could be targeted to new homes under $500,000 for maximum impact. We would then increase the likelihood that builders will build more homes that would qualify for this sort of tax advantage.
The consumer should also be rewarded for purchasing a more energy efficient new home as well. The tax incentives should be immediate and worthwhile. A $500 tax rebate would be a reasonable target as it would not be a budget buster but it would provide real tangible benefits directly to the consumer. We need to address both the supply and demand pressures for adopting green building technology.
The homebuilding industry is not only a major employer but it is also a driving force for our economy as a whole. We are currently experiencing the worst housing downturn in over 19 years. We need to stimulate responsible growth in this industry. We also need to increase the focus on energy efficiency in our homes as well as our automobiles. Rather than constantly focusing on gas prices, we can save energy and reduce harmful by products just by changing the way we build our new homes. It is estimated that new homes may be as much as 20% to 30% more efficient than homes of thirty years ago.
Right now programs like Energy Star and LEED are delivering homes that are between 25% and 50% more energy efficient than other new homes. Why not encourage that? It would be the equivalent of taking a car that currently gets 25 miles per gallon and improving that to 31-37 with no new technology!
A program that targets energy consumption and green house gas reduction while stimulating the housing industry would be a great way to get America building again!
Americans want to do what is right for society, the environment, the trees…but more importantly they want to save energy and energy costs. It makes good sense. But in the new home building business we simply trudge onward…reducing prices, increasing incentives, hoping to find the bottom of the market.
Take a look at this video...it spells out the challenges and the opportunities pretty clearly.
We need a new building boom but a sustainable and responsible boom. We need the American Dream business to be part of the American Green Solution.
I would like to propose that Senator Obama suggest an enhancement to the federal tax credits for energy efficient new homes as is contained in the federal Energy Policy Act of 2005. I would suggest that this program could also be combined with a tax incentive for consumers that purchase an energy efficient new home as well.
Currently the 2005 Energy Policy Act limits the tax credit to builders at $2000. It is estimated that making a new home “energy efficient” enough to qualify for the tax credit would require as much as a 4% to 7% increase in direct cost. This cost would be passed on to the consumer and would have a direct and negative effect on the pricing elasticity relative to less efficient new homes. I propose increasing this credit to a maximum of $5000 per home. The credit could be targeted to new homes under $500,000 for maximum impact. We would then increase the likelihood that builders will build more homes that would qualify for this sort of tax advantage.
The consumer should also be rewarded for purchasing a more energy efficient new home as well. The tax incentives should be immediate and worthwhile. A $500 tax rebate would be a reasonable target as it would not be a budget buster but it would provide real tangible benefits directly to the consumer. We need to address both the supply and demand pressures for adopting green building technology.
The homebuilding industry is not only a major employer but it is also a driving force for our economy as a whole. We are currently experiencing the worst housing downturn in over 19 years. We need to stimulate responsible growth in this industry. We also need to increase the focus on energy efficiency in our homes as well as our automobiles. Rather than constantly focusing on gas prices, we can save energy and reduce harmful by products just by changing the way we build our new homes. It is estimated that new homes may be as much as 20% to 30% more efficient than homes of thirty years ago.
Right now programs like Energy Star and LEED are delivering homes that are between 25% and 50% more energy efficient than other new homes. Why not encourage that? It would be the equivalent of taking a car that currently gets 25 miles per gallon and improving that to 31-37 with no new technology!
A program that targets energy consumption and green house gas reduction while stimulating the housing industry would be a great way to get America building again!
Thursday, May 8, 2008
Another View...How to keep your sanity in an insane market.
Editors Note: I am always looking to share other people's views and insights as well as my own. As many of you know, the people who work in the Real Estate market are trying to make sense of what they are going through. This week I am posting the thoughts of a special guest writer. Nicole Abele is a Sales Manager with Lakewood Homes. She shares her insight on how she is coping with this dysfunctional housing market without becoming dysfunctional. RB
2002-Control it
2003-Work for it
2004-I think I am working for it (But it seems too easy)
2005-Now I think I have it
2006-Got it
2007-Trying to hold on to it
2008-Lost it
I just realized today I am the youngest person still employed by my company. Funny, I am 28 (what is considered a seasoned age at some companies) and it drives me nuts when people play the age game with me. My dad always said that you will graduate college thinking you know everything and will enter your thirties knowing you know nothing. I know nothing!
“Growing up” professionally in this industry has been such an experience. I went from being a nursing student to being part of prosperous company that sold 1,800 homes in a year. It was all about timing. I was a successful sales person mostly because I was here at the right time. For most of us (from 2002-2006) in the new home industry all we had to do is show up and know how to work fast. By doing that, we were successful.
Reality, however, kicked us in the ass in June 2006. I was just promoted to a sales manager. Lucky for me, just in time to maintain my old salary as the market took a hard hit. Unlucky for me, I had no idea what was to lie ahead.
I went from literally taking orders to “what the hell is wrong with me? I have not sold anything for a month.” All the skills I had (working quick, being efficient and creating urgency) were rendered obsolete by our housing recession. I resisted at first, thinking that this was a fluke and that if I kept doing what I did so well in the past everything would fall back into place. WRONG!
Then something happened. I sat last Saturday and listened to a client say that she was buying here because of my partner. She said and I quote “I loved his personality and his selling style. That is why I am here”. Shit, I almost fell out of my chair! “It works” I thought. Being there, being present and willing to try new things got us a sale! If I would have heard this in 2006 I would have thought “Oh how sweet”. But for all of us out there selling now…know that this kind of occurrence could just be our tipping point.
I have to say my mindset has completely changed. I always was looking at what can this market do for me. Now I am thinking… “what opportunities do I have in this market?” People, more than ever, are looking for guidance during this “housing crisis”. People still want to move, they want a new home and a safe community to raise their family. What they are lacking is the security to do so. They listen to all the negative talk on the news about the declining market. Yet, they still get in their cars and drive to our communities in hope of finding answers. What we need to do is have the right mindset and be there to give them the answers they need. Hell, we are all scared right now and our lives reflect that. This market has affected our paychecks, lifestyles and attitude. Yet we are still here and so is our opportunity. Helping people get into the home they want and can afford is still a strong desire for most people in our line of work. For us, sales people that love their jobs, we can still do this.
Making 150 to 200K a year is long gone…for now. Making 70K is a challenge but still realistic. You can choose to bail out right now…this an option. If you do not love what you do then you should probably go. If you love what you do…then stay. Try crazy things, do what you never thought you would do and for god-sake have some fun! Try it, it just might work. What you do right now may not bring immediate results (sales), but it will position you and your company for a great future.
An aside…
This past month has inspired me. Like golf, you can play so poorly for so long and think you suck. However, all you need is that one good hit (the right swing, mindset and contact with the ball) to keep you in the game. Despite layoffs, confusion and uncertainty I find myself drawn back. I feel something is happening. I do not know what it is, but I know that it is good. Take me off your list of people to worry about. One thing about me…I am always ok. I may float between extremes but it is the only way I find common ground. I like that about me (because it works for me)!
Here are some inspirational quotes and words of wisdom that Nicole likes to remember:
Terra firma ain’t so firma.
All structures are unstable.
Wisdom is knowing that I am nothing…Love is knowing that I am everything…and in between my life moves.
This too shall pass.
Whatever you resist…persists.
Chin up, shoulders back, strut a little. Don’t lick your wounds. Celebrate your scars. You are in a lion’s war. Just because you did not win doesn’t mean you don’t know how to roar. (Ok, it is from Grey’s Anatomy but I liked it. LOSER)
When you do not know what to do…do nothing.
The answer will come at the time when you have to make a decision. (That’s from Grandma got to love her)
Final Note: In the future I will be trying to strong-arm more of my friends, family, and colleagues into sharing their views. If you have some thoughts to share on leadership, life, motivation, self-improvement, sales, real estate, politics or any other worthwhile topic please let me know!
2002-Control it
2003-Work for it
2004-I think I am working for it (But it seems too easy)
2005-Now I think I have it
2006-Got it
2007-Trying to hold on to it
2008-Lost it
I just realized today I am the youngest person still employed by my company. Funny, I am 28 (what is considered a seasoned age at some companies) and it drives me nuts when people play the age game with me. My dad always said that you will graduate college thinking you know everything and will enter your thirties knowing you know nothing. I know nothing!
“Growing up” professionally in this industry has been such an experience. I went from being a nursing student to being part of prosperous company that sold 1,800 homes in a year. It was all about timing. I was a successful sales person mostly because I was here at the right time. For most of us (from 2002-2006) in the new home industry all we had to do is show up and know how to work fast. By doing that, we were successful.
Reality, however, kicked us in the ass in June 2006. I was just promoted to a sales manager. Lucky for me, just in time to maintain my old salary as the market took a hard hit. Unlucky for me, I had no idea what was to lie ahead.
I went from literally taking orders to “what the hell is wrong with me? I have not sold anything for a month.” All the skills I had (working quick, being efficient and creating urgency) were rendered obsolete by our housing recession. I resisted at first, thinking that this was a fluke and that if I kept doing what I did so well in the past everything would fall back into place. WRONG!
Then something happened. I sat last Saturday and listened to a client say that she was buying here because of my partner. She said and I quote “I loved his personality and his selling style. That is why I am here”. Shit, I almost fell out of my chair! “It works” I thought. Being there, being present and willing to try new things got us a sale! If I would have heard this in 2006 I would have thought “Oh how sweet”. But for all of us out there selling now…know that this kind of occurrence could just be our tipping point.
I have to say my mindset has completely changed. I always was looking at what can this market do for me. Now I am thinking… “what opportunities do I have in this market?” People, more than ever, are looking for guidance during this “housing crisis”. People still want to move, they want a new home and a safe community to raise their family. What they are lacking is the security to do so. They listen to all the negative talk on the news about the declining market. Yet, they still get in their cars and drive to our communities in hope of finding answers. What we need to do is have the right mindset and be there to give them the answers they need. Hell, we are all scared right now and our lives reflect that. This market has affected our paychecks, lifestyles and attitude. Yet we are still here and so is our opportunity. Helping people get into the home they want and can afford is still a strong desire for most people in our line of work. For us, sales people that love their jobs, we can still do this.
Making 150 to 200K a year is long gone…for now. Making 70K is a challenge but still realistic. You can choose to bail out right now…this an option. If you do not love what you do then you should probably go. If you love what you do…then stay. Try crazy things, do what you never thought you would do and for god-sake have some fun! Try it, it just might work. What you do right now may not bring immediate results (sales), but it will position you and your company for a great future.
An aside…
This past month has inspired me. Like golf, you can play so poorly for so long and think you suck. However, all you need is that one good hit (the right swing, mindset and contact with the ball) to keep you in the game. Despite layoffs, confusion and uncertainty I find myself drawn back. I feel something is happening. I do not know what it is, but I know that it is good. Take me off your list of people to worry about. One thing about me…I am always ok. I may float between extremes but it is the only way I find common ground. I like that about me (because it works for me)!
Here are some inspirational quotes and words of wisdom that Nicole likes to remember:
Terra firma ain’t so firma.
All structures are unstable.
Wisdom is knowing that I am nothing…Love is knowing that I am everything…and in between my life moves.
This too shall pass.
Whatever you resist…persists.
Chin up, shoulders back, strut a little. Don’t lick your wounds. Celebrate your scars. You are in a lion’s war. Just because you did not win doesn’t mean you don’t know how to roar. (Ok, it is from Grey’s Anatomy but I liked it. LOSER)
When you do not know what to do…do nothing.
The answer will come at the time when you have to make a decision. (That’s from Grandma got to love her)
Final Note: In the future I will be trying to strong-arm more of my friends, family, and colleagues into sharing their views. If you have some thoughts to share on leadership, life, motivation, self-improvement, sales, real estate, politics or any other worthwhile topic please let me know!
Thursday, May 1, 2008
The Truth about Housing Cycles
Here is an easy to understand and informative explanation of the current housing market. I thought you might appreciate a calm and coherent antidote to all the hysteria and panic.
This cycle reminds me of a long family vacation...screaming from the back of the station wagon..."Are we there yet?" My Dad, sounding a little like John Wayne, would simply say..."No and if you ask me again...you might not make it there at all!"
Sit back and enjoy the movie...we'll be there soon!
This cycle reminds me of a long family vacation...screaming from the back of the station wagon..."Are we there yet?" My Dad, sounding a little like John Wayne, would simply say..."No and if you ask me again...you might not make it there at all!"
Sit back and enjoy the movie...we'll be there soon!
Wednesday, February 27, 2008
What type are you?
Sunday morning as I was shoveling down the last bites of my breakfast, I was rapidly thumbing through the Sunday Sun-Times before heading into the office. I was half-reading...reading headlines and pretending to absorb the whole story. I landed on a story that made me stop skimming and start reading. It was titled, "The Supervisor vs. The Champion" and it featured a picture of a smiling Barack Obama next to a smiling Hillary Clinton. It was written by Emily Yoffe from slate.com.
The subtitle pulled me in..."What personality tests reveal about Dem candidates." As I read the article I recalled the test the author was referencing. The Myers-Briggs Type Indicator test was a test I had taken a few times. The test uses sixteen different classifications to typecast people. The sixteen classifications are also sorted by psychologist David Kiersey into four sub-groups: Idealists, Artisans, Guardians, Rationals. The different personality types draw heavily from the work of the famous psychologist Carl Jung.
I read that according to Yoffe, Hillary Clinton was an "ESTJ" (Guardian/Supervisor) and Obama was an "ENFP" (Idealist/Champion). The following day in a Monday morning article Yoffe postulated that John McCain was an "ESTP" (Artisan/Promoter). Yoffe proceeded to use these "typecasts" to outline her view of the strengths and weakness of the three Presidential candidates. While it is unlikely that John, Hillary or Barack actually tested their MBTI with Miss Yoffe present, her typecasting seemed to be plausible and accurate on at least a surface level.
As I read the article, it seemed to explain my attraction to Obama's message of hope and change while also explaining my hesitancy to embrace Hillary's message of experience and competency. You see, I am an Idealist like Obama is...in other words Barack is most similar to my type and I seem to connect with his message more readily than I do with Hillary's. I am classified as an "ENFJ" (Idealist/Teacher). David Kiersey's and Typelogic's analysis of my type seemed to be fairly accurate...plus it didn't hurt that it was really cool to be psychologically similar to people like Abraham Lincoln, Ronald Reagan, King David of Israel, Michael Jordan, Oprah Winfrey, and Johnny Depp.
I don't really know if the MBTI test is much more than a HR department equivalent of a horoscope or if it is akin to a rigorous Wunderlic test administered to NFL rookie prospects prior to the draft. However, I do know that I enjoy the journey of understanding. Tests like the Myers-Briggs test, IQ tests and other silly tests like the ones you can find on Tickle.com have always been interesting to me. Perhaps it is the competitive part of my personality...I like testing myself and I enjoy the self-evaluation.
MBTI probably isn't the best way to pick a Presidential candidate but it can be helpful in understanding more about yourself. Self-discovery is always a worthwhile journey. Stephen R. Covey said it best in his book "Seven Habits of Highly Successful People". "Seek first to understand, then to be understood." If you want people to understand you, you need to understand yourself. Take some time and look inward. If you take the time to become more aware of your "self" you will likely be able to become more aware of others. So if you have some time, you can go to Humanmetrics.com to find your personality type using their short-cut MBTI test. Give it a try...
How can figure out where you are going if you don't know where you are?
The subtitle pulled me in..."What personality tests reveal about Dem candidates." As I read the article I recalled the test the author was referencing. The Myers-Briggs Type Indicator test was a test I had taken a few times. The test uses sixteen different classifications to typecast people. The sixteen classifications are also sorted by psychologist David Kiersey into four sub-groups: Idealists, Artisans, Guardians, Rationals. The different personality types draw heavily from the work of the famous psychologist Carl Jung.
I read that according to Yoffe, Hillary Clinton was an "ESTJ" (Guardian/Supervisor) and Obama was an "ENFP" (Idealist/Champion). The following day in a Monday morning article Yoffe postulated that John McCain was an "ESTP" (Artisan/Promoter). Yoffe proceeded to use these "typecasts" to outline her view of the strengths and weakness of the three Presidential candidates. While it is unlikely that John, Hillary or Barack actually tested their MBTI with Miss Yoffe present, her typecasting seemed to be plausible and accurate on at least a surface level.
As I read the article, it seemed to explain my attraction to Obama's message of hope and change while also explaining my hesitancy to embrace Hillary's message of experience and competency. You see, I am an Idealist like Obama is...in other words Barack is most similar to my type and I seem to connect with his message more readily than I do with Hillary's. I am classified as an "ENFJ" (Idealist/Teacher). David Kiersey's and Typelogic's analysis of my type seemed to be fairly accurate...plus it didn't hurt that it was really cool to be psychologically similar to people like Abraham Lincoln, Ronald Reagan, King David of Israel, Michael Jordan, Oprah Winfrey, and Johnny Depp.
I don't really know if the MBTI test is much more than a HR department equivalent of a horoscope or if it is akin to a rigorous Wunderlic test administered to NFL rookie prospects prior to the draft. However, I do know that I enjoy the journey of understanding. Tests like the Myers-Briggs test, IQ tests and other silly tests like the ones you can find on Tickle.com have always been interesting to me. Perhaps it is the competitive part of my personality...I like testing myself and I enjoy the self-evaluation.
MBTI probably isn't the best way to pick a Presidential candidate but it can be helpful in understanding more about yourself. Self-discovery is always a worthwhile journey. Stephen R. Covey said it best in his book "Seven Habits of Highly Successful People". "Seek first to understand, then to be understood." If you want people to understand you, you need to understand yourself. Take some time and look inward. If you take the time to become more aware of your "self" you will likely be able to become more aware of others. So if you have some time, you can go to Humanmetrics.com to find your personality type using their short-cut MBTI test. Give it a try...
How can figure out where you are going if you don't know where you are?
Monday, February 18, 2008
Facing the challenge and rising above it.
"Life is without meaning. You bring the meaning to it. The meaning of life is whatever you ascribe it to be. Being alive is the meaning."
"We must let go of the life we have planned, so as to accept the one that is waiting for us."
Those two quotes from Joseph Campbell are worth remembering while those of us in the Real Estate industry struggle to find a silver lining in all of the turmoil we currently face. As we read the morning paper and find more harbingers of bad news in the business section, we have a challenge broader than the sub-prime mortgage "crisis". We are forced to ask ourselves, "Is this what I want to do for the rest of my career?"
I think the answer depends on our goals. If we are looking for a quick and easy path to fortune and prestige, we might want to update our Monster.com profiles. However, if we are motivated by the quest for a meaningful life...now is the time to rise up. We get the chance to re-examine and maybe even reinvent our career goals.
I remember the day I first sold a new home. It was a Camden. A three bedroom, two and one half bath home on a slab. I sold it to a single guy named Tom. It was 1988. Interest rates were just dipping into the 10% range. I was a cocky "salesman" looking to make my first new home sale. To be honest, Tom would have likely purchased that home even if Pee Wee Herman was his salesman. It was the right home at the right price at the right time. Initially I was radiant in my own self-projected glory. Three days on the job and I slammed a sale! I was certain that I was destined for greatness.
As my intoxication started to wear off, I began to see things a little differently. Slowly at first. The meaning started to sink in. I just helped a complete stranger find his home...not a cell phone, a new car, a new suit, or a new bag of golf clubs...his home. I realized that this new job somehow meant a little more than just selling "stuff". I was participating in another persons life. That was an awesome revelation. And I mean awesome as in full of awe.
Like the Wizard of Oz...I was helping to grant wishes that my buyers could very well realize without my help. I was merely there to help guide them through the process. I wan't selling anything. I was helping them to change more than their address. I was helping them to find their home. Thankfully, I had this revelation early.
Without that revelation, the recession of the early ninties would have likely forced me to go get a job selling "stuff" in some other industry. Without that revelation, working weekends would have likely become intolerable. Without that revelation, making follow up calls when I should be home eating dinner would probably have become too laborous to endure.
Understanding that this career was more than just the sales process has helped me through this challenging market. Don't get me wrong. Sales awards, bonuses, and nice paychecks all make the journey more enjoyable. Closing a sale still brings a thrill that has never grown old to this day. But the awesome feeling of seeing a family find their home thanks to your guidance is the real bonus in our career. The paycheck just makes the intangible benefit into a tangible bonus.
When I am asked my opinion on the future of our industry I find myself thinking back to Joseph Campbell's quote..."Life is without meaning. You bring the meaning to it." These challenges will subside and new ones will replace them. The ability to find meaning is purely personal. This market is testing my stamina but not my committment. As long as there are people like Tom looking to find their home...I want to be there to help them find what they seek.
If you enjoy what you do and you strive to do it better every day the reward will find you. It may not be what we have grown accustomed to but as Mr. Campbell said, "We must let go of the life we have planned, so as to accept the one that is waiting for us."
"We must let go of the life we have planned, so as to accept the one that is waiting for us."
Those two quotes from Joseph Campbell are worth remembering while those of us in the Real Estate industry struggle to find a silver lining in all of the turmoil we currently face. As we read the morning paper and find more harbingers of bad news in the business section, we have a challenge broader than the sub-prime mortgage "crisis". We are forced to ask ourselves, "Is this what I want to do for the rest of my career?"
I think the answer depends on our goals. If we are looking for a quick and easy path to fortune and prestige, we might want to update our Monster.com profiles. However, if we are motivated by the quest for a meaningful life...now is the time to rise up. We get the chance to re-examine and maybe even reinvent our career goals.
I remember the day I first sold a new home. It was a Camden. A three bedroom, two and one half bath home on a slab. I sold it to a single guy named Tom. It was 1988. Interest rates were just dipping into the 10% range. I was a cocky "salesman" looking to make my first new home sale. To be honest, Tom would have likely purchased that home even if Pee Wee Herman was his salesman. It was the right home at the right price at the right time. Initially I was radiant in my own self-projected glory. Three days on the job and I slammed a sale! I was certain that I was destined for greatness.
As my intoxication started to wear off, I began to see things a little differently. Slowly at first. The meaning started to sink in. I just helped a complete stranger find his home...not a cell phone, a new car, a new suit, or a new bag of golf clubs...his home. I realized that this new job somehow meant a little more than just selling "stuff". I was participating in another persons life. That was an awesome revelation. And I mean awesome as in full of awe.
Like the Wizard of Oz...I was helping to grant wishes that my buyers could very well realize without my help. I was merely there to help guide them through the process. I wan't selling anything. I was helping them to change more than their address. I was helping them to find their home. Thankfully, I had this revelation early.
Without that revelation, the recession of the early ninties would have likely forced me to go get a job selling "stuff" in some other industry. Without that revelation, working weekends would have likely become intolerable. Without that revelation, making follow up calls when I should be home eating dinner would probably have become too laborous to endure.
Understanding that this career was more than just the sales process has helped me through this challenging market. Don't get me wrong. Sales awards, bonuses, and nice paychecks all make the journey more enjoyable. Closing a sale still brings a thrill that has never grown old to this day. But the awesome feeling of seeing a family find their home thanks to your guidance is the real bonus in our career. The paycheck just makes the intangible benefit into a tangible bonus.
When I am asked my opinion on the future of our industry I find myself thinking back to Joseph Campbell's quote..."Life is without meaning. You bring the meaning to it." These challenges will subside and new ones will replace them. The ability to find meaning is purely personal. This market is testing my stamina but not my committment. As long as there are people like Tom looking to find their home...I want to be there to help them find what they seek.
If you enjoy what you do and you strive to do it better every day the reward will find you. It may not be what we have grown accustomed to but as Mr. Campbell said, "We must let go of the life we have planned, so as to accept the one that is waiting for us."
Wednesday, February 13, 2008
Change on the horizon?
I never knew making dreams come true could be such a nightmare!
Buying a new home seems to be such a risky proposition these days that people are actually likening it to purchasing junk bonds or penny stocks. Too many people are caught in the "I don't want to make a stupid investment"mentality to actually examine the reasons why owning your own home is such a fundamental part of the American dream. If you watch the news you are led to believe that the folks at Enron got out of the energy business just in time to enter the home building business.
As a twenty year veteran of the American dream industry I can tell you that we are suffering a crisis of confidence and not an end to the dream. Most people I encounter, both prospective buyers and people in my social circle, feel that the economics are now more important than the emotion. That change in the buying process is certainly understandable but it is likely not sustainable.
Since I began my sales career, one of the axioms of new home sales was "justify with logic...close on emotions". For most people the decision to purchase a new home is more than an economic decision. It is usually a discretionary choice that we justify with a logical rationale. Does anyone really need a 4000 square foot home for a family of four? Of course not. But our homes are often a projection of our own self-image. Perhaps this industry correction will change the parameters but it will not change our desire for better homes, neighborhoods, and schools for our children.
When you examine what prospective buyers are saying these days you hear the same comments and objections. "It's not a good time." "I am afraid." "It's gonna get worse." "I don't want to make a bad decision." And the most insidious..."How big is your discount?" Are they really looking to buy their family home from the "clearance rack"? The answer is no. They are looking for reassurance and perhaps even some gentle persuasion. Given what we have witnessed in the past two years, who could blame them?
Buying a new home seems to be such a risky proposition these days that people are actually likening it to purchasing junk bonds or penny stocks. Too many people are caught in the "I don't want to make a stupid investment"mentality to actually examine the reasons why owning your own home is such a fundamental part of the American dream. If you watch the news you are led to believe that the folks at Enron got out of the energy business just in time to enter the home building business.
As a twenty year veteran of the American dream industry I can tell you that we are suffering a crisis of confidence and not an end to the dream. Most people I encounter, both prospective buyers and people in my social circle, feel that the economics are now more important than the emotion. That change in the buying process is certainly understandable but it is likely not sustainable.
Since I began my sales career, one of the axioms of new home sales was "justify with logic...close on emotions". For most people the decision to purchase a new home is more than an economic decision. It is usually a discretionary choice that we justify with a logical rationale. Does anyone really need a 4000 square foot home for a family of four? Of course not. But our homes are often a projection of our own self-image. Perhaps this industry correction will change the parameters but it will not change our desire for better homes, neighborhoods, and schools for our children.
When you examine what prospective buyers are saying these days you hear the same comments and objections. "It's not a good time." "I am afraid." "It's gonna get worse." "I don't want to make a bad decision." And the most insidious..."How big is your discount?" Are they really looking to buy their family home from the "clearance rack"? The answer is no. They are looking for reassurance and perhaps even some gentle persuasion. Given what we have witnessed in the past two years, who could blame them?
Maybe 2008 will be the beginning of a change. Maybe people will finally say, "It is time". Maybe the sales axiom will change this year..."justify with emotion and close on logic." The prospective buyers will need to be reminded of the unique non-economic/emotional benefits of purchasing a new home. The easy battle will be waged as skeptical buyers attempt to time the market. Simply put, there has not been a better time to purchase a new home in the past twenty plus years. Interest rates are at historically low levels. Prices have adjusted down almost 20% in some markets. There remains a year's worth of unsold inventory in most markets. Builders are fighting for each sale with amenities-enticements-incentives.
If a buyer has sufficient income, good credit, a modest down payment, and no home to sell...this is the buyer's market of all buyer's markets. Now is the time. My Econ 101 professor put it this way, "While markets can act irrationally in the short term. Over time, all free markets will act rationally. Consumers will know a good deal when they see one." My prediction is simply this: Change is on the horizon. The buyers will be back. Pent-up demand will lead to some rational buying behavior in 2008. We will not be seeing a return to the output levels of 2005 or perhaps even 1995 but we will see the Real Estate market shake off the standing eight count and return to the fight.
Owning a good home in a good neighborhood where your kids can go to a good school is still the American dream. While double digit growth in appreciation, homes that sell above list price, bidding wars, and speculative buyers are "so 2005"...
Most people will feel better about chasing their American dream in 2008.
Wednesday, February 6, 2008
What is a hero?
As I contemplate the theme of my site I am reminded of the words of Joseph Campbell. The sound of his words still echo in me. "Follow your bliss" he said. The simplicity of those words and that philosophy still captivate me. The road map for any hero on a quest was simple...the hero was always following his or her "bliss". I laugh now at how elusive that road map is to find in our everyday lives.
We are often looking at the world without a map to follow. Instead we usually focus on landmarks and familiar sites to help guide us on our journey. For many people leaders, mentors, teachers, parents, politicians, or even celebraties serve as their guides. For me, a hero is the most reliable guide to follow.
But what then is a hero? What makes a hero so enduring and transformational?
I look at my world. I look at my community and I see heroes every day. I believe we are all capable of being a hero. A hero is, as Joseph Campbell puts it, someone who "follows (his or her) bliss". Despite all the obstacles...the hero continues to follow the path that leads them to their "bliss".
I have always yearned to understand heroes...John Wayne to John Kennedy...Thomas Jefferson to Martin Luther King...Mother Theresa to my mom...Moses to Jesus to Buddha to Muhammed. I seek stories of heroes as a way to find my way on my journey. They serve as my landmarks. I may not know my own bliss as clearly as I should but if I can understand other heroes and their quests perhaps I will stumble toward my ultimate destination.
I may not be a hero but I'll know one when I see one...I'll let you know what I find on my journey.
We are often looking at the world without a map to follow. Instead we usually focus on landmarks and familiar sites to help guide us on our journey. For many people leaders, mentors, teachers, parents, politicians, or even celebraties serve as their guides. For me, a hero is the most reliable guide to follow.
But what then is a hero? What makes a hero so enduring and transformational?
I look at my world. I look at my community and I see heroes every day. I believe we are all capable of being a hero. A hero is, as Joseph Campbell puts it, someone who "follows (his or her) bliss". Despite all the obstacles...the hero continues to follow the path that leads them to their "bliss".
I have always yearned to understand heroes...John Wayne to John Kennedy...Thomas Jefferson to Martin Luther King...Mother Theresa to my mom...Moses to Jesus to Buddha to Muhammed. I seek stories of heroes as a way to find my way on my journey. They serve as my landmarks. I may not know my own bliss as clearly as I should but if I can understand other heroes and their quests perhaps I will stumble toward my ultimate destination.
I may not be a hero but I'll know one when I see one...I'll let you know what I find on my journey.
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