Editor’s note: Inman News is talking to agents and brokers who have persevered through past real estate cycles and is offering their perspective on business strategies that they have used in past cycles and those that they are employing in the current market downturn. This is the first segment in a multipart series. See Part 2: "Broker counsels agents through slow spell"; and Part 3: "Paying the price for the bubble."
Real estate agent Linda Davis watched several housing downturns come and go during her 32 years in the industry, and experience has served her well in weathering this latest slump, she says.
"In the late ’80s I made a mistake that I certainly learned from. I worked a lot of new construction … to the point I didn’t spend a lot of time trying to generate any other business," said Davis, an agent for RE/MAX Realty Group. "I learned not to put all of your eggs in one basket."
She diversified her business and began working with foreclosure properties. Some business strategies that she employed during past market cycles are still relevant today, while technology offers some new coping mechanisms.
Some other longtime agents and brokers, too, say their lessons learned from previous cycles are proving valuable during these tough economic times, even though today’s market decline is unique in several ways.
The housing market was hit hard during the collapse of hundreds of savings-and-loan institutions in the late 1980s and early 1990s, which culminated in a recession.
Mortgage interest rates soared into the high-teens range in percentage during the late 1970s and early 1980s, chilling the housing market as financing was out of reach for many borrowers.
Bad real estate lending during the 1980s was blamed as a key contributor to the savings and loan crisis — as it is blamed again today for this latest housing and economic crisis.
Davis said she developed a relationship with Countrywide during the 1980s to sell off that company’s foreclosure properties, also known as real estate-owned, or REO, properties. Countrywide, hammered in recent years by its heavy exposure to subprime lending, was acquired by Bank of America in July.
"I’ve always done some foreclosure work," Evans said. "That will put food on the table and pay some bills."
Foreclosure-related properties are selling these days, she said, as they can represent a good deal for investors. Because the values tend to be lower than for other properties, "you have to sell a few more of them, but of course you do it," she said.
These days, home prices in her market area of Gales Ferry in eastern Connecticut are falling about 1 percent per month, and sales are off between 25 percent to 50 percent year-over-year for the various communities in the area.
"This just seems to be a little deeper" than past downturns in the local market, Davis said, even though prices have been dropping and interest rates are low by historical comparison.
Buyers these days seem to be "waiting for the bottom, and they’re scared to jump," she said. "Back in the late 1970s people wanted to buy but they couldn’t because of the interest rates. (Today’s market) is very unique because of the combination of good interest rates and good prices."
The current market slump was fueled by earlier "stupidly high" home-price appreciation that was unprecedented in her experience, Davis said.
While some industry newcomers did not sock away much or any of their savings during the housing boom, Davis said she did put away some of her income in preparation for times like these.
"Something that new folks need to learn — you’ve got to put it away. (The market is) not going to stay wonderful forever. I saw some people who spent every penny they made. I’ve never been much of a gambler. I never got caught in that trap," she said.
A key part of surviving in the industry during tough times is to never be overly invested in the outcome of a transaction, she said, as sales can and do fall through.
Those homeowners who received subprime loans are not the only ones in jeopardy. "What I’m seeing is a lot of people who are in trouble because they used their house like a credit card and took equity out and can’t afford to sell it," she said.
Sellers who are forced to relocate, such as those who are being transferred from a local military base, can experience particular hardship, she said. "Those are the ones who I lose sleep over."
There remains an oversupply of inventory in the local housing market, she said, and some sellers are still not pricing properties low enough. "I’m stunned that they think the price has gone up when they’ve only owned it for a year," she said.
The Internet could prove to be an especially valuable tool for agents and brokers in surviving this real estate downturn — Davis noted that the Web itself wasn’t around during the recession of the early 1990s.
In cutting costs, Davis said, "You sort of look at everything, and probably the least effective (for me) is print advertising. I have cut back on that because I don’t think even in a good market it’s very effective.
"One of the advantages of this market as opposed to the late ’70s, late ’80s and early ’90s — we didn’t have the Internet to market houses back then," she said.
She launched her first Web site in 1995, and she noted that the Web offers "the best low-cost (or) no-cost advertising you can do."
The slumping market also provides an opportunity for some back-to-basics prospecting for new clients and for strengthening ties with past clients.
"Now is the time to be building your database (of contacts), trying to add more people, do more networking … so that when the market does come back you’re positioned," she said.
"Take people to lunch, do the kinds of things you don’t have time to do when it’s really busy. Build your people base. There are a lot of things I’m able to do now that I normally don’t have time to do: Write a little bit more, meet with people. People are very curious about the market. They want to hear (about it)."
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