The real estate sector of the U.S. economy has become smaller. And that means the pie of opportunity isn’t as plump as it had been in recent years. A “smaller” pie doesn’t necessarily mean a “small” pie; however, it does mean less business overall. And that undoubtedly means some real estate pros will perish while others prosper.
For anyone who’s not convinced of this shrinkage, here are a few recent news items:
- Preliminary data suggest the National Association of Realtors’ index of pending sales declined 10.1 percent nationally in 2006 compared with 2005.
- Regionally, that index dropped 14.8 percent in the West, 13 percent in the Midwest, 9.3 percent in the Northeast and 6 percent in the South for the same timeframe.
- Sales of existing homes declined in Colorado, Iowa and New York in December 2006 compared with December 2005.
- Mortgage insurance giants MGIC Investment Corp. and Radian Group have decided to consolidate into one company.
- Connecticut-based Mortgage Lenders Network has filed for Chapter 11 bankruptcy protection and laid off more than 900 people.
Earlier reports have noted fewer home sales in other states, tighter underwriting standards for home-loan borrowers and staff reductions at other companies, all of which are unmistakable signs of shrinkage.
So, what does this massive downsizing mean to individuals and companies that depend on home sales? How can brokers, salespeople and affiliates compete and win in a smaller marketplace?
Pep-talk gurus will tout the miracles of a positive attitude. But positive thoughts, while certainly helpful, won’t achieve results without the accompaniment of positive actions, which generally don’t happen without some sort of forethought, i.e., A Plan.
The mere concept of A Plan might seem to presuppose foreknowledge of the future, but that’s not necessarily the case. Rather, good planning practices can incorporate best-case and worst-case scenarios and allow for plenty of flexibility as the future unfolds. For example, a reserve fund might be tapped either to take advantage of newly perceived opportunities or to take some needed time off to regroup and re-energize later in the year.
The formulation of A Plan begins with an assessment of the opportunities and threats in the marketplace and the strengths and weaknesses of the company or individual. How can those strengths be employed to exploit the opportunities and minimize the threats?
“Opportunities” refers not just to one-off real estate sales or loans, but rather to market niches that might be countercyclical or offer growth potential in the local market, for example. On the flip side, “threats” might refer to whole categories of buyers who are no longer qualified to buy a home, new competitors in the marketplace and so on. Opportunities and threats are specific to markets.
“Strengths” might include skills or knowledge about certain types of buyers, sellers, borrowers, transactions or loan products. For example, a specialist might focus on retirees, short sales, rental properties or other opportunities that require special expertise. Strengths also could involve operating efficiencies, marketing prowess, technological superiority and so on. Strengths and weaknesses are specific to companies or individuals.
A plan, then, explores how to expend available resources in a way that will employ strengths and overcome weaknesses to capitalize on opportunities and minimize threats.
If the opportunities aren’t attractive, the threats seem truly ominous, one’s strengths are perhaps outdated or one’s individual weakness are impossible to overcome, then a shrinking market might be a signal to exit the real estate business altogether or at least take a break from the business for a while. Times like these are often an impetus for retirements, business consolidations or new careers in other lines of work, all of which can be positive outcomes.
On the other hand, there are always bold businesspeople who decide to expand in difficult markets, presumably because they believe the opportunities are ripe, their own strengths are especially well-matched to the market and they have access to the resources expansion requires. One recent example is New York City-based mortgage broker Homebridge Mortgage Bankers, which re-branded as Refinance.com, and announced plans to hire 80 new loan officers and open new locations in Florida and California. Whether the bet will pay off for Refinance.com or other venturesome folks in today’s markets remains to be seen.
Marcie Geffner is a real estate reporter in Los Angeles.
Copyright 2007 Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.
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