The “New Normal” & The Realtor

August 9, 2010

Today’s New York Times carries an article entitled: “Jobless and Staying That Way” by Nelson Schwartz.  In the article Schwartz considers the possibility (probability according to some) that low growth and high unemployment will be the “New Normal” and that with 1.4 million Americans out of work for more than 99 weeks, and 14.6 million Americans out of work for more than 6 months, the economy, on the very brink of Depression at the beginning of 2009, may be in for low growth at best and Deflation at worst (like Japan for over ten years) for the foreseeable future and certainly no less than the next three to five years.  Schwartz quotes former top financial aids to both George W. Bush and William J. Clinton as agreeing to this possibility, and – possibly more importantly, noted investors Bill Gross and Mohamed El-Erian (managers of Pimco, the World’s largest bond fund, as believers in this economic prophecy.

So where does that leave you, the men and women who have invested your time and treasure in real estate, building good companies and nurturing strong brands in your local markets?  What can you do to avoid the bad effects of such a reality (if it is a reality, which only time will tell)?  What does that mean for your personal economic future, the futures of those you support with your brokerages, and the futures of your families?  How will low growth or even deflation hurt your business?

Better yet, let’s turn the question on its head and ask this: “If, indeed, that is the future of our business for some time to come, then what can I do to benefit from that economic climate”?  I think that is the real question we need to address: to do otherwise is to give in to despair, and that never helped anyone.

If you own a great deal of rental property, or manage that for your clients, the value of that will go down, or at the very least not rise as rapidly as previously.  On the other hand, mortgage money – at least if you have equity – may be significantly cheaper and the ability to reduce your single greatest expense in investment real estate property ownership can be greatly reduced, allowing you to earn more money on your rentals, which probably will also find a better market because there may be (will be in that scenario) more people who can’t afford housing on their own and may have to rent.  If you have equity, it may even be a great time to add to your portfolio since you are in an ideal position to identify good property that could have attractive pricing.

There may also be a great opportunity to attract top-drawer talent to your brokerage since the unemployment rate, under this scenario, will exceed the historic 5% American model by eighty to one-hundred percent: not a happy time for your country, but probably an excellent opportunity to find some really excellent talent that you can mentor and who will be very pleased to find a good home where they can work for themselves and show off their talents.  They certainly deserve that chance.  The other day I noted on my calendar what would have been the one-hundredth birthday of a good friend and personal mentor.  He was an Italian immigrant who came to this country at the age of eleven and worked his way from a Fuller Brush salesman working the poorest districts of Philly and Camden to the senior vice president of sales for the largest direct marketing company in the World.  He saw me through some very difficult times in my early career by reminding me that every coin has two sides, and that, in his case, for example, he would use those more difficult economic times to hire the best people (on commission, of course) and train them to be killer salespeople, reaping the rewards of his farsightedness for many years to come.

Is this the time to use your economic farsightedness to purchase some of your competition?  Is this the time to grow and take your business to the next level, while your economic enemy is hiding under the desk biting his/her nails? 

I’d be very interested in your feedback.  We are firm believers in listening to our customers, and you are the professionals in the field.  I want to hear how you are planning to approach this new dynamic.  We’ll share your thoughts on our Web Site’s Blog, but if you are not interested in seeing your name in lights, just enter “Anon” for your name and that’s how it will appear on our Blog.  Don’t worry about your competition getting your plans, they aren’t the ones reading this article!

At Title Alliance we are in the business of making your title operation work well for your: to help you further your dreams and to help you cement your relationship with your agents and their clients through excellent service delivered in a personal and friendly way.  We make your title operation better received and more profitable, and we take it as a personal challenge to help you grow your business.  We like working with successful people, and our job is to help you be successful.  How can we help you grow?

 

Bill Cotter, Partner

Title Alliance, Ltd.

Bill Cotter founded Title Alliance in 1983 and is one of six title insurance professionals who are partners in the company.  Title Alliance companies operate in 15 states and produce over 10,000 title policies each year.  Their companies consistently rank among the highest in the industry in profit margin and in client satisfaction.

Advertisement