Patience

- Do not be desirous of having things done quickly.
- Do not look at small advantages.
- Desire to have things done quickly prevents their being done thoroughly.
- Looking at small advantages prevents great affairs from being accomplished.


Confucius
(551 B.C. - 479 B.C.)

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I am re-publishing this quotation because I think it speaks to how we should approach the coming year.

We all know that our country is in a "crisis of confidence" (to quote Jimmy Carter in 1976): consumer optimism is the lowest it's been in 50 years (source: MarketWatch) and there appears to be another big hit to take place in the real estate market place. (See my blog post from 12/16)

It will be very easy for us to "hunker down" and focus on "tiny victories" on a "day-to-day" basis. But I'd like to offer a different opinion. I remember a time in my career that I focused completely on "doing whatever it takes" to be financially successful; making phone calls, searching for new products/services, preparing competitive reports, prospecting for new vendors.

In fact, I remember hearing and living by the adage, "it's all a numbers game". According to popular goal achieving gurus, you can reward yourself each day after achieving your daily goal of cold calls, presentations or visits.

Well, I'm not so sure that works. 2500 years ago Confucius understood this. By focusing so closely on the day-to-day stuff, we lose our vigilance for the big picture; we prevent oursevles from doing our job thoroughly. We need to work together to get out of the collective situation in which we find ourselves. And it will take a LOT of work and lots of patience.

As we look toward 2009, in the light of our culture's prediliction for immediate results, I hope that you begin the year with a large picture and vision for your life and the lives of those for whom you care.

Have a safe and peaceful New Year!

Jim

Here Comes Another Bump In The Road

This chart from Credit Suisse via the IMF shows the heavy subprime resets in 2008, plus it shows the reset problems with Alt-A and Option ARM loans in later years.

Although many of the homeowners in the 2009 to 2011 reset periods will refinance (if they can), this shows that the problems in housing will linger for several years. What is especially concerning is all these Option ARM resets in 2010 and 2011. Most of these homeowners are selecting the minimum payments (negatively amortizing) and many homeowners will be upside down when the ARM resets.

Hopefully, our Northern California area will not be hit as hard as other areas of the country. But, we won't know. We need to face this challenge "head on". Talk with your clients. The professional real estate industry - in some instances tacitly, in others actively - participated in getting us into this situation. But it can lead us out of the mess we're in.

It's the right thing to do.

The Old Rules Don't Apply

A look back... September 29, 2007. The following is a segment on the Today Show. Jim Cramer and the President-Elect of NAR Charles McMillan "spar" on whether to buy a house. Mr. McMillan was KO-d.




The "new conventional wisdom" was that, as Matt Lauer says at the beginning of this clip: "Whatever happened to that pot of gold that not too long ago if you put cash into the real estate market it was pretty easy money." We can debate at a different time whether the consumer's perception of the real estate industry is shaped by segments like these or whether these segments reflect the perceptions of the marketplace.

What I believe needs to be addressed is how real estate professionals responded then (and respond now) to the "real estate market collapse". Mr. McMillan didn't really address the fundamental issue here: Real Estate was NEVER supposed to be an "investment vehicle"! The unprecedented property value increases were aberrations, NOT the norm. This type of response, as well as the availability of property data from a variety of sources has created a wary and demanding consumer that professionals in the real estate industry must address. And address them on the consumers' terms.

The old rules don't apply.

Prepping for the New Year

It's that time of year. A time to review 2008 and preparing your business plan for 2009.

Whether your a Mac or PC user, or prefer online to computer-based systems, you probably have all - or most ;) - of your activities in some calendar. I have an iPhone and use google calendar along with Microsoft Outlook Exchange and Apple Mail. They all get "synced" up and make life much easier.

But the most important thing is to match the goals you may have set for 2008 with the activities in your calendar. And, if you're really enterprising, then match your calendar with your checkbook. A very successful entrepreneur/mentor of mine taught me the value of this activity. He said, "You can tell if you've invested in your future or wasted your past by matching your goals with your calendar with your checkbook.

I've taken that concept and added a little to it: my values. I believe that when your actions are consistent with your values AND calendar AND checkbook, your life becomes filled with power and strength. You may not "get all you want". But you'll surely be better off than not doing anything at all!

Whether you're an independent contractor or employee, I urge you to take the time to do this valuable activity.

For more information about how to set goals, take a look at http://www.mindtools.com.

The Market's Going to Change!

No. This post isn't what you think it's about.

This is really about how the residential real estate market is going to change as a result of products like Point2Agent and ListHub. These products enable listing distribution to some of the most popular consumer websites - like google, Yahoo Real Estate, Trulia, Zillow, et. al., - with the primary objective of getting more eyeballs to the listing.

But, really what does this mean?

I believe it means significant change to the existing real estate business models: the brokerage business model, the independent contractor agent, and the MLS's.

Right now, listings are owned by brokers - not the agents that actually have the relationship with the buyer and/or seller, nor by the homeowners themselves (owners sign their property listing information ownership" over to brokers when they sign listing agreements). Agents, as well as consumers, generally don't understand this point.

For the benefit of consumers, should this whole model change?

Marketing Basics 101

Customer-Centered Brand Management

In a future set of blogs, I'd like to discuss how brand management can help agents and small brokerages compete in a world of consistent change and down markets. For now, here's an article from the Harvard Business Review for your edification.

Key ideas from the Harvard Business Review article by Roland T. Rust, Valarie A. Zeithaml, and Katherine N. Lemon

The Idea

We all know that to boost profits, we must grow customer equity—by building loyalty and broadening our offerings to fulfill our customers’ emerging needs. But though we “talk” customer focus, we don’t “walk” it. Instead, we strive to build brand equity—assuming sales will follow.

Consider General Motors’ Oldsmobile brand. As Olds buyers aged, GM created ad campaigns intended to lure younger buyers to the existing brand, instead of focusing young buyers’ attention on a different GM car or launching a new brand geared to their tastes. Despite GM’s costly efforts to refurbish the brand, Oldsmobile’s market share sputtered from 6.9% to 1.6% during 1985 to 2000.

How to avoid such scenarios? View your brands in a new light: They’re not your raisons d’être you must defend at all costs. Rather, they’re tools for creating and cultivating profitable, long-term relationships with customers.

To put your brands in their proper place, organize your business in new ways: Assign people to manage customer segments, not brands—then give them the strings to the marketing purse. Create brands that satisfy increasingly narrow customer segments. (Think men’s and women’s vitamins.) And retire ineffective brands.

Brands come and go, but your customers must remain. When you put brands in service of your customers, your customer equity and profits soar.

The Idea in Practice

To put your brands in service of your customers:

Create the Role of Customer Segment Manager

When brand managers control your company’s marketing resources, they may persist too long with a brand that has lost its punch. To ensure that decisions based on customer relationships trump brand-based decisions, create or strengthen the role of customer segment manager and allocate resources to that function rather than to traditional brand managers.

Build Brands Around Customer Segments, not Vice Versa

Differentiate your brands by target customer segment more than by product features.

Example: At Liz Claiborne, the world’s largest women’s clothing company, each customer segment has its own named brand and personality—such as Dana Buchman for professional women, Ellen Tracy for sophisticated but casual women, and Elizabeth for plus-size women. The lines are so strongly differentiated by brand, fit, and style that few consumers know they’re made by the same company.

Make Brands as Narrow as Possible

Use advances in technology and customer information to tighten each brand’s focus on increasingly narrow customer segments. Witness the television channels geared specifically to Latinos, golfers, senior citizens, African-Americans, women, and gays. Tighter focus enhances a brand’s clarity and value—in customers’ eyes.

Know When to Hand Off Customers to Other Brands

Don’t spend disproportionately to hold on to a brand’s customer relationship if customers fit more naturally with another brand in your portfolio.

Example: If a longtime customer of Fairfield Inn—Marriot’s budget hotel brand—begins traveling more frequently, Marriott might use special deals to invite him to switch to its higher-priced Marriott brand. The company would forfeit the Fairfield Inn brand relationship for the higher-value customer relationship with the Marriott brand—understanding that future profits aren’t driven by repeat business at Fairfield Inn but by customers’ purchases across all Marriott brands.

Retire Ineffective Brands

Sometimes a brand becomes very unattractive to a customer segment. Reversing that impression might be prohibitively difficult. Instead, retire brands that no longer have avid customers—even if overly aggressive brand managers want to protect their fiefdom. Nabisco, for instance, phased out its Mr. Salty brand when the public became concerned about the ill effects of too much sodium.

How Agents should justify their commissions

This is an interesting article by Bernice Ross, CEO of RealEstateCoach.com. It describes the types of services that a listing agent should provide in order to earn/justify their commission.

Here are a couple of items in her proposed marketing plan:

• 800 number IVR system
• Listing syndication
• Video syndication
• Using online tools to redecorate the home
• Track the activity and provide real analytics of the marketing efforts.
  

I've been in the industry for many years and I can honestly say that I haven't seen many agents who perform these services consistently.

Do agents provide these services? What services have you seen agents provide? Do you think they deserve their commissions for the service they provide?

What are your thoughts?

Welcome!

This is the inaugural post for the Real Estate Market Observer. While we are focused on obtaining and publishing information on the Northern California Real Estate Market and how that market works, we also recognize that the "way" real estate business is conducted is rapidly changing. To that end, we will seek out and find new methods for professionals to learn.

But we will also, hopefully, educate the consumer about the real estate industry. We will attempt to show consumers what methods and strategies true professionals are using to help their clients either buy or sell their property.

We invite your comments, suggestions, tips, hints or information. We hope that there will be a lively, ongoing dialog that will educate or at the very least, inform.

In the final analysis, our true success will be a real estate industry that is more transparent; one in which practitioners and consumers will benefit from more transparency.