Last week, I started a discussion on the historical price
trending in the real estate industry. I
highlighted a recent interview that was
done by Robert Shiller on Bloomberg television.
The interview centered on the notion that home ownership has
historically been a mediocre or poor investment. In his opinion, treating it as an investment was a “fad” based on short-term economic conditions
that probably will not happen again.
Wow…did I get an earful back from several of the WorkPuzzle
readers! Apparently, many of you don’t care for Dr. Shiller (in general) and
did not find his analysis very thoughtful.
Here is part of an email I received shortly after
publishing:
“…to think that [drawing the conclusion that] this real estate cycle, however severe, will
change these longer term trends is a rush to judgment. I’ve always found
Shiller coy, playful, and not entirely serious in the way he comes across. Or
so he seems on TV. His index was full of
bubble markets and, I always felt, distorted (and made worse) the perception of
real estate in the 34 states that were not bubble markets.”
Here is another one:
“…the problem [with Shiller’s analysis] is it ignores rents,
or imputed rents. Over time, rents rise,
but housing debt service is more or less fixed.
Eventually, when the house is paid off, you live there 'rent free.' No matter what, you’re paying rent, either to
your landlord, or to yourself. Yes, you
have maintenance, taxes, and so forth, but so does a landlord. And you get the psychic reward of owning your
own place, and can do what you want with it.I can’t believe a smart guy like Shiller doesn’t get
this. Compare the net worth of
homeowners and non-homeowners…there’s no comparison, and the house is a big
part of that. Sorry for the rant, but
seeing a knowledgeable guy like Shiller run down housing just frosts me.”
There were several other good points as well. I’m glad I prefaced my original introduction with the statement “I’m not a real estate expert…” I think that I've proven that to be true, and it appears that some of the talking heads on
television may not be experts either!
It’s certainly good to know that it's not all doom and gloom for the real estate industry. That’s encouraging.
So, what does all of this have to do with recruiting? Suprisingly, it is what I initially found interesting is the historical housing price graph above. There
is great news in this data. And, there is
especially great news for real estate companies focusing on “new to real estate”
recruiting in the future.
Regardless of whether you ascribe to Shiller’s vision or the more hopeful scenarios outlined by many of our readers, I think
there is a consensus that what happened between 2000 and 2010 will probably not
repeat itself (at least not in the short-term).
It is much more likely that the graph will either flatten
out to the right or begin a slow and steady rise that keeps pace with inflation. As one reader put it,
“…all the talk was about how real estate may never be any
good again, because it will 'only' appreciate at about the rate of
inflation. It’s SUPPOSED to only
appreciate at the rate of inflation.
It’s a consumable…someone has to be able to afford to live there to
rent it. If it appreciates faster than
people’s incomes, it becomes unaffordable, and we just saw what happens when
that happens. “
That makes sense.
And if it’s true, then this recruiting principle will help you be
successful in the future:
Recruiting is most effective in stable
markets.
This idea may seem counterintuitive, but it’s definetly something that goes through the minds of talented candidates as they consider changing careers. And this principle has already had a profound effect on real estate recruiting over the last 10 years.
Think about it–if you were attempting to recruit between
2000 and 2006, it was much easier to get warm bodies in the door, but it was
difficult to hire the right people. What
drew many of these new hires into the industry was a “get rich quick”
mentality. These new hires not only
left when the easy money dried up (more than 600,000 agents left the real estate
industry between 2006 and 2009), but also they caused disruption and harm to many organizational cultures along the way.
Of course, hiring “new to real estate” agents during the
backside of the real estate bubble (2007 to 2009) has been very
challenging. While the press constantly
paints a negative picture of markets undergoing correction, talented
individuals naturally shy away from the turmoil.
So, where does that leave us now? For the past couple of years, there seems to be
some stabilization happening. As we move
to the right on the graph (the future), many experts are suggesting
(Shiller included) that we may be in for a period of slow and steady growth.
Here is the recuting lesson to take from this discussion: Slow and steady growth is the ideal environment for hiring “new to real
estate” agents.
How do we know this? We've seen it with our own eyes. As we consult with real
estate companies we constantly see truly high-quality agents who have been with companies
over 15 years. When did those new agents
come into the industry? During the previous period of stability.
As you know, it’s difficult to predict the future. However, if there is a sustained period of
slow real estate growth ahead and the real estate industry experiences the
retirement of many of it’s mature agents (those 55 and older now), there could
be a perfect storm brewing (in a good sense) in the world of “new to real estate” recruiting.
I think we’d all enjoying seeing that happen. Make sure you're prepared to take advantage of it.
Join the WorkPuzzle Discussion at the Tidemark Online Community (TMOC)
Engage in the WorkPuzzle discussion by joining the TMOC private social network. Commenting on a public blog like WorkPuzzle can be a little intimidating, so why not join the discussion inside the privacy of the TMOC discussion group?
By joining TMOC, you'll get to see who else is in the group and your comments will only be seen by those whom you trust. Joining TMOC is quick, easy, and free (no kidding…this takes less than 2 minutes). To get started, click here.
Already of a member of TMOC? If so, join the WorkPuzzle Dialog Group by clicking on the WorkPuzzle Group icon on the left side of your TMOC homepage. Questions? Email the WorkPuzzle editor (workpuzzle@hiringcenter.net) and we'll walk through the process.
Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle.
