Step to a Goal, Not a tune
Sometimes we think we are stepping towards a goal – but we are just dancing to a tune.
I was sitting in a crowded doctor’s waiting room on Monday. There was not a seat to be had. I was sitting with my back to the wall, facing the receptionist window. The receptionist was starting to be approached by a few of the waiting patients the second time around by now, one wanted to make sure she didn’t somehow miss, in this small room, her name being called, because the appointment was one hour ago; another telling the already frazzled lady that she had to reschedule as she had to pick up her grandchildren from school.
Just as this walker aided grandmother was turning away from the reception window a smartly dressed drug rep came in the door.
She reminded me of a stewardess, sorry, a flight attendant, at the airport. She was professionally dressed, impeccably groomed, and was wheeling a smart two wheeled suitcase and had a leather bag over her shoulder emblazoned, not with the name of her airline, but the name of the drug she was promoting.
This very earnest drug rep politely asked to see the two doctors for a moment. Now I couldn’t see the expression of the receptionist, but I imagined it was one that would well accompany this unuttered comment, “Lady, I have 14 patients running over an hour behind and you expect me to bump you ahead of them so you can sell something? Take a hike.” The receptionist obviously did tell the young lady that a meeting was not possible for I heard, “Would it be okay if I left some samples, some pamphlets and two tickets to a banquet we are having?”
“Sure.” Came the reply.
The drug rep then fumbled around for about five minutes, blocking the receptionist window, while she assembled her sample pack, brochures, and stuffed an envelope, which she proceeded to hand the receptionist.
I was watching this all with great interest, having once been a salesman myself. I then saw her pull out clipboard and make a few minutes worth of notes before organizing herself, reapplying her smile, and exiting.
I smiled to myself. I knew this young lady thought she was making steps toward her sales goal. I knew she was just kidding herself. I also knew what her comments on her daily sales sheet on her clip board were, “Visited Dr. So and So, left samples and brochures along with tickets. Will follow up in two weeks.”
When this lady finished her day she was probably pretty satisfied with it. In fact she probably told her sales manager she made seven doctors visits that day, well above her goal of five a day. In fact she was able to actually check off seven doctors from her monthly sales list, her list that enumerated her steps for success.
Later that year she would be hard pressed to explain to her boss why her monthly sales figures were low. She had done all the things needed to complete her goal. She made the right amount of doctor visits. She made the required 15 phone calls a day. She dressed right. Heck she even bought 10 doctors office breakfasts this month and she was only required to buy 8! She can’t help it that sales are down. She did all she was supposed to do.
I have been a salesman and a sales manager for years. I have seen this lady. Heck I have BEEN this lady. She thinks she is stepping towards her goal when in reality she is just stepping to a tune. But I have also been the rep that shows up at seven, because I know that’s when my customer is having his coffee with the staff, because I had previously made friends with his head assistant that clued me in to when I could grab a few minutes of the bosses precious time.
It takes more to succeed in this business than taking the right steps. Those steps need to lead in the right direction. Those “visits to the doctor’s office” have to be productive visits, not just visits to be ticked off of a sales plan. It is not enough to be satisfied with the effort; you have to be satisfied with the result of the effort.
I have been thinking of this all week since I witnessed it. I see it all the time in real estate. The sad thing is, most agents don’t even dance to a tune much less take steps toward their goal.
Examine your steps. Make sure they led toward you goal and are not just steps in a dance.
The local real estate news and gossip has been mostly down beat the last two weeks. The July 4th weekend has most people gone and the buyers are few. Lately I have been hearing a lot of, “Don’t put this in your column, but…..” kind of comments. Let me give you the general flavor; there are quite a few projects that are being tabled for quite some time or flat out canceled. This is a good thing. It will leave the inventory numbers level. Reservation deposits are being returned. Some buyers are walking away from hefty deposits. I get a few calls from sellers anxious to deal.
Another good thing is that the builders are starting to see prices of raw materials come down and starting to see the subs more eager to bid jobs.
I continue to believe that while we will see pockets of price drops, in general (and the facts support this) prices continue an uptrend, albeit a moderate one. In the condo market we will not see a strong market again for eighteen months. It is a buyers market now and it is hard to get a trend yet because prices are all over the place. I would hate to be an appraiser or a lender right now.
The single family home market, which had much less of an investor influence, is doing very well in some markets, although overall sales are slow.
The commercial market is being influenced by the rising interest rates but the high demand is lessening this effect. There is still a shortage of class A space and even general office space. I see a lot of building of class b, but it seems to be scooped up quickly. Newer buildings with lower insurance rates are attracting the buyers. Many companies are still in expansion mode. Many of these buildings, like Cyperlin, will be ready in very late 2007 when demand will be at its peak. I get three to four calls A WEEK for companies looking for space now.
Watch news on insurance, this will be a major player in the commercial market as well as condos. It’s expensive and hard to get. Make sure you factor in new insurance rates into your cap rates.
If you need someplace to invest your money, call me. We have opportunities in commercial. If you are looking to capitalize on the residential opportunities email deb@ma-realty.com. There are wonderful buys out there.
Gregg
www.investinwaterfront.com
www.cyperlincenter.com
Cell: 239-851-5464
Sunday, August 13, 2006
The Snowflake that Caused the Avalanche
The Snowflake that Caused the Avalanche
What caused the residential real estate “slow down” and what will precipitate it’s revival?
I would like to share with you some of my feelings on these two issues. Pointing a finger at the cause for the slowdown is about as easy as pointing a finger at the one snowflake that caused the avalanche. Some might call it the perfect storm. That might by apropos because the general consensus was that the timing of the slowdown coincided with the hectic hurricane season of 2005.
When the hurricanes hit there certainly was unrest in the mid east and the oil prices spiked because of the short term shutdown of supply caused by Katrina in the Gulf of Mexico and heightened sensitivity about gas prices because of long lines at the pumps in Florida. Then the increased gas prices caused concerns by people contemplating a second home that their pocketbooks might suffer.
By that time late summer and fall the developers where finally capturing the margins that in the past were going to the investors. Most had already bumped up preconstruction prices to eliminate the investor by then.
Raw material costs and interest rates were on the rise. The raw material increases were real, the interest rate increases were really not “high” but rates were where they should be in a healthy economy. Borrower perception is everything, however. The raw material increases and the rising rates were a one two punch that hit from both sides. China consumption of concrete and steel drove down supply and increased prices here in the US. Prices of new homes went up and so did the cost of borrowing. Adjustable rate mortgages went up for existing home owners making them think twice about a second purchase.
The resale market slowed as new homes attracted more buyers than the used home market. The “trade up” market (buyers looking for bigger or better homes) suffered as sellers could not sell their existing homes. High property taxes and skyrocketing insurance rates were financially trapping folks in their homes.
Reaction time by developers is slow. It takes a long time to entitle and permit a project. We were already in a slow down and some projects were not even out of the ground yet. But they could not stop; they had presales and monies committed. So even though condos and homes were not moving, more and more inventory was added – kind of like adding more dry wood to a raging fire; and to add accelerant to the incendiary situation, costs continued to rise – both on raw materials and land.
Ok, so the cause of the slowdown may have been:
Hurricanes
The war in Iraq
Gasoline Prices
Interest Rates
Property taxes
Insurance rates
Raw material and labor costs increases
China’s emergence as a huge consumer of construction goods.
Inexperienced real estate investors
Developer’s reaction times
Too much inventory
Which snow flake caused it all? I don’t know. I think the answer is different for different folks. Conditions were precarious and ready to fall. We just did not know it at the time.
The recent BP oil field debacle, which by the way only effects under 2% of oil usage here in the U.S, is another scary example of just one snow flake causing an avalanche. By all rights this should not have caused the stir on Wall Street that it did. I am now reading a superb book on energy situation; A Thousand Barrels a Second by Peter Tertzakian. I highly recommend it. It will give you a better understanding of where we will be going on the oil situation.
My feeling is that the turn around will happen very quickly. (But not very soon) But we will be into it before we know what hits us. Look at the potential list of causes for a clue. First, for things that will not change quickly, like the cost of gasoline, we have to get dulled to the effect. Other issues, like interest rates, need to make a turn or stall to change the “high rate” perception. The recent pause by the fed is a good sign. I see another increase before the end of the year and then perhaps more pauses and a turn around. But this may mean that the economy is starting to cool.
Inventory will be depleted – BUT VERY SLOWLY - and when supply and demand is in better balance prices will increase more rapidly again.
A point to make here is that indeed prices are still increasing. We are still experiencing housing inflation. Don’t by fooled into thinking prices in general are dropping. They are not. As I have said before there are pocket of super deals. But long term players will do very well in the real estate market.
Certainly the inexperienced investors are out of the market. As Joe Armenia correctly pointed out to me yesterday, the situation was similar to the stock market dot com boom. Those inexperienced investors will not be back very soon.
Watch for the snowflakes good and bad. No hurricanes this year would be a good snowflake. A terrorist attack on our transportation system a bad one. Both could have a great effect on our little corner of paradise.
What caused the residential real estate “slow down” and what will precipitate it’s revival?
I would like to share with you some of my feelings on these two issues. Pointing a finger at the cause for the slowdown is about as easy as pointing a finger at the one snowflake that caused the avalanche. Some might call it the perfect storm. That might by apropos because the general consensus was that the timing of the slowdown coincided with the hectic hurricane season of 2005.
When the hurricanes hit there certainly was unrest in the mid east and the oil prices spiked because of the short term shutdown of supply caused by Katrina in the Gulf of Mexico and heightened sensitivity about gas prices because of long lines at the pumps in Florida. Then the increased gas prices caused concerns by people contemplating a second home that their pocketbooks might suffer.
By that time late summer and fall the developers where finally capturing the margins that in the past were going to the investors. Most had already bumped up preconstruction prices to eliminate the investor by then.
Raw material costs and interest rates were on the rise. The raw material increases were real, the interest rate increases were really not “high” but rates were where they should be in a healthy economy. Borrower perception is everything, however. The raw material increases and the rising rates were a one two punch that hit from both sides. China consumption of concrete and steel drove down supply and increased prices here in the US. Prices of new homes went up and so did the cost of borrowing. Adjustable rate mortgages went up for existing home owners making them think twice about a second purchase.
The resale market slowed as new homes attracted more buyers than the used home market. The “trade up” market (buyers looking for bigger or better homes) suffered as sellers could not sell their existing homes. High property taxes and skyrocketing insurance rates were financially trapping folks in their homes.
Reaction time by developers is slow. It takes a long time to entitle and permit a project. We were already in a slow down and some projects were not even out of the ground yet. But they could not stop; they had presales and monies committed. So even though condos and homes were not moving, more and more inventory was added – kind of like adding more dry wood to a raging fire; and to add accelerant to the incendiary situation, costs continued to rise – both on raw materials and land.
Ok, so the cause of the slowdown may have been:
Hurricanes
The war in Iraq
Gasoline Prices
Interest Rates
Property taxes
Insurance rates
Raw material and labor costs increases
China’s emergence as a huge consumer of construction goods.
Inexperienced real estate investors
Developer’s reaction times
Too much inventory
Which snow flake caused it all? I don’t know. I think the answer is different for different folks. Conditions were precarious and ready to fall. We just did not know it at the time.
The recent BP oil field debacle, which by the way only effects under 2% of oil usage here in the U.S, is another scary example of just one snow flake causing an avalanche. By all rights this should not have caused the stir on Wall Street that it did. I am now reading a superb book on energy situation; A Thousand Barrels a Second by Peter Tertzakian. I highly recommend it. It will give you a better understanding of where we will be going on the oil situation.
My feeling is that the turn around will happen very quickly. (But not very soon) But we will be into it before we know what hits us. Look at the potential list of causes for a clue. First, for things that will not change quickly, like the cost of gasoline, we have to get dulled to the effect. Other issues, like interest rates, need to make a turn or stall to change the “high rate” perception. The recent pause by the fed is a good sign. I see another increase before the end of the year and then perhaps more pauses and a turn around. But this may mean that the economy is starting to cool.
Inventory will be depleted – BUT VERY SLOWLY - and when supply and demand is in better balance prices will increase more rapidly again.
A point to make here is that indeed prices are still increasing. We are still experiencing housing inflation. Don’t by fooled into thinking prices in general are dropping. They are not. As I have said before there are pocket of super deals. But long term players will do very well in the real estate market.
Certainly the inexperienced investors are out of the market. As Joe Armenia correctly pointed out to me yesterday, the situation was similar to the stock market dot com boom. Those inexperienced investors will not be back very soon.
Watch for the snowflakes good and bad. No hurricanes this year would be a good snowflake. A terrorist attack on our transportation system a bad one. Both could have a great effect on our little corner of paradise.
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