What is undermining consumer confidence? What can you, as a real estate professional, do to bolster confidence and help ease the market back on track? Find out in the following Power Broker Roundtable, brought to you by the National Association of REALTORS® and Roundtable moderator Rei Mesa, NAR’s Special Liaison for Large Firm Relations. Participants this month include:
Ron Peltier, Chairman/CEO, Home Services of America, Minneapolis, Minn.
Margaret Kelly, CEO, RE/MAX, LLC, Denver, Colo.
Alex Perriello, President/CEO, Realogy Franchise Group, Parsippany, N.J.
Rei Mesa: Does anybody remember the 1989 movie, “Field of Dreams?” An Iowa farmer standing in his cornfield hears a voice: “If you build it, they will come.” So he builds a baseball field in the middle of his cornfield, and what happens? They do come—in droves. If that isn’t a testament to the power of confidence, I don’t know what is. With the real estate industry poised on the edge of a soft, green, but very fragile recovery, it seems to me that what’s vastly needed is a big dose of this kind of confidence…not only for hesitant consumers, but for the battle-weary brokers and agents. Today, we’ve invited a few heavy hitters into the “real estate cornfield” to bat around the concept of restoring confidence. Ron, where is all this missing confidence and how do we get it back?
Ron Peltier: Consumer confidence is being undermined today by a perfect storm of issues: high unemployment, a weak economy, and the toughest credit standards ever. I think it’s time to look at another perfect storm in the atmosphere: attractive prices, historically low interest rates, and great inventory selection that make this the best time to buy. That’s the set of circumstances that inspires confidence, and that is what we, as real estate professionals, have to drive home to get things moving.
Margaret Kelly: Yes, that’s the message we need to send. There are five million existing homes on the market, but there is also a new generation coming into home-buying age, and over a million new households forming every single year—not to mention the foreign buyers who put some $82 billion into our home-sale economy in 2011. Every one of these new households needs a roof over their heads, and it’s our job to put them together.
Alex Perriello: In many areas, home prices are still declining, and that is very troubling. I don’t think consumer confidence can be fully restored until that trend reverses. On the other hand, Rei, your point is well taken. Optimism is a self-fulfilling prophecy. Where are the lines of people waiting to scoop up these 3.85 percent mortgage rates? We need to marshal our troops to get out there and re-focus public attention on the tried-and-true benefits of homeownership over the long haul.
RM: I agree. I believe the worst is behind us, and that message is at the very heart of this year’s NAR’s Public Advocacy campaign. We are the professionals, and consumers look to us for fair and balanced information. It behooves us to be cautiously optimistic and to project that state of mind to consumers.
RP: The single greatest hurdle may be credit issues—and, perhaps, appraisals. Nobody wants to go back to the loose underwriting of 2003 and 2004—but lenders must find that middle-ground and get serious about responsible lending if the industry is to get back on track.
MK: Historically, there has been a spike in home sales after every recession. It will happen again if we appeal to, and educate, the next wave of buyers.
AP: As long as living indoors doesn’t go out of style, we all have our jobs to do. We must stay positive, focus on education, and work together to find workable solutions.
RM: There are expected to be somewhere between four and five million home sales this year. That means there is some $50 billion in commissions to be made. It’s time for brokers and agents to reach out, run with the challenge, and decide, in no uncertain terms, how much of that will go into their pockets.