Thursday, July 7, 2011
Thursday, June 30, 2011
Figuring out what the gen Y group wants will be a major challenge for all industries, including real estate. Right now, this group is driving much of the growth in multi-family. As a result, multi-family has experienced a boom. But what is the 18-32 year old demographic really looking for. Determining what they want, of course, is very important and starts with understanding how gen Y differs from gen X and their baby-boom parents. Some research suggests the following characteristics of gen Y:
- ethnically diverse
- better educated
- tech savvy
- environmentally conscious
- pet friendly
gen Y. What is this going to look like? It could mean building communities that have wi-fi hot spots, walkability, mixed-use, smaller floor plans, more open space, amenities that support an active and social lifestyle, high end finishes, and access to outdoor spaces. In a nutshell, amenities that accommodate a balanced work and play lifestyle will be better suited to gen Y. Today, this group is driving a boom in multi-family but soon will make the decision to own versus rent. When they make this decision will depend on many factors. At that time, the next generation of home buyers, gen Y, will drive the housing recovery. Meanwhile, the boomers will be downsizing. The end result will be a rebound in housing even if unemployment remains higher than it has during previous economic expansions. The rebound will be especially fun for those businesses that are poised to meet the demands of gen Y, the next drivers of our economy. Until then, real estate growth will be strongest in those areas of the country with the lowest unemployment rates, at least 2% or more below the current national unemployment rate.
Just like all retailers, builders and developers are taking note of the next wave of home buyers, but appealing to gen Y will not be easy. In fact, the tendency to guess at what this group deems important or superimpose or overlay one's own ideas about what is important will not work. Products that are embraced by gen Y will have to genuinely reflect their own tastes and lifestyles, not the tastes and preferences of the preceding generations. This will be as true for real estate as it is for technology products, etc. Like it or not, the torch has been passed and gen Y will lead the next renaissance in real estate. In fact, it has already begun!
Wednesday, June 29, 2011
Unemployment -- Jobs are a catalyst for housing and those areas with the lowest unemployment typically have stronger housing markets. Start by comparing your local unemployment rate to the national average of 9.2%. If it is more than 2% below the US average, chances are good your housing market is making a comeback. Denton County, for instance, has an unemployment rate = 7.4%. (WSJ)
Rents -- Places where rents are low favor buyers and make owning a home attractive. If home prices are less than 15 times annual rents, the market can be construed to favor buyers.
Denton's price to rent multiple is 11, making it a favorable place to buy versus rent.
Foreclosures -- Obviously, foreclosures are the dagger to any real estate recovery. A single foreclosure in a neighborhood can have an adverse impact on property values. Healthier communities have fewer foreclosures. According to Realty Trac's April 2011 report, one in every 593 units nationwide received a foreclosure filing notice. That figure is down 9% from May 2011 and down 34% from April 2010.
Denton Foreclosure Rate = 1.18% (%age of properties subject to foreclosure filings in 2010). At the peak of the foreclosure crisis, 2.23% of the properties in the US were subject to foreclosure. (WSJ)
Another factor to be considered is how much property values have declined since their peak. Most strong housing markets have seen anywhere from 3% to 8.5% declines versus a city like Las Vegas which has experienced as much as a 50% decline in property values. Typically, the stronger markets are those that did not see the huge run-ups in value. Timing the bottom of the market is all but impossible and chances are good that some areas in the US will continue to see property values decline. It seems that the worst part of the storm has passed and many markets such as Denton, TX are showing signs of strength. Since real estate is local, the recovery rate will vary from area to area. As a result, many areas have reached a bottom and are waging a comeback. Other hard-hit areas seem stuck at the bottom while some areas dodged the recession altogether. Searching for the bottom then is a regional and sub-regional affair.
Saturday, June 25, 2011
Clearly, these are not normal times. Many maturing loansare being extended rather than foreclosed on. This postpones the day ofreckoning when the owner loses the property and the lender incurs the loan loss.This phenomenon is called “extend and pretend.”The lender extends the loan and pretends it is still performing.Banks are weighed down with loans like this. Wall Streethas sold billions of dollars of these loans to investors all overthe world. Why don’t the banks and other lenders foreclose onthese properties and let the market clear? Why don’t they sellthem to new owners that can fix up the properties and findtenants for them? The answer is that after the massive losses incurred by banksfrom failed residential mortgages, they are not sufficientlycapitalized to immediately recognize the additional losses theyhave in their commercial real estate loans. After closing morethan 315 banks in the past three years, the FDIC DepositInsurance Fund (DIF) is $8 billion in the red. TheFDIC indicates it could take 17 years to rebuildthe DIF to desired levels. Federal policies initiated in the past twoyears suggest extend and pretend could be in place for many years to come.Rather than take the losses immediately, policy makers have decided toamortize these losses over a number of years.
- lock in the capital gains tax rate for a defined period of time
- release trapped real estate assets into the marketplace
- create tax incentives for investors who purchase distressed assets
- discontinue governmental policies that encourage moral hazard
- resist the temptation to over-regulate the lending industry
- US government should become a lender of last resort for small business
- discontinue the practice of bailing out businesses that are deemed to big too fail
Thursday, June 23, 2011
Hotel customer service rep (not front desk person) calls customer one week before his scheduled arrival and asks the following questions:
Have you stayed at _____________ before? We want to be the first to welcome you to... Is this trip for business or pleasure? Oh, I see. What time do you plan on arriving? Customer repsonse. _____________ will be working the desk that evening and she will be happy to check you in.
What type of pillow do you like -- soft or firm? Customer response. Okay, we'll have that type of pillow waiting for you?
What type of non-alcoholic beverage would you like in the room upon your arrival? Customer response. Okay, we'll have that in your room. Just let us know during check-in if you need help with bags and mention a bucket of ice and we'll have that delivered to your room as well.
Also, did you know we have a free complimentary breakfast which includes ____________, __________, ____________________. We encourage you to take advantage between _____________ and ___________________. Customer response....
Then you could explain what else is available for the customer such as shuttle service to and from the airport, work-out facilities, and pool amenities. Then you could close by asking if there is any special need or service that you can help with such as directions or pressing services.
This is the kind of personalization that will put the customer's experience over the top. Of course, it's important for hotels to offer amenities such as wi-fi and in-room movies but it's about much more than the amenities. The trend toward more amenities can not become a substitute for superior service and personal interaction. It's about the overall experience. Hotels that are the best at personalizing a traveler's experience will be the ones whose revenue soars when the economy recovers. The 80/20 principle, if applied properly, could revolutionize the hospitality industry. Find out the 20% that matters for each client and focus on delivering. It all starts with a courtesy call from a live person (not automated email) before the guest arrives, during his or her stay, and then after departure. Extreme service is what creates customer loyalty -- the wi-fi and free breakfast are simply icing on the cake -- great service takes it over the top.
Monday, June 20, 2011
|Republican Party Candidate|
|Democratic Party Candidate|
Friday, June 17, 2011
|Is it a global brand?|
America needs jobs desperately and it needs jobs that pay better than minimum wage. Wal-Mart and other retail jobs are not the answer. The answer lies in manufacturing jobs and construction jobs. Let's ramp up and start exporting high quality American goods to consumers around the globe. Couple a resurgence in American manufacturing with real US support for small business and the economy might take flight. Give more perks and money to large business in the US and watch while they continue to sock it away and continue to pay out large bonuses to top leaders without increasing hiring or salaries for the average worker.
|May 2011: US - 9.1%; TX - 8.0%|
Whatever happens next in our economy, it's time to think big, forget the status quo, and envision an economy that is a healthy blend of manufacturing and service sector jobs. This will provide options for a broad spectrum of workers and options are a good thing. There is reason to be hopeful but there is also serious cause for alarm. Nothing will come easy in the US again. If we want growth, we will have to work for it and earn it. We can't wait around on the government to provide the answer, and the government must partner with the American people and American business to make positive things happen in our economy. One such positive would be a resurgence in American industrial manufacturing.