realonomics

Meet Moe - Part 1

Starting a real estate company is well, sort of easy. Operating a real estate company is challenging…to the max! Creating and sustaining a profitable real estate company is frankly, the new acid test for 2009. Yes, your eyes are reading correctly…2009.

We are a few days from turning the corner into the final stretch of 2007. Mostly, REALonomics believes, that the back half of ‘07 is going to be the beginning of one of the toughest stretch runs in the history of real estate brokerage. This is a serious position for us to take but one premised upon the current “going-south” market conditions that show no signs of waning. REALonomics now believes the current conditions will continue to gain momentum at least throughout 2008 and perhaps into the spring of 2009.

Our New Operating Reality

This is our new reality…acknowledge it…face it…embrace it…and work within it to redesign your broker/owner model into a more sleek, streamlined and efficient machine. The aberrant market presents the industry with an opportunity to create new, highly competitive brokerage business models that can emerge at the end of this market cycle as tomorrow’s winners.

But we are going to have to deal with the Stooges that still linger in our business culture. And, it’s no laughing matter. How we deal with the Three Stooges within our industry will create the 2009 acid test for brokerage firms.

Meet Our Moe - Acid Test Numero Uno

Moe was the preeminent director of the Stooges…a comedic enforcer…a slap happy terminator. We remember him as the the “intelligencia” of the trio. The decision-maker and enforcer of dicipline within the triad of morons. Our industry’s Moe is our traditional overhead models that rumble down the economic highway like tanks burning up fuel and blasting away at the agile moving markets with archaic artillery.

Replacing traditional overhead models will be acid test numero uno for the brokerage industry in 2009. The survivors will be those who replace tank-like operating models with agile, light-weight, low maintenance operating models that can quickly prosecute the wide spread warfare for consumer attention and loyalty in open markets. It’s going to become a competition for speed, geographic adaptation and agile morphing the likes of which we haven’t seen…our tanks won’t cut it! Park em! Get out! Run!

REALonomics identifies three rumbling tank-like operating models that will need to be replaced for those who want to compete in the next era for the huge opportunity for new ROI:

1. Buildings, buildings and more buildings
2. Employee-laden environments
3. Labor intensive transaction management

Bricks and Mortar Command and Control

In the old days…circa 1960-1994…our buildings defined us and our place in limited, static geographic markets. The edifice with the sign (our name, our brand) sent signals to the defined territory that we were present, we had a name and consumers could come to us for real estate solutions. This was command and control! This is the tank.

In order to bolster our bricks and mortar business model and control our fixed territorial markets we utilized our market tank (buildings) to lure consumers into calling off signs, reading print ads and invitations to consumers to “come into the office” (Floyd Wickman’s “CITO”).

This began to change in 1994 when the first property listings and photos hit the “Information Super Highway” as we called it back then. It was the beginning of the transformation of our industry’s business model.

If REALonomics is right and the market drags until 2009, we are going to have to jettison overhead anyway. Buildings are bulk, too costly to maintain and almost wholly unnecessary. While the market goes agile, too much of the industry still clings to the retail expression in a single market place…THE BUILDING!

This one issue alone can bring down many a great brokerage firm. We must redesign the way we congregate before 2009 arrives. Those who do will be positioned for the next upturn. Those who don’t may loose.

Why do we do what we do…when we don’t have to do what we do? I just don’t understand.

The Employee-rich Environments

Buildings require maintenance, furnishings, equipment, utilities, technology, restrooms, heating and cooling, rents (in most cases), personal guarantees (in all cases) coffee makers, and most importantly…EMPLOYEES to staff them.

During the decade long market run-up (circa 1994-2005: our dates), we acquired more fixed-base operating stations than ever before in the history of the real estate industry. After all, money was flowing and agents were coming into the industry in unprecedented numbers. This added more employee overhead than ever before that continued to execute duties under old labor intense transaction models. All of this at broker/owner’s expense and risk.

Employees never met environments they didn’t love and long to linger within. Having one’s spot (cubicle or office) is the essence of permanence and a pseudo sense of “I am safe.” Whereas, broker/owners, the true entrepreneurs and risk-takers of our industry are never provided any safety they don’t create and demand for themselves.

Tanks are being shut down, layoffs have begun and buildings are being scaled back or, in some case, shut down altogether. Is it too little too late? The bigger question for the industry is simply, why do we do what we do…when we don’t have to do what we do? I just don’t understand.

Labor Intensive Transaction Models

Instead of, for example, adopting more streamlined transaction process controls during the market run-up, such as paperless tools, we marched on…or, I should say…we drove on…in our tanks…blasting away.

In other words, we didn’t seize the moment (a decade should be long enough) to re-invent our operating platform by investing and engaging in the required R&D that would streamline our operations, making us more competitive in the new open, fluid, ever-changing markets…we took the money, spent it and in many cases kept the tank fired up and rolling.

To be positioned as a competive brokerage firm in 2009, we must replace our employee laden, tank-like models with streamlined, high tech, consumer-friendly, low cost per transaction management systems…the second cousin to our employee rich environments.

We are, as REALonomics has said, “Awash in Paper“, despite the fact that we have at our finger tips new, cost-effective technology models that can dramatically reduce our per transaction costs, increasing profitability. Many times we simply don’t believe in the technology we have available to us, so the high cost tanks roll on!

Once again, we ask, why do we do what we do…when we don’t have to do what we do? I just don’t understand.

And how would you propose we prepare ourselves for the next market cycle?

Popularity: 27% [?]

Alan Greenspan - Fed Reserve Chairman, Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005

Peter Schiff, Pres. Euro Pacific Capital:

“The losses are going to be phenomenal…my guesstimate in the subprime world is that the majority of loans are going to go into default. Not just 5 or 10 percent, but the majority.”

Angelo Mozilo, Charmain & CEO Countrywide Home Loans:

“Company is seeing home price depreciation at levels not seen since the Great Depression”

Joel Naroff, Economist:

“While some may say the stability in prices is an indication that the bottom may be near, I say it is the major problem facing the market. With inventories so high and sales so weak, unless people start pulling homes off the market, the overhang will remain.”

Listen to this message from Steve Tripoli, MarketPlace: Subprime Message.

Popularity: 9% [?]

Next to email, blogging is the fastest growing Internet communication model and it is ramping up by astronomical leaps and bounds. Growth, for now, is cult-like and unabated.

REALonomics is a late blogging bloomer, having been planted in the potting soil of the blogosphere a scant few months back. We need much more business model dialogue about how the concept of blogging fits into our industry. As of this post, both feet are not down yet. The other shoe needs to drop, so to speak, for blogging to become a useful piece of the real estate industry’s economic model. Without any intention of insult, allow me to say that for now, we are all first generation “Blahgers” with room for growth.

We are BLAHG 1.0 by any standard, present company at the forefront of this categorization. Turning the current Blahg-o-Sphere” into a truly “common place” component within our real estate models is going to be a tall order.

State of the BLAHG

Real estate BLAHGS will not be true economic contributors to our bottom line ROI until a set of fundamental shifts occur. These shifts are academic to change and essential to the open adoption of new models.

The State of the BLAHG within our industry is mostly self-serving. We all write, we all write for each other, at each other and about each other. This is BLAHG 1.0 because the economics won’t develop until the consumer is on board. Getting the consumer to board the train is a tall order because the value proposition that causes them to purchase a ticket is not yet clearly defined. We are still playing at this. This is BLAHG 1.0 because it is about us…only a few of us…and it can’t be about us… or just us and have any chance of truly working for the consumer!

Integration of the BLAHG

Our industry will need to dismantle part of its infrastructure and reassemble it from the ground up. Mostly, we need to examine the manner in which we connect sellers with buyers, consumers with our organization and how we integrate property offerings into multiple consumer-centric conversations.

It’s still about property. Real estate transactions remain unchanged at their nucleus. It’s still about a buyer. It’s still about a seller. It’s still about the money that makes transactions work. The modus, however, by which we bring the transaction components together in transparent environments is the next important step in the integration of the BLAHG into our business models.

Broker/owners need to lead the charge by learning about BLAWGs, by BLAWGing and by plunging themselves over the cliff into the BLAWGing abyss which is a new sea of opportunity.

Consumer Adoption of the BLAHG

An insurance professional made this profound statement to me a few days ago, “I don’t understand blogging, how it works and why it is important but it seems reasonable that we should do it and scary at the same time.” We had a conversation that evolved around how his company and the consumers doing business with it could benefit by BLAHGing with his organization. He remained frightened and unconvinced until I mentioned that BLAHGing could be a means for clients to become partners with him and a kind of sales force in the organization…this got his attention.

Before we can release BLAHG 2.0, the industry will need to first convince ourselves that the consumer is an extension of our enterprise, a true partner. Broker/Owners continue to exhibit a great deal of anxiety over BLAWGing. Let me just say it and get it out of the way; this psychosis is “RESTLESS BLAWG SYNDROME” (RBS). But it is a real mental impairment for the industry. Transparency is the nature of the BLAWG, its heart and soul. Transparency, to date, has not yet become the nature of the real estate industry. We are conflicted over this notion.

Consumer adoption of the BLAWG in our real estate models and in the open arena of commerce and conversation is going to prove a bit illusive for a while. In order to fulfil the BLAWG integration we need to accomplish the following:

• Convert ourselves to belief in BLAWGing; dispensing with fear;
• Discover the path to integration within our current models;
• Build BLAWGs that quadrangulate sellers, buyers, property and money with Brokerage in the wings;
• Integrate powerful consumer-centric blogging platforms into our marketing game plan;
• Provide BLAWGing opportunities at every level of the relocation blueprint;

We are in the midst of BLAWG 1.0, transitioning to BLAWG 2.0. Within a very short period of time we can enter BLOG 3.0, leaving behind the experimental era. Until we reach the BLOG, we must BLAWG.

Popularity: 11% [?]

Albert Einstein is credited with creating the dual theories of Special and General Relativity. We know this from Science 101 where we recited E=MC², perhaps not knowing or appreciating what it actually means. Well, we at REALonomics won’t be conducting any relativity experiments in this post except to say that Einstein’s theory has to do, in part, with the movement of a mass in the midst of different environments, sort of…ARGHH!

Examples: A clock that is moving will tick slower than one that is not moving…hmm. When someone watches an object moving toward them, it appears smaller than it really is…uhh huh. Two events that seem to be happening simultaneously to “John” will not appear to be simultaneous to Jane, if Jane is moving in a direction in any respect to John…this is why I failed physics, folks. Time moves slower with lower gravity…so, astronauts actually return to earth younger than they would have been had they stayed on terra firma for the same time period. Finally, at least for now, the universe is expanding with the parts of it that are at its core; the farthest fringe away moving faster than light can travel…okay, got it!

The long and short of E=MC² is that matter and energy are somehow interrelating all the time. The old “Energy is equivalent to Mass times the Speed of Light, squared” formula. This Ensteinian thing has something to do with objects, movement, light, speed, things bending and being warped and so forth.

RE is Facing Relativity Issues

Let’s nominate Albert for the keynote address at NAR this year or, if you prefer Inman Real Estate Connect. He, better than anyone, can explain the movement of real estate as a MASS in the midst of a rapidly changing environment.

We are facing E=re² as perhaps our perpetual model for decades to come. The stability we have previously known has now been thrown “out the window” of relevance. Our former stable model clock is now going to have to compete with a new shiny rapidly moving timepiece that has more energy (ticks slower) than its stationary competitor.

Events Measured Differently

Factions within our industry, although engaged in the same set of economic and business development events are seeing them differently. Why can’t we connect the dots with degree of uniformity? Traditional real estate business models, heals dug-in, are like Jane because Jane is moving in directions antithetical to John’s perspective. Think with me…I need help, anyway!

The antiquated clock referenced above, uses more energy as it sits mired in the muck of ambiguity and traditionalism, seemingly unable to gain momentum within its environment. Those RE models that move, although appearing to use additional energy, will use less energy than stagnant models. Do anything but don’t stand still.

The Gravity of the Situation

Our heavy, clunky, high overhead, retail business and operating schemas are like gravitational lead. Albert told us that removal of gravity or at least a movement in the direction of weightlessness would reduce aging. The real estate industry must create its own weightless models and thus reduce the drag, wear, tear and breakdown of its antiquated, low ROI, intense labor business practices.

USA Today carried a piece in its July 17, 2007 publication regarding the survey of top economists asking them, in part, when the housing market would hit bottom. Approximately 58% of the economists surveyed believed the bottom would come in either 4th quarter 2007 or, 1st quarter 2008. Another growing group of thinkers puts the housing bottom into late 2008. Inventories in Las Vegas, Nevada are growing at approximately three times the absorption rate. This is the gravity of the situation.

Albert told us, “gravity will age you faster than weightlessness in a given time period.” He’s right and not just in the world of physics.

Bright Side - Our Universe is Expanding

There exists in this soup bowl of relativity the molecular variant for opportunity. The outer fringes of Einstein’s universe, he postulated, are moving faster than we can calculate.

Our industry’s is being stretched to its maximum and the centrifugal force is pushing the fringe edges away from traditional inner core toward new, streamlined, light weight models that move, it seems, at the speed of light. These new clocks tick slower and do not age as fast.

It’s a tall order when we are called upon to reinvent our universe. But that is exactly what we must do. Those who hesitate much longer may find themselves unable to cope with the management of change hitting us from all sides. It’s an insane situation, but one filled with golden opportunities…man I love this industry!

Out of clutter, find simplicity. From discord, find harmony. In the middle of difficulty lies opportunity.”

Albert Einstein

Popularity: 6% [?]

Part 3 - CityBlogUSA

This post is the third installment of a three-part series with Donald Teel, the Founder of e-Partner, and it addresses blogging in general and the CityBlogUSA Network specifically; its mission, model and functionality. In addition, this post looks at the place of blogging in real estate business model paradigms in a consumer-centric industry.

REALONOMICS: CityBlogUSA is a pretty stout venture, what’s the nutshell on this thing?
CITYBLOGUSA: The e-Partner team took a look at the blogging phenomena during the first few months of 2006 and made some important discoveries about blogs and blogging that we thought might guide us into that universe. We decided there were reasons it was a space we could not ignore.

REALONOMICS: What were the discoveries your team made and what were the compelling reasons to jump into the blogging ocean?
CITYBLOGUSA: “Ocean” is a good word to describe blogging and it was one of the discoveries; the sheer enormity of blogging as a social medium for interaction and idea pooling is profound. We also discovered that a lot of people were writing, only a few were reading and even less are commenting, leading us to conclude that we were still in the infancy stage of blogging as a means to new business models. We discovered that only a very small slice of blogs had what I would call “meat and potatoes” content…real view points, cutting edge thinking…and they ranged from the cute boutique blog to high-powered political blogs.

But far and away the largest discovery was that blogging isn’t really being used as effectively as it can be within the real estate industry to create peer-to-peer relationships and business models that can help owners of real estate companies. Owners don’t know much about blogging and are generally confounded by it. Finally, we discovered that only about 10% of all owners had a grasp of what blogging is; they asked us, point blank, “What is blogging?” While many are saying blogging is peaking, I’m saying, for the industry we have no clue yet what it can mean to us in terms of consumer loyalty.

Our reasons for creating the CityBlogUSA Network, however, were more than fanciful and had to do with our business belief about consumer-centricity within the real estate brokerage business and the fact that real estate companies should utilize blogging as a part of their business development strategies. We work from the premise that anything good for the consumer is good for the broker/owner…literally, everything, and this belief can ultimately create higher profits for owners. Having been one, I can say, owners are generally skeptical people and tend to be a little intimidated by consumer demands. Blogging allows us remove the sense of nervousness about opening up the operation to consumer scrutiny.

REALONOMICS: Tell us about the consumer side of the CityBlogUSA Network.
CITYBLOGUSA: We decided to take a risk and empower the consumer to do what the consumer is already doing or, in fact, wants to do…communicate with others about real estate, thus the marketing tag “Ask the people who live there.” Our first premise, which is the premise of blogging as a social media, was residents know more about living in a city than others do and should be afforded the opportunity to post information about not only real estate but any other topic they want to discuss, from acupuncture to zoology.

We believe the democratization of real estate is evolving at a quickening pace. Peers want to dialogue with peers. Consumers trust other consumers. We need to acknowledge this and create the business models that match this truth, rather than resist the change.

From the business side of the CityBlogUSA Network we asked ourselves a penetrating question, “why aren’t owners providing community-based blogging within the markets for residents who have a story to tell and consumers who want to relocate, need to sell where they live and buy real estate in a different city?

REALONOMICS: What were the reasons owners weren’t providing such a medium for their markets?
CITYBLOGUSA: Lack of knowledge, understanding, initiative, technology enablement and a dash of fear. Like I said, broker/owners, too many of us, didn’t even know what a blog was! Owners didn’t have the time or the technology savvy to create blogs, manage them and make them work.

When we started to tell owners we were going to empower residents in their markets to talk about their “favorite city and home town” via a social networking medium the top immediate question was, “who is going to police what they say?” Which is like saying, “we exist for our clients but we really don’t want total transparency and unfettered communication because we might not like what they say.”

REALONOMICS: Where is the CityBlogUSA Network now in terms of development.
CITYBLOGUSA: Square one…and, it’s a round BETA hole and our sledge hammer is pretty beat up. On a scale of 1 to 10, we are .0023418! Seriously, we took the WordPress Multi-User platform and had to do some pretty strenuous code enhancements to make it work in every State and City in the United States and within the entire e-Partner Community-Based Network. Every developer who does this will attest to the concept of “Protracted BETA” or, the work is never done. Right now the CityBlogUSA Network is up, running, being blogged, agents are joining, owners are joining and we are at about week four. The truly motivated are jumping on board because we are offering some degree of exclusivity to owners who want to be in the middle of this and the agents who want to position themselves. We are just scratching the surface and moving very deliberately toward solutions, avoiding jumping on every bandwagon that hits the Internet weekly.

We have no illusions about resident/consumer blogging. Despite the growth of blogs, the vast majority of consumers are still not fully literate about the blogosphere and how it can empower them…but, they are learning quickly, which is why the real estate industry needs to be at the forefront of the creativity and implementation curve, not behind the eight ball.

REALONOMICS: Where does the real estate industry fit into the CityBlogUSA Network?
CITYBLOGUSA: First and foremost, all that we do at e-Partner involves the industry with a primary focus on broker/owners and the consumer. We start there. However, we are not creating the blogging network so that it can feature real estate practitioners as its centerpiece; that would be counter-productive to the consumer-centric models we believe in and where the industry is going.

The CityBlogUSA Network is consumer and resident focused with broker/owners and agents in more of a supportive role, i.e., we are here, you can find us, blog with us, ask us questions, use our knowledge and invite us into your world if you choose to do so.

In this sense we are not like ActiveRain, which is far-and-away the industry leader for promoting agents and ancillary service providers at the front end of their solution. We don’t have a “come one, come all” element. In fact, we have a “first come, first served” model for agents. We are actually creating limited exclusivity for agents at the community blogging level. If you visit our Myrtle Beach blog, you will see agents from Century 21, independent firms and Coldwell Banker, while the South Carolina Blogging Network is used as a tool of another brokerage firm. I honestly believe the blending of the industry is the wave of the future and it isn’t a new phenomenon. Zillow, Trulia, ActiveRain, CityBlogUSA and others are doing it. In our traditional circles, we have resisted it to a large degree with the exception of Realtor.com, where all firms, brands and agents get to play.

What’s different about the CityBlogUSA Network is the consumer-centricity and resident focus. It will take us a while to get where we need to go, so we are in it for the long haul.

REALONOMICS: How do people get involved in the blogging network?
CITYBLOGUSA: Easy, they go to www.CityBlogUSA.com, pick a State and a City and hop into authoring, commenting and suggesting ideas to their hearts content. They can upload photos of their community through the PhotoBlogUSA component as well. If they are serious about exposure they can spend some money to promote themselves to consumers and residents by engaging in highly target ads.

If a user wants to hop directly into their State, they can simple dial in their browser to such locations as CaliforniaBlogPage.com, AlabamaBlogPage.com, MaineBlogPage.com, etc. Just hammer the state name into the address bar and follow it with BlogPage.com.

Popularity: 9% [?]