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A Buyers' Market
Real Estate by Jean Gruss | Editor/Lee-Collier
Jim Gillespie, Coldwell Banker's president and CEO, says there are plenty of homebuyers shopping for a home. They'll start buying again when sellers realize the market has changed.
Jim Gillespie says you can't deny the demographic trends.
You've heard them before: millions of boomers will start buying retirement homes. Their children, the echo-boomers, are buying their first homes now. Add to that 1.2 million legal immigrants who move to the U.S. every year and you've got a bullish case for residential real estate.
Despite the gloomy headlines, Gillespie, Coldwell Banker's president and CEO, says home sales are on track to record their third-best year ever. "It's still a solid year," Gillespie says.
Gillespie doesn't deny a slowing real estate market. But he argues that the market will rebound once sellers realize the run-up in prices is over and price their homes accordingly.
The Review caught up with Gillespie as he was meeting with top sales agents at the Ritz-Carlton in Naples. Here's an edited transcript of the conversation:
Q: How are you responding to the slowdown in real estate sales? Are you increasing advertising or cutting back expenses?
A: We are funneling more advertising dollars from traditional media into the Internet. According to the National Association of Realtors, 77% begin their search on the Internet. So what we're trying to do is reach out and try to find those people and bring them to our Web site. We're going to kick off a $3 million radio campaign and our purpose is to drive them to our national Web site and then we have a seamless transfer from our national Web site to our local companies' Web sites.
As far as other things, we'll introduce next month at our management conference an office-profitability course that looks at what you need to do in a market where revenues are down from last year. We also have introduced a course called "Boost" for people who have been in the business a year or more and this helps them hone their skills. Very few people are in the industry today that were in the industry the last time there was a decline in the market.
Q: As smaller real estate agencies see their profits decline, do you see an opportunity to acquire them?
A: There's a tremendous opportunity. There are always good opportunities to franchise an organization. On the company owned side, NRT, there's tremendous opportunity to purchase a company that is not surviving very well in the down market and do an acquisition where you can take out some expenses, bring in quality salespeople and management. It's the same with our affiliate companies. I've been in the business 31 years and lived through several downturns and what always happens in downturns with a real good, strong company ... is your market share goes up.
Q: What's your forecast? When will the market stabilize?
A: I don't have a crystal ball, so I'm not going to sit here and say this is what Jim Gillespie thinks. I rely upon our National Association of Realtors. The association says that next year units will be pretty flat to this year, which isn't bad because this is the third best year in history. All the demographics are overwhelming. No one can dispute that. The buyers are out there. But sellers are not realistic right now. They're still thinking that their property was worth $200,000 last year and can ask $230,000 this year.
For sellers, depending on how severe the market it is, it usually takes six to 18 months for them to realize the market has changed. Nationally, we're at a 7.3-month supply of homes. According to the National Association of Realtors, a six-month supply is a balanced market. So right now we're in a buyers market. Once the sellers get realistic and price their homes where they should be priced, then that inventory will flush out and it will be a balanced market.
Q: How are you dealing with the growth of discount brokers?
A: What we do is tell our people to make sure they explain to sellers what they bring to the table as a full-service broker. You used the term "discounter," but really the term is "limited service." First, understand that limited service and discounting has been around the 31 years I've been in business. That's nothing new. There are always people who are going to want to go with somebody at a reduced commission to get the job done. That's fine, but what we try to explain to our people is to make sure that the consumer understands the differences.
What I tell people to do is to write down the myriad of things that they do from their very first point of contact with the potential customer all the way through and past the closing, because it's amazing what real estate people do and all the hassles that can take place with trying to get a property marketed and closed. People confuse real estate with stocks, bonds and travel and all the other things where truly as commodities you can do that for a lot less. Real estate is not a commodity.
Q: How has technology changed your business?
A: The advantage that we have is that if there's a great new unique thing out there that an Internet real estate company can come up with, well they don't have the distribution base that we do. So we can pick up that technology and provide that through our close to 4,000 offices literally overnight. Now we're going to launch in the next month Google Earth [maps] and show where the listings are. We'll be the first national real estate company to overlay on the [Google] Earth map shopping centers, schools, parks and sorts of things like that.
Q: What's happened to real estate speculators?
A: Nationally, speculators are about 3.7% of the market, according to the National Association of Realtors. I think in Florida that is dramatically higher, but I don't know the number. I've been on national TV years ago saying you shouldn't speculate on anything. You shouldn't speculate on real estate, stocks, bonds or whatever. The upside is tremendous, but you better be able to afford the downside. Some of the speculators have moved to Texas and hot markets north of where Katrina hit.
Q: Is your company expanding internationally?
A: That's where our biggest growth is going to be in the future. We're going to continue to grow tremendously in the United States, but we are very mature in the United States. The world is getting smaller. On Sept. 27, we'll have our home-price comparison index where we compare similar-type properties and this year for the first time we're adding 140-plus markets internationally. So you can compare a similar type property in other parts of the country and other parts of the world. The rest of the world loves American brands and Coldwell Banker's a great American brand, as is Coca-Cola and General Motors. The world is where business is done.
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