Contributed by Bill Rawlings, Vice President & Managing Broker, North Atlanta Office
Recently I was invited to attend the Sotheby’s International Realty Affiliate Orientation in Parsippany, NJ and I felt Richard Smith had some insight regarding the current real estate environment.
Richard Smith is President and CEO of Realogy, a global provider of real estate and relocation services of which Sotheby’s International Realty is included. Richard has the distinct and unique honor of representing our industry on the 145 Member CEO Business Roundtable for the Unites States Government giving him access to not only members of Congress and other lawmakers, but the President as well
Did you know that data shows that Luxury market started to “recover” 10 months ago? Because the wealthy educated buyer believes that the market is at the bottom, or as close to the bottom as is it going to be, he buys and holds. To this type of buyer one or two percentage points in market value does not matter because they know that for the long haul it will historically bring a significant rate of return.
But why hasn’t the real estate market seen a more significant recovery in lower price points? Smith believes “real recovery” is slowly happening now but is convinced that the average consumer will not see this change until after the next President election has taken place. The U.S. Debt-Ceiling crisis will be the last major decision made by this administration related to economic policies, so don’t expect to see anything new after August 2nd. The focus of the current administration will shift into re-election campaigning. Until U.S. government policies are changed, we will not see a change in the market, so we are in for a flat year/year sales until there is policy change to impact the markets.
Who should we back in the upcoming 2012 election? He isn’t willing to name names quite yet, but he feels we all need to be watching for and lending our support to any candidate, regardless of party affiliation, to the one who supports hands off approach to correcting the housing predicament. Interestingly he points out that no one has EVER been re-elected to a second term when unemployment has risen above 7.2 – 7.3%. Smith predicts that unemployment will hover around 9.1 – 9.3 % and will be the driving force in the next election. One of the sticky points to alleviating employment crisis is that companies fear what Obama care will actually cost-keeping many on the fence from adding new jobs.
He believes the government led Home Affordability Programs (HAMP and HARP) have done nothing but exacerbated the housing problem in this country. Instead, he believes that the market must correct itself.
Lastly, Smith strongly believes that the real estate industry must respond to the NAR Call to Action’s regarding the implementation of the Dodd-Frank bill as it is NOT good for our industry.