New roles to play in the new reality…

One of the many fascinating reports that I get on a regular basis is the Brookings Institute Metropolitan Policy Program Update – a report on urban areas and the governmental policies and programs that impact them. The latest report is entitled "The Suburbanization of Poverty." Here is an excerpt from that report:

An analysis of the location of poverty in America, particularly in the nation’s 95 largest metro areas in 2000, 2007, and 2008 reveals that:

- By 2008, suburbs were home to the largest and fastest-growing poor population in the country. Between 2000 and 2008, suburbs in the country’s largest metro areas saw their poor population grow by 25 percent—almost five times faster than primary cities and well ahead of the growth seen in smaller metro areas and non-metropolitan communities. As a result, by 2008 large suburbs were home to 1.5 million more poor than their primary cities and housed almost one-third of the nation’s poor overall.


- Midwestern cities and suburbs experienced by far the largest poverty rate increases over the decade. Led by increasing poverty in auto manufacturing metro areas—like Grand Rapids and Youngstown—Midwestern city and suburban poverty rates climbed 3.0 and 2.2 percentage points, respectively. At the same time, Northeastern metros—led by New York and Worcester— actually saw poverty rates in their primary cities decline, while collectively their suburbs experienced a slight increase.


-In 2008, 91.6 million people—more than 30 percent of the nation’s population—fell below 200 percent of the federal poverty level. More individuals lived in families with incomes between 100 and 200 percent of poverty line (52.5 million) than below the poverty line (39.1 million) in 2008. Between 2000 and 2008, large suburbs saw the fastest growing low-income populations across community types and the greatest uptick in the share of the population living under 200 percent of poverty.


-Western cities and Florida suburbs were among the first to see the effects of the “Great Recession” translate into significant increases in poverty between 2007 and 2008. Sun Belt metro areas hit hardest by the collapse of the housing market saw significant gains in poverty between 2007 and 2008, with suburban increases clustered in Florida metro areas—like Miami, Tampa, and Palm Bay—and city poverty increases most prevalent in Western metro areas— like Los Angeles, Riverside, and Phoenix. Based on increases in unemployment over the past year, Sun Belt metro areas are also likely to experience the largest increases in poverty in 2009.

What does this all mean to Realtors and should we have strategies to deal with this phenomenon? At a “gut feel” level many of us who live and work in suburban areas around large cities have probably already felt this happening. Median home prices have been falling for the last few years as some of the main causes of creeping suburban poverty reached us – layoffs, downsizing, plant closings and the attendant foreclosures and value loses in the neighborhoods that we service.

As I have opined many time before this is not a temporary thing but a fundamental reset of the American way of life in many of these neighborhoods and even in states like Michigan. Our automotive industry has been decimated, our manufacturing jobs outsourced or moved to other states. Our population is in decline and our housing market is in a shambles. Our unemployment rate remains the highest in the nation at more than 14%. Most large builders have exited the state or gone bankrupt and our home values have decline over 30% in the last three years. Michigan’s Realtors cannot just ignore all of that. Other Realtor groups in other states have their own versions of what has happened to their local markets.

So what are we to do? Should we put our tails between our legs and slink away? Should we put our licenses in escrow and hang it up? How are we to deal with this suburbanization of poverty that we are now a part of?

I think people in the industry will do several things to deal with this crisis; some of which have already started to happen in many parts of the country. There are already reports out of Texas of builders regrouping and starting to build smaller, more affordable housing, which the reduced earning power of this new reality will dictate. No more McMansions with big, energy wasting “volume rooms.” Housing starts there are now averaging 400-500 Sq Ft less space according to reports that I have read.

Realtor’s have responded to the need to refocus, too. The median home price of sold homes has fallen dramatically in the last couple of years and it is not going to jump back up. Realtors are getting used to making a living off a significantly lower median sale price. In many areas the days of the second home are over and certainly we are seeing serious downsizing efforts in almost every economic group, some of it labeled “greening”, but downsizing none the less, so Realtors are adapting to sell smaller homes.

We’ll also have to learn to sell to a whole new generation of buyers. The Boomer boom is over and most of them, while wanting to downsize for retirement, are trapped in their McMansions for now. The Gen-X crowd is so fearful of losing the jobs that they have that they've settled in for a while in the homes that they own. So, we’ll have to focus our efforts on the Millennials –the 20 or 30-somethings who will make up the bulk of the buyer pool for a while. For the most part they are the first-time buyers who fueled the mini-boomlet that we saw the the end of last year.

These are not people who put a lost of trust in institutions or traditions. They are the “wired-generation” who spend an great deal of time on-line, in front of video games or communicating electronically. They used to be on Facebook until we got there and took it over. Now they are elsewhere. We think that they Tweet on Twitter and they think it’s cute that we think that. They are elsewhere, texting each other about our Tweeting. They are also a generation that has accepted that they will have less, not more than their parents or grandparents and have moved on. They are no necessarily the "Green Generation",that too is a movement co-opted by their elders; however, they are into "less is more" and "life is about things other than just possessions", so maybe they are more green than those who run around exchanging their old light bulbs for florescent bulbs.

As much as they would like to believe that they no longer need us, because they have access to all of the information that they need on the Internet, they still need someone to integrate and interpret all of the data that they can access on the net and someone to set up the appointments and show them houses and someone to help write and negotiate the deals. When they look at Realtors they see a profession dominated by people who look like their parents or grandparents. What they don’t need is another parent telling them what to do. There's a fine line between being a trusted advisor and becoming an overbearing father/mother-figure. That’s the role we’ve been asked to play – the trusted advisor. Let’s try not to blow it.

So, for many of us, it means figuring out how to either sell a lot more less expensive houses to maintain the income levels that we’ve enjoyed or perhaps to learn to live within the means of a reduced income stream. It also means learning to work with a new and different set of buyers who have different demand and different dreams than we are used to servicing. Some will be better able than others to cope with these changes, so expect also a great turnover of the people that you’ve been used to working with in the field. The Chinese saying/curse “May you live in interesting times” has come true in our time. Deal with it.