WorkPuzzle

3 Recruiting Habits of Successful Leaders- Part 2

In Tuesday's article, I began a discussion about what it takes to be great at recruiting.

I quoted an article in Forbes written by Meghan Biro entitled, "5 Recruiting Habits of Successful Leaders." I found all of the precepts relevant, but there were 3 habits that really seemed to define what is needed to be successful in the area of recruiting.

Habit 1 was discussed in the previous blog. Today's article will present habits 2 and 3.

To refresh your memory of the concept, here is the first paragraph of Meghan's article.

"The simple fact is that recruiting is often a company’s first impression, and a reflection of its culture and workforce brand personality. It’s a spectacular — and too underexploited — opportunity to wow, woo, seduce and excite talent. Top talent doesn’t want to work in Dullsville. They want to work in a company that understands, challenges, excites, surprises and delights them. They want to work hard, play hard, and feel appreciated.  Recruiting should be where the courtship starts. Your organization doesn’t have to be a Zappos or Google — to attract “the right fit” and talent skill set you need to soar.”

Below are excerpts from the remaining two habits that are specific for recruiting:

Make The Necessary Leadership Changes

Your weaknesses should be pretty obvious when your inventory is finished. Whatever you decide, consider hiring outside talent to help you develop a holistic, integrated recruiting process. Of every choice, ask the following two questions:

    Is this going to help us attract stellar talent?

    Is it a true reflection of our company?  Remember: Recruitment is a major branding opportunity.

Keep It Real

As I touched on above, your recruiting process must be a genuine reflection of your company’s leadership and workplace culture. Whether your organization is way zany, slightly playful, or downright dour, you want to attract talent that feels comfortable in your culture.

HR and Recruiting are an untapped gold mine for too many organizations. Work hard to make them a reflection of your mission and methods, appealing and user-friendly, and able to identify and communicate with the right talent. This is an exciting exercise in leadership excellence.

Without exceptions, those who follow the above advice not only recruit well, but they recruit the best talent.

Remember who your real recruiting competitors are. They aren’t other Real Estate companies, although they do matter. Your real competitors are other industries, also seeking the best talent in your community.   And most of them understand the above principles.

Do you?

 

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Editor's Note: This article was written by Dr. David Mashburn. Dave is a Clinical and Consulting Psychologist, a Partner at Tidemark, Inc. and a regular contributor to WorkPuzzle. 

3 Recruiting Habits of Successful Leaders

Over the last 10 years, we have had the experience of partnering with companies who are dedicated and thriving at recruiting and also those who have not found the same success.

Why? I have two questions I always ask myself when considering the recruiting process of a particular client:

 

"Would talented people I know want to work here?"

"Which of these managers would be effective in inspiring talented people to work here?"

Those simple but powerful questions get at the heart of what we all must ask ourselves when it comes to examining and improving the recruiting process in our respective companies.

In my quest to gather information on how to best assess your process, I came upon a Forbes Magazine article; 5 Recruiting Habits of Successful Leaders by Meghan Biro.

Although all of them were relevant, there were three that I felt were critical to establishing a well developed recruiting process. Today I will present and examine the first critical habit and my next blog will cover the last two.

Ms. Biro begins the article with the following:

“The signs start early in the hiring process: a dry, lifeless job posting or stale employer branding that does not feel inspired….. I can remember walking out of a few select interviews earlier in my career and saying to myself, “There is no way I’m working at that mausoleum.” Or better yet – I’ve enjoyed being part of a world class organization recruiting top talent – where every day of interviewing seems to feel like a rush of adrenaline. You see – I’ve been on all sides of this equation in my own career – The best of the best, the good, the ugly.

The simple fact is that recruiting is often a company’s first impression, and a reflection of its culture and workforce brand personality. It’s a spectacular — and too underexploited — opportunity to wow, woo, seduce and excite talent. Top talent doesn’t want to work in Dullsville. They want to work in a company that understands, challenges, excites, surprises and delights them. They want to work hard, play hard, and feel appreciated.  Recruiting should be where the courtship starts. Your organization doesn’t have to be a Zappos or Google — to attract “the right fit” and talent skill set you need to soar.”

"Habit #1: Take A Workplace Culture Inventory. Take a good hard look at your current HR and recruiting practices. Put yourself in the shoes of a talented person who has never heard of your company.

• How are you trying to reach that person?
• Are you using filtering tools to target the right kind of talent you need?
• How is the language in your employer branding and follow-up information? Stodgy branding can be a real turn-off.
• What about your career site design? Is it fresh and appealing to to all generations? 
  
• How are your initial and follow-up contacts conducted? Deconstruct the whole recruiting process from initial posting to final hire.
• Where do you need to make changes to catch the eye and imagination of the talent you need?
• Do you solicit feedback from recent hires and even those who decided to take another career opportunity – yes, at another brand."

The consistent theme among the Real Estate companies best at attracting and landing top talent (who have never considered Real Estate as a career) is that they never cease tweaking the recruiting process to make their company more appealing.

Take some time to ponder how your most talented friends would experience your recruiting process. Is it designed to attract or repel them?

More next edition.

 

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Editor's Note: This article was written by Dr. David Mashburn. Dave is a Clinical and Consulting Psychologist, a Partner at Tidemark, Inc. and a regular contributor to WorkPuzzle. 

5 Business Clichés You Should Remove From Your Vocabulary

As I communicate with those in my business network, I have the tendency to find and repeat certain phrases.  I sometimes get stuck in a rut (see…there’s one right there) and communicate with a lack of thoughtfulness and creativity.

According to Jeff Haden, a bestselling author and columnist for Inc. Magazine, most of us struggle with this issue.  We overuse phrases that sound good, but are void of sensible thought.  While our listeners don’t cover their ears, they certainly get sick of hearing overused phrases!

In a recent post on LinkedIn, he provided 10 common examples of these overused phrases that all of us should stop using. Also, Jeff provides some entertaining commentary on what these clichés really communicate to our listeners.

Here are my favorites from Jeff’s list:

"Work smarter, not harder."

What happens when you say that to me?

 

One: You imply I'm stupid. Two: You imply whatever I'm doing should take a lot less time and effort than it does. And three: After you say it, I kinda hate you.

If you know I could be more efficient, tell me how. If you know there's a better way, show me how. If you think there's a better way but don't know what it is, say so. Admit you don't have the answer. Then ask me to help you figure it out.

And, most importantly, recognize that sometimes the only thing to do is to work harder. So get off your butt and help me. But don't just tell me to work smarter -- that doesn't help at all.

"It just wasn't meant to be."

Um, no. Fate had nothing to do with it. Something went wrong. Figure out what went wrong and learn from it.

"It just wasn't meant to be..." only places responsibility elsewhere.

"Let's figure out what we can do next time," is empowering -- and places the responsibility where it should be: on you.

"Do it now and ask for forgiveness later."

If that's your credo, you're not a bold, daring risk taker; you're lazy and self-indulgent. Good ideas are rarely stifled. People like better; if they don't like your idea, the problem usually isn't them, it's you.

Instead of taking the easy way out, describe what you want to do. Prove it makes sense. Get people behind you.

Then whatever you want to do has a much better chance of succeeding.

"Failure is not an option."

This phrase is often used by a leader who gets frustrated and wants to shut down questions about a debatable decision or a seemingly impossible goal: "Listen, folks, failure is simply not an option." (Strikes table or podium with fist.)

Failure is always possible. Sometimes it's an inevitability. Just because you say it isn't doesn't make it so.

Don't reach for a platitude in the face of criticism or resistance. Justify your decision. Answer the hard questions.

If you can't, maybe your decision isn't so wise after all.

"Let's not reinvent the wheel."

Because hey, your wheel might turn out to be a better wheel, which means my wheel wasn't so great.

And we can't have that.

To read the rest of Jeff’s list (there are a total of 10 clichés), check out his entire LinkedIn posting.

After reading this, I’m inspired to be more articulate in my day-to-day communication.  If I value the people around me, it makes sense to leave the clichés behind and put more thought into how I’m interacting.

Here’s to raising the bar on our business communication!  Yes, that’s a joke.

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. 

Why the best Recruiting Coordinators and Managers Sell the Invisible

While driving in my car, I have been listening again to Selling the Invisible, a book by Harry Beckwith.

You might think that I picked this title as a means of improving our sales within Tidemark, but you’d be mistaken.   I did read this book a few years ago for that purpose, but this time I wanted to think through how proven marketing ideas could help you improve the recruiting process. 

It’s been my observation that most well-run real estate companies understand that they are not only in the real estate transaction business, but also in the agent recruiting business. Gaining market share means performing both functions well.

I’ve also noticed that top recruiting companies share a common defining characteristic—their management teams tend to seek out any and all information that might lead them to increased results. There is a solid correlation between openness to assessment/feedback and steady improvement.

Those who are not willing to track, examine, metric, compare, and seek improvement (including challenging long-held beliefs) will invariably underperform their competitors and peers.  

As I was listening to Selling the Invisible from this perspective, I wrote down several principles that differentiate the best recruiting companies behavior from those who struggle.  Here are some of the standout differentiators and my comments beside each one:

Assume your service is bad. It can't hurt, and it will force you to improve. It is so uncanny how the best leaders I have ever met in my entire life have always made this assumption. Conversely the worst have an arrogant stance of "we've figured it out." I have learned a great deal through the humility of these fine leaders. 

Ignore your industry's benchmarks, and copy Disney's.  The point here is to surprise the candidate. Remember the blog we did on the offices that display a welcome sign with each candidate’s name before every interview? 

Big mistakes are big opportunities. If you aren't' performing well, see it as a time to examine, learn and improve.  If you make a mistake with a candidate, follow it with an apology, a gift card, and a promise to improve.  This will typically work wonders to reversing the course of the hiring process for most people. 

Don't just think better. Think different. Be open to out of the box ways of understanding a dilemma. Don't get so locked into old belief systems that you aren't willing to entertain other ways of seeing realty. You just might discover something revolutionary. 

Don't just create what the market needs or wants. Create what it would love. For recruiting, the market is the candidates you’re interviewing. The thing that all candidates love is to be understood thoroughly before making any bold statements about how you can solve their pain.

Every act is a marketing act. Make every employee a marketing employee. From the first contact with a candidate until he hands you his license, every touch with him is a marketing message.

What does each step in your recruiting process suggest to a candidate?  The candidates who will turn into top producing agents will be intuitively sensitive to how they are being treated (this is part of what will make them great agents).

If anyone on your team is not treating them with the upmost amount of respect, they WILL go elsewhere. If you’re waiting for agents to prove themselves before treating them with this respect, you ARE losing the best candidates. 

In most professional services, you are not really selling expertise - because your expertise is assumed, and because your prospect cannot intelligently evaluate your expertise anyway. Instead you are selling a relationship. Hopefully this speaks for itself. 

Which of the above principles can you improve upon? Which are strengths? Which are weaknesses?  Know that it is easier to see the weaknesses in others rather than yourself, so you might want to re-read the list a couple of times and make it a point of discussion with some of your peers.

Make sure you don’t miss the first point as you process this information-- we all must entertain a need for improvement if we want to grow. 

 

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Editor's Note: This article was written by Dr. David Mashburn. Dave is a Clinical and Consulting Psychologist, a Partner at Tidemark, Inc. and a regular contributor to WorkPuzzle. 

Best of….Advice for the 2014 Grads - Part 2

Earlier this week, I promised to share a couple of my favorite commencement speeches from the 2014 graduation season.

Hopefully you had a chance to read Marc Andreessen’s simple, but profound advice on Twitter highlighted earlier this week: 

Do what contributes -- focus on the beneficial value created for other people vs. just one's own ego [ie. following your own dreams and passions].

My favorite commencement speech for 2014 grads builds upon this idea, but explains how “normal people” (folks like you and me) can truly change the world around them.

The speech was written and delivered by Admiral William McRaven at the 2014 University of Texas graduation ceremonies.  If you’d rather read the transcript than watch the video, the transcript is posted on the University of Texas website.  You can probably get through the transcript more quickly than watching the video.

However, if you have 20 minutes to indulge, watch a very humble 4-star Admiral masterfully dispense some of the best career advice I’ve ever heard:

 

After watching (or reading) the speech, you may want to take away a summary of Admiral McRaven’s advice.  Here is an outline of what he instructs:  

Start each day with a task completed (make your bed).

Find and connect with others to help you through life.

Respect everyone (measure people by the size of their hearts).

Know that life is not fair (keep moving forward anyway).

Know that you will fail often (get over it and don't give up).

Take risks to achieve new performance levels.

Don’t back down from the “sharks.”

Step up (exert extra effort and display the most fortitude) when the times are the toughest.

Understand the power of hope to lift up the downtrodden.

Persevere—never, ever give up.

There are not many of us who can be world-class athletes, movie stars, authors, politicians, business leaders, or even Navy Seals.  But, we can all apply these principles in our daily lives and impact those around us.

If you’re responsible for coaching agents, these are traits that most humans have the capacity to access regardless of their natural talents.  A focus on these character traits and principles is something you can teach every one of your agents.

As Admiral McRaven noted, the impact of such coaching will have far reaching results.

 

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. 

Best of...Advice for the 2014 Grads

There is a plethora of professional advice floating around the internet this time of year. As the celebrities and politicians are called upon to do commencement speeches, each tries to boil down the essence of their success into short 20-minute speeches.

This is a very difficult thing to do.

How can a high-performing person really summarize a complex career into a few choice nuggets that could be taken and applied by the graduates he or she is addressing?

Most can’t do it (and I believe I would probably be in that group).  Instead of offering something meaningful or profound, they fall back on platitudes or focus on issues that most normal people can’t really apply.

Each year, I try to find a couple of these commencement speeches that rise above the norm and, at least, border on being profound.  I’ll share two of my favorites from this year in the WorkPuzzles ahead.

Why should you care about graduation advice?

I would argue that much of the advice that is being offered to graduates could be applied to the new agent interviews and to new agent coaching.   Many of the new to real estate candidates and agents are dealing with the same issues as the new grads: 

How do they use their talents and training to make an impact in the professional world?

My second “favorite speech” this year was not a speech at all, but instead a Twitter rant done by Marc Andreessen.  He was responding to the widespread notion that grads should follow their passions in the pursuit of their careers (see an example here).

The Twitter dialog was captured by Rob Wile a couple of weeks ago and documented in a posting on Business Insider.  Here is Marc Andreessen’s advice for graduates this year:

Tweet #1:  Thesis: "Do what you love" / "Follow your passion" is dangerous and destructive career advice.

Tweet #2: We tend to hear it from (a) Highly successful people who (b) Have become successful doing what they love.

Tweet #3: The problem is that we do NOT hear from people who have failed to become successful by doing what they love.

Tweet  #4:  Particularly pernicious problem in tournament-style fields with a few big winners & lots of losers: media, athletics, startups.

Tweet #5:  Better career advice may be "Do what contributes" -- focus on the beneficial value created for other people vs. just one's own ego.

Tweet #6: People who contribute the most are often the most satisfied with what they do -- and in fields with high remuneration, make the most $.

Tweet#7: Perhaps difficult advice since requires focus on others vs. oneself -- perhaps bad fit with endemic narcissism in modern culture?

Tweet #8: Requires delayed gratification -- may toil for many years to get the payoff of contributing value to the world, vs short-term happiness.

I can’t believe I’m going to say this, but I think Twitter might be a good thing.  If it causes people to articulate their thoughts in such a concise and meaningful way—it would be a great thing.

This is simple and profound advice that every candidate and new agent needs to hear.  If your new agents all bought into this mentality, you’d hire many more top performers!

Later this week, I’ll share my favorite commencement speech from this year’s graduation season.  After reading the transcript, I immediately sent it to my four oldest kids with a note that said, “You've got to read/watch this…”

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. 

Shortcuts to Recruiting?

Roger Stauback once said: 

“Nothing good comes in life or athletics unless a lot of hard work has preceded the effort. Only temporary success is achieved by taking shortcuts.”

“Recruiting people who don’t even have a real estate license is a waste of time.”

This statement is not unusual to hear from managers in the real estate industry.

These managers view the deeper pipeline approach (an approach that attracts people who have never considered real estate as a profession much less considered attending licensing school) as not worth their time or efforts.

I would guess that there are many of you reading this article who have held this belief in the past; or perhaps still do. If you can support that belief with logic and metrics, I would be more than happy to consider your points. I just haven't seen that so far.

The primary approach for Recruiting in the real estate industry has included the following 3 options:

• Recruit experienced agents;
• Contact new real estate licensees (through State listings)
• Wait for the newly licensed to come to you.

There is nothing inherently wrong with this type of recruiting. In fact most companies would miss out on good candidates if these methods were overlooked.

However, it's our belief that if a company relies solely on these procedures they are ignoring a huge market of potential candidates. This would be the pipeline group who may take 4 to 12 months (and a bit of listening, coaching and vocational counseling) to join your company. But they are definitely not a "waste of time."

It is always difficult to move forward with change. We all have our set routines and comfort zones. However, this can also cause us to be short-sighted and overlook errors in our logic.

For today's edition, let's look at what I consider one such error.

“I don’t have time to spend with someone who is undecided about whether to become a real estate agent, let alone answer so many of their questions, waiting months for them to come on board."

Using time wisely and effectively is important to all of us, especially in the real estate industry. Many of us look for the shortcuts assuming these will achieve the objective. Hiring the "easiest to hire" is an example of one of those shortcuts. While this may take less time initially, one wonders how much more time and resources these candidates, who love HGTV or visiting open houses, burn up in the future with attrition, etc?  There is a reason that the phrase “low hanging fruit” has developed some negative connotations. The best fruit takes time, effort and attention to ripen and mature.

On a personal note, my daughter works in the recruiting division of a large, well-known global company. It is the type of company that everyone wants to work for so they are bombarded by applicants. However, this company systematically pursues candidates from outside the applicant field, because they realize that it is vital to attract employees that they want, not just employees who want them.

Yes, this approach takes time and effort-but the results are that you will likely find the near-perfect match to meet your recruiting goals and objectives.

 

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Editor's Note: This article was written by Dr. David Mashburn. Dave is a Clinical and Consulting Psychologist, a Partner at Tidemark, Inc. and a regular contributor to WorkPuzzle. 

How Millennials are Screwing Everything Up in Real Estate—Part 3

Today, we’ll finish up a discussion that was started last week on the role of the millennial generation (those currently ages 18 – 35) in the real estate industry. 

The original topic was sparked by new research showing that millennials are delaying getting into the real estate market (as first time buyers) compared to previous generations. 

The question I posed last week was:

Do you believe it takes a while for a person to mature to the place where they are ready to perform the tasks of a real estate agent?

Or, do you believe the agent job can be equally performed by any age group?

Thank you to those who took the time to share your thoughts.

Across the board, not too many people came to the defense of the millennial generation.  In general, most of you seem to believe that individuals in this age group may need to mature before taking on the tasks and responsibilities of a real estate professional.

Thomas Maier, a broker/manager for Berkshire Hathaway Home Services Carolinas Realty, disagrees:

I believe that any age can make a fantastic Realtor.  I feel the primary ingredient must be that they desire to make this a career and know they must invest long hard hours early on to see the sustainable return on their investment. 

In the same way some of the millennial generation lack patience due to the “now” attitude of our technological society the older “new” agents sometimes lack patience for a different reason.  They often see this as a quick or last ditch fix to try to create income for retirement and do not feel they have the time to build for the future. 

In our area many of the top 20 agents industry wide are under 40.  They are the ones who start young, have vision, put in the work, and built a solid foundation early on.  They see this as a career and that they own a business, not a stepping stone or hobby along the way.

As a side note, Thomas is part of the millennial generation.  He started working in real estate soon after college, focused his efforts on building a successful business, and lived what he described.  There is no doubt that some millennials have been very successful in real estate.

But, are there enough individuals like Thomas (and his high performing peers) to fix the demographic problem (large number of existing agents are 55 or older) outlined in last week’s WorkPuzzle?

Scott Nelson, owner and CEO of Comey and Shepherd Realtors in Cincinnati, thinks that focusing recruiting efforts on millennials is a mistake.  Here are his thoughts:

[Hiring millennials] makes sense on paper, but we sure haven’t seen it [work out consistently].  In fact, we had four or five under thirty quick in/quick out hiring failures in our Mariemont office last year, to the great discouragement of our manager there. 

[Our recruiting team] has talked about a quality we call “being settled” that an under thirty needs to possess before they really transition to the real estate industry as something more than an alternative to waiting tables. 

Being settled could mean being married or partnered up “permanently”.  It could also mean that spouses or partners have a solid, real job.  While those are not the only characteristics, they do have to be serious and focused on their careers.

Absent being settled, these young folk seem to be drifting and real estate is deadly for them. They don’t have the discipline it takes.

I think the [millennials home-buyer marketing sketch] supports the view that entry age for new agents is rising, not falling.  The delaying of everything by pampered millennials means, to me, that those under 35 are rarely appropriate for our business. 

In the millennial generation, everyone’s a winner and everyone gets a trophy just for showing up!  This translates into tolerance for later bloomers, semesters in Europe, moving back in with the parents after college. 

That’s the world we live in and I think it means we will largely continue to replace our retiring agents with the” settled” 40-55 year-olds.  These fresh 40 – 55 year olds tend to give us 10-15 productive years.  That’s just what we need.

Of course, there are exceptions to this rule—we’ll welcome anyone who can focus their talents on real estate and create a successful business.  But, the exceptions are rare.

Scott owns one of the highest performing companies in the country (on a per agent productivity basis), so he admits his company is very selective in hiring new agents compared to most companies.   He is very passionate (and made a life-long study) about finding the best fit for those who become agents in his company.

Not sure I can add much to what has already been said by Scott and Thomas—two different perspectives that were both well articulated.  You’ll have to make up your own mind on what works for your company.

This I do know, the discussion will continue and the puzzle of hiring the best people may never be fully solved.

 

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. 

How Millennials are Screwing Everything Up in Real Estate—Part 2

Earlier this week, I started a discussion on the disappointing impact the millennial generation is having on the real estate industry.  There has been lots of great feedback on this topic—thank you to all of those who have shared thoughts.

Today, we’re going to address the impact this generation is having on real estate recruiting.  More specifically:

Is there a connection between the millennial generation’s sluggishness to become first-time buyers and the way they approach their careers?

Before answering this question, let’s lay a little ground work.  For the last couple of years, I have been using the following slide in my presentations:

Source: Real Trends, Inc. 

The y-axis represents the age ranges of real estate agents, and the x-axis represents total number of realtors in the United States.   It’s obvious that the real estate industry is “top-heavy” with older agents, and the problem worsened during the downturn.   

There is a serious demographic problem that needs to be corrected.  Also, this correction needs to happen over the next 10-years as the older agents start to retire and lose energy towards the business.

So, this demographic problem needs to be fixed.  How do you fix it? 

Many assume (myself included) that the real estate industry needs to hire as many young professionals as possible.  The millennial generation (those currently 18 to 35) is a natural target for this fix.  

They are many in number, possess above average technology skills, and high percentages of them are underemployed.  They have limited career opportunities in the traditional employment market.

Is this not a match made in heaven?  It seems two cosmic problems (real estate needs new blood and millennials need meaningful careers) are coming together to form a perfect win –win solution.  Right?

Not so fast.  At least that’s what some of you have been telling me.

There may be a problem with the capacity that many in the millennial generation have towards building viable careers.  They not only can’t buy houses, but they also may have trouble focusing enough to develop a self-guided career.

Part of this conclusion is based on the real estate marketing sketch we did earlier this week (15.5% unemployment rate, 29% of those under 35 still living with their parents, $20K + in credit card debt, etc.). If they have financial problems keeping them from entering the real estate market, would some of the same problems also keep them from performing well in the role of a real estate agent?   It’s certainly a possibility.

As one of our readers commented,  “It used to be that kids worked for their parents.  Now parents work for their kids.” 

What are your thoughts on this topic?   Have you noticed a pattern with the millennials you've hired? 

Do you believe it takes a while for a person to mature to the place where they are ready to perform the tasks of a real estate agent? 

Or, do you believe the agent job can be equally performed by any age group?

Comment via email and I’ll share some of your thoughts (with your permission) in the next WorkPuzzle.

 

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle. 

How Millennials are Screwing Everything Up in Real Estate

Not sure if you noticed, but the highly anticipated millennial generation is not exactly pulling their weight in the housing market. 

This group of 74-million consumers (now ages 18 to 35 years old) is the primary focus of much marketing attention because of its size and supposed affluence.   For many market sectors (ex. consumer electronics), there is much to be gained by catching the attention of this group.   But for the housing market, this generation has become a disappointment.

New market research recently reported in the Wall Street Journal documents the depressing millennial generation realities:

For now, the absence of young adults from the housing market continues to put a dent in the homeownership rate, which dropped to 64.8% in the first quarter, compared with 65.2% in the fourth quarter of 2013, according to U.S. Census statistics. The rate was as high as 69.2% in the fourth quarter of 2004.

For those younger than 35, the rate has fallen noticeably faster. It slipped to 36.2% in the first quarter, from 36.8% in the fourth. The homeownership rate for this group was as high as 43.6% in the second quarter of 2004.

Of course, this begs the question: Why is this happening? 

I’ll address this question in today’s WorkPuzzle.  

Secondly:   How will this impact real estate recruiting? 

I’ll cover this topic in our discussion later this week.

Market Watch reporter, Amy Hoak, recently did a great job of boiling down the factors that are keeping millennials from entering the housing market.  Here is a quick summary:

Unemployment and low savings

The unemployment rate for 18-to-29-year-olds was 9.1% in April, which rises to 15.5% if you include those who have given up looking for work... The unemployment rate was 6.3% in April for all ages.

Forget that without a job it’s just about impossible to get a mortgage. (It’s also hard to rent: 29% percent of adults younger than 35 live with their parents, according to Gallup poll results released earlier this year.) A slow start to earnings also means a slow start to saving.  The majority of younger renters report having insufficient assets to cover a 5% down payment plus closing costs on a typical starter home.

Consumer Debt plus Student Debt

Young adults tend to have a high utilization rate on their credit cards, an average debt of $23,332 and high incidences of late payments. [In turn], Millennials also have the lowest credit scores [compared to other generations].

While a mediocre credit score might not have mattered all that much 10 years ago, it takes higher scores to obtain a mortgage today. And improving a score takes time.

In 2012, 1.3 million students who graduated from four-year colleges (or 71%) had student loan debt…. Graduating seniors with student loans had average debt levels of $29,400 in 2012, up 25% from $23,450 in 2008.

And new mortgage regulations, set into motion by the Dodd-Frank Act, require that borrowers have no more than a 43% debt-to-income ratio (with debt encompassing monthly housing costs and debt payments, including those on student loans).

Delaying marriage, family

The median age of first marriage is about 27 for women and 29 for men, according to the U.S. Census Bureau. In 1950, it was about 21 for women and 24 for men.

Because people are marrying and having kids at an older age, many young people might spend more years renting apartments and living in cities, before moving to the suburbs.

Meanwhile, the average age of first-time mothers was 25.8 years old in 2012…. The average age was 21.4 in 1970.  [During the same period], first-birth rates…rose for women between the ages of 30 and 39, the data shows.

Bottom line:  People with no money, no savings, lots of debt, and little motivation to change don’t make good real estate customers.  Hopefully this set of circumstances will change over time (if nothing else, these young people will eventually grow up), but it may take awhile.

Also, this may be a pattern that will continue to be followed by future generations in a “post traditional values” America.  How you adjust to this reality is a problem every real estate company must solve.

Next time, we’ll discuss how this reality is impacting real estate recruiting.  You may be surprised at some the changes that will be NOT be coming…

 

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Editor's Note: This article was written by Ben Hess. Ben is the Founding Partner and Managing Director of Tidemark, Inc. and a regular contributor to WorkPuzzle.