Here is a question I was recently asked and my answer to them… even if you don’t coach Real Estate professionals, you need to read this answer!
Question: It seems like everyone that I talk to is just waffling around complaining that there’s no work and everybody only has REOs (bank-owned properties). Is that the right group of people to target for coaching? They don’t seem to be a really positive crowd right now.
Answer: This past week, my financial advisor called and said, “We’re getting a lot of calls from people who are almost ready to retire. They’re stressing about the economy and what’s going on.”
I went to this presentation. It was really fascinating. It gave me good insight into what’s been going on, and a historical perspective as well. Let me share some of the things I learned. These are lessons that you can talk about with people that will encourage them and provide good motivation to stay in action and do things a little bit differently now than in the past.
I learned that the economy always takes dips when big things happen. The economy hates uncertainty. There is typically a drop in the market in between presidencies. Then other historical events happen like 9/11, the economic crisis we’ve just been in, or someone is assassinated.
What’s interesting is that there’s always a rebound. In the past, the rebound usually took a short period of time. We actually just saw a little bit of rebound in the stock market. It went up 900 of the 1,500 points it had gone down in the previous week. That’s a pretty good rebound.
If you look at any 10-year period over the last 60 years, the market and the economy have always been stronger at the end of the 10-year period than at the beginning. I have a graph that actually shows some of the dips that have occurred during world events and what’s going on.
The economy usually strengthens within each presidency, too. Not necessarily with Nixon and George W., but with all the other presidencies, the economy has actually grown. The actual stock market is better for that. I think that is really fascinating.
The Dow is higher at the end of a presidency than the beginning. The average annual returns under a Republican president are 10.7%, and a Democratic president it’s usually 12.8%.
Nixon’s was the only presidency where the stock market went down (1.6%). It could also go down under George W. Bush, but we only have data through 2007. There’s only a 3.2% growth under this Bush.
Under Clinton, it was 17%. George H. Bush was 15%, Ronald Reagan was 14%. Jimmy Carter was 11%, Ford was 18%. Johnson was 10%. It’s all really strong over a 60-year period. We’re not talking about just the last 10 years.
There’s a tool called the Misery Index that combines unemployment and inflation. In 1980, the Misery Index was 20.76. In 2007, we’re at 7.46. It’s substantially lower. That’s not to say that we don’t have high inflation or some unemployment right now. It could be that we’re starting a recession.
There have been 10 recessions in the past 60 years. On average they happen every six years, but sometimes there has only been a three- or four-year period between the end of one recession and the start of the next one.
Since 1982, we’ve only had three recessions, basically one per decade. There were nine, 11 and seven years between the beginning of each one and the beginning of the next. That was really interesting because I had been feeling like, “Gosh, didn’t we just have a recession?” It made me realize how common it is.
What does that mean? I don’t think of it and say, “Definitely plan for a recession.” I just know in six years we’ll have another one. That’s not necessarily true, although a lot of people are hearing that we are heading for a recession or already in one.
Imagine a wall clock. Economists use a clock index to talk about where the economy is. At 12:00, it’s known as the boom. That’s typically when the news media is talking about how it’s a great time to buy real estate and how good an investment it is.
By 3:00, there’s a slowdown. We start seeing signs that maybe the housing bubble is bursting. They’re starting to see more foreclosures.
By 6:00, that’s the recession. I would argue that the American economy is somewhere in the 6:00 range based on what the news media is saying. It may be a little bit before or after.
At 9:00, we’re in the heart of the recovery.
If we’re near 6:00 right now, where do most people make their money? Let’s say it’s in investing or the stock market. That happens during the recovery period because by the time you get to the boom, there’s not much time left before things start to turn again. This is a cyclical pattern that we see over and over again.
At that presentation, the speaker said, “The best time to invest is when it hurts the most.” I thought that was a really profound statement because he was talking to a room full of gray-haired people who are all concerned about retirement, their 401Ks and all their funds, and how to keep them alive. They’re worried because they are at retirement age. They want to be able to do what they’re going to do.
Basically what he was telling them is, “Don’t get out of the market. Play the game because number one, there will be a bounce back; and number two, most of the money is made during the recovery period. If you get out during the recovery and rebound, you’re going to miss all the action. I know it hurts, but if you don’t have to pull your money out and don’t have to take a big draw right now, don’t.”
Let’s take this clock analogy to small businesses, because that’s who I work with. A lot of small businesses may be feeling the effects of a recession if they have credit lines that have been cut or real estate that’s under water. From a business perspective, they may be feeling the pinch. Yet the best time to invest in their business and what they want to accomplish is when it hurts the most.
To get people to see that, say, “You have to set yourself and your business up now so that when the real estate market takes off again, you are positioned well. You have your marketing going and people paying attention. ready to take action. That’s only going to help you and serve your business.”
Maybe you just use the clock analogy with people and say, “I know this is a tough time and things have not yet turned. There’s almost a slowdown in the slow down. There’s not as much of a drop in the real estate market. There’s not as much negative stuff happening as there used to be. It’s slowing down, and in some areas I think it is turning the corner. That’s what I hear.
If you are marketing your coaching services to realtors, the one thing to do would be to validate first. “I know it’s been a really challenging market, and not just a couple of months. You’ve really seen the effects for the last year or two.”
Validate, validate, validate. Then say, “I know you’re not alone in this, and this has been a really challenging time. Let me show you something.” Draw a picture of a clock and go through the lesson of the boom, slowdown, recession and recovery.
You can even ask them, “Where would you say that we are right now?” They’ll probably point to 6:00. You can say, “Where is most of the money made?” Most of the money is made between 6:00 and 12:00. That is when things are starting to take off again. If you get back into real estate or ramp up after things are already booming or close to the boom, you’ll miss a lot of the growth.
It could just be that you ask, “What do you want to see your business doing over the next year? What do you need to do to position yourself to take advantage of the recovery? How can you ride that recovery wave? What support do you need in order to ride that recovery? What new training and marketing do you need? What accountability? What would help position you to really ride that wave?”
Then you step in there and say, “I can help you do that. I can help you to position yourself so you gain those types of things.”
You can also do skills and education. I’m trying to think about the needs of a realtor in this market. Obviously, there are some different strategies for selling houses today than a year or three years ago. Back then, they were receiving multiple offers. All they had to do was list it and do nothing. If that strategy is no longer working, something needs to shift up.
You can approach it like, “That’s what I can help you to do. I can help you to figure out how to shift up your strategies and really make the most of what you’ve got.”
“The fact is that you have listings and people need housing. They’ll always need housing. How can you make the most of this? It could be changing the strategy. We haven’t hit bottom yet, so let’s get the listings even lower so that people think, ‘Really? In that neighborhood, there’s a house for that price? I have to check it out.’”
That’s an approach with realtors. If they’re not open to coaching for whatever reason, the questions become, “How are you positioning yourself? Are you positioning yourself to ride the wave of recovery? If you wait or you’re not positioned right, when the opportunities come, you won’t be ready. They’ll go to someone else and the money will go into somebody else’s pocket.”
That’s an approach to take with them.
