Recovery on the Horizon?

That things are tough everywhere is not lost on anyone who watches Bloomberg, MSNBC, or a financial news channel. Everyday during this horrendous “earnings season” we hear of Fortune 500 and Dow company pillars reporting reductions in revenues and profits by 20%, 30% and more. I heard the C.O.O. of J.C. Penney’s on Bloomberg yesterday “boasting” that they would be reporting a 1% revenue increase for the past quarter! Like that was big news!

With that backdrop, could you imagine a business at the end of 2008 reporting a 21% increase in volume? Yet that’s essentially what The Orlando Regional Realtor Association reported on Monday. According to their PR department, this regional association reported on Monday that its members sold 1,305 homes, town houses and condominium units in December 2008 — 21 percent more than in December 2007, when the market was in the midst of a deep downturn. They also reported that during the four final months of last year, nearly 1,000 more homes changed hands compared with the same period in 2007. Those four consecutive months of year-over-year gains snapped a 27-month string of declines.

So what does that mean in terms of making a living as a realtor? Let’s crunch some numbers. This association has 4300 members. Even though all are not active in real estate anymore, we’ll take the conservative approach and use all 4300 members in our calculation. If we divide the number of units sold in December, (1,305) by the 4300 members of the association, we see that each member “sold” around 1/3rd of one unit. Put another way, based on Decembers sales figures, each member of the association is now seeing one transaction every 3 months in Orlando.

Now there’s no question that one transaction every three months is not enough for any real estate professional in normal markets. (Exception noted for those unique high-priced markets where homes are still in the multimillion dollar range and concomitant commissions still are in the stratosphere.) Most of us have a general rule of thumb that we need at least one “sale” per month to keep the lights on.

But what is interesting about this data from Orlando is not the static numbers, but rather the “rate of increase” reflected in the numbers. Because for the first time in over 2 years, the decline in the number of home transactions in the region was halted in its tracks. But more importantly, the decline not only stopped, but it turned upward in a very dramatic fashion.

For Orlando to see a 21% increase in transactions during the month of December as compared to December 2007 is huge. Whether we are talking about improving our revenues as a business, improving our won-lost record as a sports team, or improving our returns on our investments, to see a 21% improvement in only one year is normally considered a herculean task. Yet Orlando has achieved the almost impossible, and in my view is forecasting the recovery to all our markets in 2009.

Remember, housing usually leads the nation’s recovery, and Florida and California lead the rest of the country. In a time when most U.S. industries are laying off employees due to reductions in volume, housing in Orlando at least, is seeing a rebound. What do you think, is this forecasting the “bounce” for the rest of the country that we’ve all been waiting for?

Geoff Thompson

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About The Author: Geoff Thompson is an owner and founding partner of Colibri Real Estate, LLC. Since 1996 the companies under this banner have offered online real estate licensing and insurance licensing courses as well as online real estate exam prep and insurance exam prep.