By Stephanie Andre
RISMEDIA, May 17, 2007-By now, it would be difficult to find
anyone who isn't aware of the changes to the real estate business over the
past 12-plus months. Lost in the shuffle, however, has been the effect this
change has had on the residential real estate relocation business. Here, Kathy
Connelly, Prudential Georgia's senior vice president of corporate services, and
the 2007 president of the Relocation Directors Council, and Dan Forsman,
Prudential Georgia's president and CEO, talk candidly about the relocation
industry's problems, possible fixes and how it's affecting not just relocation,
but the real estate industry as a whole.
Real Estate magazine: Kathy, can you briefly describe
your work with the Relocation Directors Council (RDC)?
Kathy Connelly: We are a nonprofit organization, made up of
275 of some of the most well-known real estate companies in the country.
Our group is inclusive of all brands and networks involved in residential real
estate relocation. We meet twice each year, and the objectives of the
organization are:
- Encourage the personal and professional growth of its
members
- Foster continuing education in relocation
- Organize a communication network for relocation directors
- Promote a high level of ethical and professional conduct among its members
- Exert a positive and beneficial influence within the relocation industry
We share best practices, discuss issues and solutions as
they relate to the industry, the challenges we are facing, and how to train
agents on this business. We also have a corporate advisory council that
includes members such as UPS, The Home Depot, Intercontinental Hotels,
Coca-Cola, and our third-party advisory council has representatives from
National Equity, Primacy Relocation, Summit Mobility and Lexicon Relocation.
Our advisory members serve a two-year term.
RE: As the 2007 president of the RDC, what are some of your
chief responsibilities?
KC: A lot of my job is charting a path for the organization,
enhancing the value proposition to our members, and reaching out to people who
may not be aware of our member organization and benefits. I really believe in
raising awareness and using our group as a vital resource of information and
local market data; it helps our corporate clients make informed decisions on
properties or transferees in our respective markets. Additionally, my role as
president allows me to have a platform to serve as an ambassador for our
organization.
Dan Forsman: The RDC has been invaluable to Kathy over the years.
It has given her a venue to stay abreast of industry changes, to exchange best
practices with her peers, and has contributed to her professional development,
all of which has helped to position our company as a relocation leader in our
market. As an owner, I need to support my team to be the best they can be,
which ultimately benefits our corporate and third-party clients, my agents and
my company. Kathy has never been one to shy away from her commitment and
dedication to the relocation industry and her role as 2007 president of the
Relocation Directors Council is just one of many ways she has given back to her
field.
RE: How would you describe the state of the relocation industry
today?
KC: It's in a changing mode. I've been in this business since
1989; we're always talking about change. Over the years, we have seen a change
in services offered and in different policies and even tiered policies, but
often the programs come full circle. As the real estate markets change, things
go back and forth to meet the demands of the market. The pricing structure and
the way suppliers are compensated are the biggest changes. In the past, clients
paid for service. Now much of the revenue of third-party companies is generated
from referral fees and other ancillary revenue funded by the suppliers in an
effort to hold down cost for the corporate client and remain competitive.
RE: What problems do you see with the industry right now?
KC: Over the years, we've seen a lot of consolidation-a lot of
acquisitions and mergers under different brands. That is somewhat concerning
because the defining lines are often blurred within the traditional broker
networks. Also, there's a lot of pressure on service providers to provide a
higher level of service under reduced revenue models. The risk for service
failures exist when our best front line service providers-the agent or the van
line driver-opt out of servicing our referrals because they can't afford to handle
our business. Some companies are trying to leverage their volume to secure
higher referral fees. This is a huge challenge that faces the industry-rising
referral fees are a great topic of conversation.
RE: How do you fix those problems?
KC: That's the $64,000 question. Everybody has a threshold.
Ultimately, many may bow out. They'll have to ask themselves, "Are we
getting enough business from a single source to make it up on volume?"
Third-party companies are going to have to manage their business better, keep
relocation employees more in compliance and limit options if they are going to
commit to volume for the service provider. That's the only way to deliver on
the commitment and make it feasible for the service provider. Ultimately,
everyone in the service chain has to recognize a ROI (return on investment).
People in real estate care very much about delivering high levels of service,
but you do have to balance the right kind of service and the cost to stay at
that level.
RE: Where do you see the relocation business going in the near
future?
KC: We have to be careful to not get beyond a threshold that
compromises service for price. We have to educate all parties to the
transaction so that we are all better informed about the effect of cost versus
service and the risks associated with exceeding the cost threshold.
However, you're still going to see change. Companies will
re-evaluate the process and their providers. The changing real estate markets
are already creating higher costs as corporate clients are faced with more
inventory, even though some companies have limited, or removed, the buyout as
options for employees. If they need the employee bad enough, they may be faced
with a decision to make it an option-as a matter of policy or as a matter of
exception. You may see companies revisiting their policies to adapt to the
changing real estate markets. On the other side of it, we have this looming war
for talent. The Baby Boomers are retiring, so companies are faced with a more
limited pool of skilled individuals. It's a good idea for companies to reassess
to make sure they continue meeting the needs of the demographics of their
employee population and markets where they operate.
Second of two parts: Signs of an exodus are here. Some blame the real estate slump; others aren't so sure.
By DAN DEWITT
Published June 11, 2007
THONOTOSASSA - The half-dozen child-sized violins lined up on Cynthia Jolley's driveway were once played by students at her Temple Terrace music studio.
She closed the studio in October because of increasing expenses and declining enrollment - including 10 students whose parents either left the state or told her they planned to. By last month, the violins had become yard-sale fodder to unload before she and her husband, Walter Hause, move to her hometown in central Tennessee.
"Actually, if we stayed, we wouldn't have had anybody to teach, " Jolley, 40, joked. "It seemed like we were losing everybody."
So it is across the state. Squeezed by rising property taxes and homeowners insurance rates, and frustrated by crowded roads and schools, increasing numbers of residents are moving from Florida, which since World War II has been one of America's favorite states to move to. To be sure, Florida remains a strong lure, particularly for retirees, but evidence is mounting that the migration boom it experienced in the first half of the decade is over:
- Public school enrollment, expected to climb by nearly 49, 000 students last school year, dropped by 3, 571, the first decline in 24 years.
- The number of Florida drivers seeking licenses in other states has increased since 2005, while the number of out-of-state drivers moving to Florida has fallen.
- Three of the nation's largest van lines moved more customers out of the state than into it last year, reversing a decades-long trend.
Many housing analysts say these are signs not of a long-term population shift but of the slumping real estate market.
"It's temporary, " said Mark Vitner, senior economist with Wachovia Corp. "Housing prices will correct. ... We need a couple of years with no hurricanes to right the ship."
But Harvey Bennett, senior vice president of Florida TaxWatch, a nonprofit group supported in part by corporations, a sees the statistics as warning signs that the state Legislature should heed when it meets this week to address rising property taxes.
"You look at these numbers and wonder whether this is a watershed moment for Florida, " Bennett said.
On the other hand ...
Growth has been so strong for so long in Florida that even wondering about it is momentous, said Gary Mormino, professor of Florida studies at the University of South Florida.
"This is the first time since the recession of the 1970s when real question marks appear about the future of Florida, " he said.
About 90 percent of the state's population growth since 1950 - from about 3-million to more than 18-million - has stemmed from migration, said Stanley Smith, director of the state Bureau of Economic and Business Research, "and the lion's share of that is migration from other states."
This stream of net immigration - the measure of people moving into Florida minus those moving out - has clearly dwindled since statewide sales of existing homes peaked two years ago this month. The slowdown aside, few housing analysts or population researchers are convinced it has stopped or begun to flow the other way.
"There are always a certain number of people who move to Florida and shuffle around to other parts of the South, " said Chuck Longino, a professor of gerontology at Wake Forest University. "I know the media calls them 'halfbacks' and says they are extremely numerous, but I don't buy it until I see some hard numbers."
The evidence against a historic exodus includes statistics from U-Haul, which continued to move more residents into the state than out of it in 2006, and the total number of Florida drivers, which increased last year by 1.4 percent. Also, growth in the state has dropped dramatically during previous economic downturns, in the mid 1970s and early 1980s, Smith said.
Finally, the latest estimates from the U.S. Census Bureau and the Bureau of Economic and Business Research show strong growth, with the state agency calculating that Florida gained 430, 905 residents in the 12 months ending April 1, 2006 - one of the largest annual increases in the state's history and well above the rate Florida is famous for: 1, 000 new residents per day.
The state's new estimate, due out in August, will show slower but continued population growth based on the number of new residential electric customers and building permits, said Smith, though he cautioned that the report is meant to track trends, not pinpoint annual gains.
"It's possible that it overstated the true growth because of the bubble and the speculation, " he said. "Year by year, it can be a little misleading."
Popularity as myth
Or a lot misleading, considering the high level of speculation throughout Florida, said Jack McCabe, owner of McCabe Research & Consulting in Deerfield Beach.
He also thinks the Census Bureau's estimate, based mostly on tax filings for the 2005 tax year, is too old to be meaningful.
"The population surveys we're getting from government agencies are not anywhere near what's happening in real life, " said McCabe, who said the state - and certainly its most crowded and expensive counties -may be losing more migrants than it is gaining.
Most of South Florida - Miami-Dade, Broward, Palm Beach and Monroe counties- has seen declines in numbers of public school students and licensed drivers in the past year. So has Pinellas County, which lost 2, 265 students last school year and 7, 601 drivers in 2006.
Meanwhile, Florida's housing market "underwent a large sales slump last year, " said Lawrence Yun, an economist with the National Association of Realtors. "Georgia, Tennessee and the Carolinas by contrast all had record home sales in 2006."
Atlantic Relocation Systems of Tampa, an agent for Atlas Van Lines, moved more people out of the state than in for the first time in memory last year, said Bob Glenn, vice president and general manager. Many more out-of-state moves have been delayed by the sluggish housing market, he said.
"We've got people who have been on the active list (to move) going back to September and they still haven't been able to sell, " he said. "People are almost being held hostage by their homes."
McCabe said, "It's anecdotal evidence but it's a preponderance of evidence. The idea of 1, 000 people per day moving to Florida is an absolute myth at this point."
The bottom line
Whatever the extent of the shifting migration, the root cause is money, most analysts and demographers say: Florida didn't lose its allure; it became too expensive to compete with other Southern states.
The state's housing prices were overinflated by speculation during the boom, said Vitner, the Wachovia economist. Even with recent declines in Florida prices, the median-priced home in South Florida costs more than twice as much as one in Atlanta, according to the National Association of Realtors. The median price of a house in the Tampa Bay area, $203, 200, is at least $18, 000 higher than one in Atlanta, Charlotte, N.C., or Columbia, S.C.
Surging housing costs drove the increase in property taxes from 2001, when the average amount of state and local taxes Floridians paid ranked 36th in the nation, to 2005, when the state ranked 26th, according to TaxWatch. Inflated home prices also contributed to higher insurance premiums, which have jumped from an average of $930 in 2004, when the state was hit by four hurricanes, to $1, 600 in 2006, according to the state Office of Insurance Regulation.
"In the past, Florida was a low-tax, low-cost, low-wage state, " said Bennett, of TaxWatch, "but increasingly it is just a low-wage state and that's a serious concern."
If housing prices continue to fall and lawmakers can reduce taxes and control insurance rates, the thinking goes, Florida will resume attracting Northerners, including a large share of the 77-million baby boomer retirees.
"I haven't seen the data that people are a whole lot more inclined to stay in Buffalo than their parents were, " said Larry Polivka, professor of aging studies at USF.
The congestion state
Departing Floridians usually have many reasons for leaving the state. Money plays a part. So do the consequences of the state's rapid and, some say, poorly controlled growth.
"At what point is there so much growth that the dream turns sour? I don't know if anyone knows that answer, " Florida-studies professor Mormino said.
Jolley and Hause, the Thonotosassa couple planning to move to Tennessee, sold their manufactured home on half an acre for $148, 000. The couple, who plan to live temporarily with Jolley's parents, say they are looking at slab-built homes on larger lots that cost as little as $84, 000. They will also be leaving behind the traffic jams that turned the 10-mile drive to their studio into a half-hour crawl.
"I was shocked at everything being so expensive and crowded down here, " said Hause, 59, a retired pharmaceutical chemist from Pennsylvania.
Eddie and Peggy Castro sold their house in the Old Southeast neighborhood of St. Petersburg for $233, 000 and bought a townhouse for $129, 000 near Augusta, Ga. Their annual savings on homeowners insurance will be nearly $2, 900, they said, but more important, they escaped crime, crowds of boaters in their favorite waterways, and out-of-control condominium development.
"This is not the little town I grew up in, " said Peggy Castro, 51, who had lived in St. Petersburg since 1966.
Britt Wirt, a real estate agent from Redington Shores, said he and his wife, Virginia, plan to build a retirement home in eastern Tennessee on a wooded 5-acre tract with a stream and a waterfall they bought for $40, 000.
"When we saw that waterfall, we said, 'That's it. The search is over, ' " said Wirt, 64.
"I was born and raised in Florida and my wife has been here 35 to 40 years. ... With the taxes, the insurance and the crowds, we've just about had our fill."
About this series
Florida has been transformed over the last decade by a huge migration from other states. But there's mounting evidence the tide has turned.
Sunday: A look inside the migration boom. Among the shifting patterns: By 2005, the Northeast had replaced the Midwest as the top source of migrants to the Tampa Bay area. Read more at news.tampabay.com.
Today: Is Florida losing its allure? Data on school enrollment, driver's licenses and moving companies all indicate a slowdown of Florida's growth - and reversal in some cases.
------------------------------------------------------