• Lowest interest rates in 45 years creating extraordinarily high housing demand.
• Explosion of hybrid mortgage instruments (no doc, no down, etc.,) allow many renters to buy who may not have bought until years later
• Strong, positive demographics–baby boom in prime earning years
  • Strong immigration/migration driven by strong national and Minnesota economy.
• Explosion in second home purchasing fueled by primary residence home equity borrowing and Capital Gains exclusion for sale of principal residence (TRA 1997).
• Strong and growing state economy, low unemployment (uneven nationally-housing very positive economic influence -Greenspan 2001, 2003)

Where we are now

Post 2006:

• Rising interest rates will price more buyers out of the market
• Credit crunch: consumer/mortgage broker/lender/ investor irresponsibility comes home to roost. Credit tightening will make it harder for some buyers to qualify for a mortgage.
• Demographics turn negative:
  • less replacement buyers: sold first time homebuyers "forward" many years
  • Baby boom ages and enter their 60's (2006)
  • Anti-immigration sentiment begins to have impact
• Rising state unemployment
• Consumer homes tapped out as source of easy credit locking consumers into place (no equity).
• Fewer people moving to the state

Recommendations to REALTORS® and their customers:

1. Housing must go on sale. (During the boom, sellers got a premium for their properties–that bloom will be reduced in this market.)
   • Prices must drop or homes taken off the market in order to reduce the high and rising inventory.
2. Buyers are being realistic in their offers…it is the sellers who do not understand three things:
   • Their home values increased a lot from 2000-2005.
   • They are selling into a falling market so 10% less today is better than 20% less next spring.
   • Selling in this market (getting less for their home) permits them to buy in this market (buying for less).
3. Brokers must reduce the number of "unproductive agents" (x transactions per year) in order to stop the dilution of productive, professional agent's income. If this does not happen, REALTORS® should stop the blabber about "professionalism." My definition of a "professional" in real estate is someone who counsels consumers in the buying and selling of real estate and does at least 10 transactions per year. [Real estate sales is an experiential based business: the more business one does over time the more proficient, competent one is–consumers/customers make this determination based upon the depth and breath of the services provided by the REALTOR® not based upon the symbolic REALTOR® "R."]
4. The real estate business must develop management acumen. There are no rational business models that hire more people during a time of market weakness. Why would broker's intentionally dilute the income of their best agents by hiring agents on the hope of selling to his/her relatives? What kind of service does this type of agent provide other than a 50% commission split? Isn't the point of a consumer-centric business to be consumer, not agent centered? The "agent as customer model" is not pro-consumer and violates the professional role/image competent REALTORS® try so hard to project.
5. Real estate brokers must focus more on the training, development and management of their sales staff and less on raw numbers of salespeople. Highly trained and managed agents are the broker's tool to win the public's confidence and the key to stronger earnings