Housing

Don't Expect a Boom Anytime Soon for Slow Market, Experts Say

Weak Demand Spurred by Falling Home Prices Does Little to Revive Flat Real-Estate Ad Spending

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Has the real-estate market finally hit rock bottom? The short answer is maybe.

Every positive report seems to be matched, if not outnumbered, by negative news. It's enough to make you dizzy: Job growth might be on the upswing ever so slightly and mortgage rates falling, but a steady stream of foreclosures is still working through the system, keeping buyers on the sidelines, for fear of falling prices. Got that ?

The only certainties seem to be that there is no new boom on the horizon and that real-estate ad spending -- which tends to closely track the market -- is not likely to make a major rebound anytime soon.

"There's not going to be this 20% or 30% bounce, that 's not going to happen," said Steve Murray, editor of a leading industry newsletter called Real Trends. But Mr. Murray says trends are improving. Real Trends' latest report released last week showed annualized sales of new and existing homes increasing to 5.37 million in June, up from 4.86 million in May, but still 9.1% less than June of a year ago (a number he says was inflated because of federal tax credits in effect at the time).

But for every bull there are plenty of bears. And the pessimists got more ammunition last week when the National Association of Realtors reported sales trends that seemed to conflict some with what Real Trends published. The organization said sales of existing homes actually slid 0.8% in June to a seasonally adjusted annual rate of 4.77 million, which was below economist expectations and represents a seven-month low. Only a month earlier, the organization reported an 8.2% uptick in pending sales for May, offering hope that better days were soon ahead.

"Weak demand is the key reason sales are down," Patrick Newport, an economist with IHS Global Insight, said in a report. "Buyers are worried about falling house prices, the job outlook, and now, about the debt ceiling."

And that would not augur an increase in ad spending because marketing budgets of big franchisers are fueled in part by fees that are often based on transactions. The category has a big hole to climb out of , with real-estate companies, home builders and related firms cutting measured-media outlays from $3.1 billion in 2006 to $968 million in 2009, before ticking up slightly to $1 billion last year, according to Kantar Media. Still, companies have kept up a decent presence on TV. Century 21 is sticking by its plan to advertise during the Super Bowl and is plowing ahead with a campaign that debuted in the spring that positions agents as "smarter, bolder, faster."

With the rise of the internet, "most of us would have forecast the death of the real-estate agent," said Century 21 Chief Marketing Officer Beverly Thorne. "But that on-the-street neighborhood, local knowledge is proving to be unbelievably critical."

At the same time, marketers are still throwing money into digital. Coldwell Banker has rolled out what it is billing a "Pandora-like" property search tool. Users are asked to give a thumbs up or thumbs down to a series of images, including abstract scenes such as footprints in the sand or snowmobiles. The selections are used to generate a list of properties designed to match these emotionally-tinged preferences. Called "BlueScape," the tool is part of a revamped search suite Coldwell will announce this week that includes other functionalities such as "Affordability Radar," designed to let consumers match homes to their budget situation, and "Lifestyle Search," which allows users to narrow searches based on preferences such as public transportation.

HOW AUCTION.COM IS WINNING

One of the biggest conquerors of the housing crisis is Auction.com, which has made a living selling some $10 billion worth of mostly foreclosed real estate since 2007.

The privately held California-based company holds auctions in hotels, convention centers and on its website, disposing distressed properties on behalf of lenders, developers and builders. Auction.com takes a 5% cut on every sale, but only if it closes. Last year, the company unloaded 35,500 foreclosed assets worth $2.4 billion, and this year's tally is already up to 26,500 properties for $2.6 billion.

While other real-estate companies have cut ad budgets in the downturn, Auction.com is spending more, including on newspapers such as the Wall Street Journal. This year's marketing budget is up to roughly $40 million, the company said.

Of course, the housing crisis will end one day, and Auction.com is already preparing, ramping up its commercial property business, as well as selling distressed commercial loans.
--E.J. Schultz

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