Real Estate Leaders Look Ahead

Bob Majorino

As homeowners and homebuyers across America, especially those who live in Southern California, continue to feel the effects of a struggling market, The Acorn continues its multipart series about the future of the real estate industry and what might be expected from the economic forces ahead.

This week's discussion involves Bob Majorino, CEO and owner of Prudential California Realty. The company's branch offices include Calabasas, Westlake/ North Ranch, Thousand Oaks (Regional Sales and Corporate Offices), Camarillo, Oxnard and Fillmore.

Majorino's business career began with the IBM Corporation working in the field engineering, education and management divisions. He became a professional Realtor in 1978 and owned his own company within the first two years of his career.

Majorino lives in Camarillo with Sarah, his wife of 31 years, and two children, Kevin and Tina.

Q: Let's begin by distinguishing between residential and commercial real estate. Is the shopping center and industrial market, for example, feeling the same effects as the housing market?

A: Commercial and industrial real estate is doing very well still. A "ripple effect" from the housing slowdown is a possibility, as other industries are affected by whatever happens in real estate. Consequently, tenants may not be able to keep up with rents if their businesses suffer a significant slowdown, which adversely affects commercial/industrial values.

Q: How is the current slump different than the downturn experienced by Southern Californians in the early to mid-'90s?

A: In the early '90s interest rates were substantially higher, and inventory of unsold homes was double what it is today. Also, the experience level of working through a possible foreclosure sale by effecting a "short sale" (wherein the lender takes less than the loan balance as a final payoff in lieu of foreclosing on the owner) was nonexistent. We all learned a lot about the lending business in those days.

Today, we stand prepared and ready to assist people through these difficult transactions because we have that experience and have built relationships with lenders which can help save some people from certain foreclosure. Also, others who are capable of buying can benefit from these transactions on occasion, as the lender is motivated to get the payoff as soon as possible without having to go through the legal entanglements, if possible.

Q: One of the hottest growth markets has been in the Conejo Valley, including Calabasas, Westlake Village, Oak Park and Thousand Oaks. Are these communities feeling the correction more than others?

A: No. These communities will feel a bit of devaluation temporarily, but the rebound is much quicker with properties located in the center of any development plan. The higher desirability of these areas insulates the neighborhoods a bit more than in outlying areas.

Q: Are sellers learning to be more realistic in their expectations?

A: Yes. The average seller is better educated and more aware of the options and market conditions which exist today, mostly because the real estate professionals in the area have become more experienced over time and have made it a point to share that knowledge with their clientele. This is a healthy situation for all, as real estate is a critical investment for all homeowners, and the more they know about it, the safer and more profitable that investment can be.

Q: The building industry often complains about "barriers to entry," or government policies that make new home construction difficult. Even if construction policies were relaxed, don't the market forces make the building of new homes risky?

A: I would not want to be a builder around this area without the recent sluggishness, never mind with it. Now would not be the time to take the tremendous risks that builders take.

Q: Is our local area insulated somewhat due to the lack of new construction in the pipeline, or does that even matter at this point?

A: The insulation that exists around our area is not caused by a lack of new construction, but by the desirability of the properties based on location, favorable weather conditions, generally higher quality construction standards, good schools, great community services and so forth. New construction would not hurt the market further at this time unless it could be carried out on such a large scale as to truly dilute the inventory.

Q: We've heard that while existing homes are sitting on the market longer, the median sales prices are still trying to hold firm. How much longer before prices stabilize, perhaps even increase again, or is this just wishful thinking?

A: I would say that prices will hover around the bottom of the market when it reaches that point, with prices beginning to gain strength and begin climbing in about 18 months. I don't feel it is wishful thinking. Real estate is the ultimate investment. It will never go away or diminish in value. What we are currently experiencing is completely normal. The longterm always demonstrates the true value of any real estate investment.

Q: What do you think it will take to create a turnaround?

A: Individual neighborhoods will experience their own markets, wherein the most motivated sellers will sell first, followed by the next highest level of motivation and then the next. As the selection of homes on any given street gets sold off, the inventory becomes more scarce, and eventually the prices reverse and start to climb. As this occurs, sellers become more confident in the value of their homes, and prices return to higher levels, using yesterday's sales as today's measuring stick. Fortunately, we still have favorable interest rates on our side, and inventory is currently not overabundant. There is still room for more competition. Buyers who are buying for more normal reasons such as relocation for work, additional needs because of family growth, etc., will also take some of the focus from the "price only" approach to owning a home. This is healthy, as homeownership is so much more than the price you paid for your property.

Q: What are you telling your agents to keep them encouraged?

A: I'm telling my agents to be leaders. They cannot let the temperature of the market dictate their attitudes. They must set the pace and lead the way. They must also respond to the needs of their clients instead of simply answering their questions. This means investing a considerable amount of time discussing the needs of each individual and researching possible solutions to their problems. It means working with people the way they should be worked with- one at a time- until every possible alternative has been tested.

It takes patience and skill and knowledge, unlike selling houses in the frenzy we experienced a few years ago, when people were buying faster than we could sit down and talk to them. This is the market for professional people who want to help make a significant difference in the lives of their clients utilizing their accumulated knowledge and all the support systems the company provides for them.