Industry Watch: The Sprawl Crawl

The worst highway bottlenecks; tech sector seeks nontraditional in office space; why new-home costs keeping going up.

September 1, 2000

Road congestion. Some folks have taken to referring to it as “where the rubber hits the sprawl.” The nation’s suburbs and exurbs are expanding their total populations by about three million people per year as a result of residential relocations while central cities are losing more than two million residents a year. Horrendous traffic is the result. The American Highway Users Alliance identifies the worst bottlenecks:

Los Angeles:
I 405 at I 10
US 101 at I 405
SR 55 at SR 22
I 10 at I 5

Houston:
US 59 at I 610
I 610 at I 10

Seattle:
I 5 at I 90

Boston:
I 93 at US 1

Washington (Md. area):
I 495 at I 270

Washington (Va. area):
I 95 at I 495

Albuquerque:
I 40 at I 25

Atlanta:
I 285 at I 85
I 75 at I 85

Chicago:
I 290 at I 88 and I 294

Technology is creating different work-life styles, and different office requirements to match them. With high-tech industries dominating various office corridors in California’s Silicon Valley or Florida’s Tampa Bay area, commercial practitioners find that prospective owners’ and tenants’ requirements differ from their traditional office counterparts. Among the aberrations:

  • High-tech firms tend to be staff heavy.
  • Parking requirements are higher.
  • Fiber optics are a major issue.
  • There’s great demand for souped-up communication requirements.
  • There is a desire for nearby nature.

William Raveis, chairman of Connecticut independent megabrokerage, William Raveis Real Estate, offers one of the latest approaches to one-stop, cradle-to-grave homeowner services. Called HomeLink, Raveis describes it as “a new business model for the real estate industry providing homeowners with convenience, choice, savings, and increased control throughout their homeownership experience.”

Key to the program is the role of the transaction coordinator to facilitate salespeople’s jobs and the personal move coordinator, who serves to satisfy housing needs for consumers. The program also integrates professional salespeople and brokers, Internet technology, customized software applications, and other homeowner product and service providers.

The personal move coordinator arranges for such transaction-related services as facilitating mortgages, home inspections, warranty insurance coverage, moving, utility connections, and standard homeownership necessities, such as lawn care, appliance purchases, home cleaning, and property maintenance. Raveis contends that the coordinator becomes the staff person that salespeople have always wanted—handling all aspects of the transaction directly with the client that might divert salespeople from what they do best—sell.

Such an undertaking generally requires alliances with a number of service providers. In HomeLink’s case this includes American Home Shield for home warranties; United Van Lines; Security Link: U.S. Radon Systems, for radon detection; Storage by Design, for custom storage systems; Alamo Rent A Car; Utility.com, for connection of utility services; TheBoxCompany.com, for moving and storage boxes, and a number of insurance providers.

Home Link isn’t the first to offer a basket of services to homeowners. Coldwell Banker, with its concierge service, got more than a year head start; and a number of franchise groups and independent real estate companies have fashioned similar undertakings.

Wonder why the cost of new homes continues to spiral upward? The National Association of Home Builders points a finger at governmental regulations.

An NAHB spokesperson recently told a Congressional committee that 10 percent of the cost of building a new home is attributable to unnecessary regulation and regulatory delays, fees associated with building, plumbing, electrical and tree removal permits, construction waste disposal, and high impact analysis fees. In recent years, NAHB claims, extra costs of additional federal regulations have been layered on top of state and local requirements. Without a serious effort to alter these requirements, home prices will continue to advance, NAHB says.

A recent report issued by Deutsche Bank Securities Inc. predicts that the number of people employed in the mortgage loan business will decline. That reduction won’t occur among mortgage brokers, but rather among mortgage bankers and lenders.

As the authors of the Deutsche Bank review see it: “What we’ve learned is that the mortgage broker, who today generates as much as 80 percent to 90 percent of all mortgage originations, is important. The mortgage process is far from point and click—it’s more like a visceral experience. Who wouldn’t want some hand holding along the way? And, there’s plenty of replaceable human capital within the industry.”

In the recently released Real Trends 500 list, which evaluates brokerages’ 1999 production performance, four of the fifteen leading companies in terms of transactional activity aren’t among the 15 leading dollar-volume companies. To calculate the largest U.S. brokerages, you use two standard measuring rods—the company’s number of closed transactions (or transactional sides) and its total dollar volume of sales. Standing varies depending on which measurement is used.

Specifically, Crye-Leike Inc., Memphis, is 10th in transactions but 16th in dollar volume; Gundaker, REALTORS Better Homes and Gardens, St. Louis, is 11th in transactions, 19th in dollar volume; Realty One, Inc., Cleveland, is 14th in transactions, 21st in dollar volume; and Ebby Halliday, REALTORS, Dallas, is15th in transactions, 20th in dollar volume.

Of course, the fact that these companies are predominantly located in affordable areas of the country explains this phenomenon.

On the flip side, a number of companies make the top 15 in sales volume, but not in transactional activity. These companies most likely earned that ranking because they’re located in high-priced areas:

Alain Pinel, REALTORS, Inc., Saratoga, Calif.,—7th in dollar volume, 59th in transactions; Fred Sands, REALTORS, Los Angeles—11th in dollar volume, 31st in transactions; Baird and Warner, Inc., Chicago—14th in dollar volume, 17th in transactions; and Prudential California/Nevada Realty, Walnut Creek, Calif. —15th in dollar volume, 26th in transactions.

NRT, Inc., the Cendant-related entity that has acquired more than 100 independent firms and franchised them under one of the three Cendant brands, leads both categories—not surprising since it’s so big. It had a dollar volume of $94.35 billion to match its transactional side total of 362,368.

Among the Top 15 companies, Prudential Fox & Roach, REALTORS, in Devon, Pa., recorded the greatest percentage gain in dollar sales volume—79.30 percent—last year. Overall, however, among all companies on the Real Trends 500, Keller Williams Realty, in Oklahoma City, realized the greatest percentage gain in dollar volume—267.23 percent, a jump from $ 67.56 million to $248.1 million.

There are some happy homeowners in Cincinnati these days. For the second time in less than a year, the Cincinnati City Council has voted to lower the city’s property tax. There’s not a large amount of money involved (the owner of a $125,000 home will save about $25) but it’s better than the tax increases Cincinnatians usually experience annually. Still another small rollback may be forthcoming in December when the city financiers set the final tax rate for the year. Cincinnati can afford the rollbacks thanks to a nearly $20 million budget surplus. The tax cuts are expected to cost about $19 million over the next six years. With a population of about 360,000, the city has an annual budget of $650 million.

Arvida Realty Services’ second-quarter numbers are a testament to the solid state of real estate in Florida. Thelargest brokerage in Florida posted a 32.6 percent year-to-year increase in pending sales for the second quarter of 2000, representing 10,853 transactionsand a gross sales volume of $2.35 billion. Pending sales in the second quarter of 2000 surpassed the first quarter by 6.1 percent. Also on the uptick: the average price of Florida property--$216,000--compared with $189,000 in the same period last year.

Little wonder that real estate companies continue to increase their presence on the Web. Nielsen/Net Ratings recently reported that more than 49 percent of U.S. homes can access the Internet. That’s an estimated 134.2 Americans with Web access, Neilsen says, a six percent increase over the 119.2 million reported last December.

Veteran industry observer Tom Dooley is president of TWD Associates, a real estate consulting firm in Arlington Heights, Il., and editor of two monthly newsletters. Contact him at 847/398-6410; tdoo@aol.com.

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