As published in the November 1, 2010 Toledo Business Journal
Margaret Kelly
RE/MAX
Demographics will fix
real estate market
Toledo Business Journal recently spoke to Margaret Kelly, RE/MAX CEO and a director of the Denver Branch of the Federal Reserve Bank. She shared the following thoughts.
Toledo Business Journal: You are the CEO of one of the largest real estate firms in the world. Can you share your ties to northwest Ohio and southeast Michigan?
Margaret Kelly: I grew up in Detroit. I lived there my entire life, and my sister lives here in Toledo. To me, Toledo and Detroit are just one big suburb, they’re so close together. I have come to Toledo so many times.
TBJ: Earlier this year, you were appointed to the board of directors of the Denver Branch of the Federal Reserve Bank. What are your thoughts on the direction of the economy and GDP growth? Can you explain the Fed’s planned move concerning long-term interest rates and planned purchases of Treasury notes?
MK: Yes, I was appointed to the Fed, which is a phenomenal honor to me, because the Federal Reserve is made up of bankers and independent business people. So, to be part of the independent business part of it is awesome.
When I went to Washington, DC for orientation and to the Kansas City board and the Denver Branch board, I was the only Realtor – the only real estate person on there. So, it has been really great – with this economy and how tough housing can be – to actually be a voice for real estate right now.
As far as what we see with the economy, it’s going to be tough. We’re going to bounce along the bottom for a little while. The economy will not recover until housing recovers. And housing can’t recover until employment recovers, because people who have jobs are people who spend and buy houses.
I can’t speak as a representative of the Federal Reserve, but I can speak as a businessperson. I think that the big thing right now is for us to be able to focus on unemployment, creating jobs. Not government jobs, but private jobs. As far as the Fed purchasing bonds, Treasury notes, etc., they’re doing that to loosen up money. Because, as soon as banks have the ability to lend more, the more businesses are going to be able to borrow and be able to expand. If they expand, they employ. Everything is connected to everything else.
I personally am a proponent of the free market. You know, let’s let things settle out. We’re in such tough times right now that little tweaks here and there are really good. So the fact that they may have to go back in to find some of this, you know what, they see it long-term that maybe that’s the best thing to get some liquidity out there into the market. Do I want it long-term? Absolutely not. We need to get back to status quo without any stimulus, without any help; let’s see what we settle to, and then we can go from there.
People say all the time that we’re in this new normal. We’re not in a new normal, it was an old abnormal. What we had – the spike up and down – was not right. Let’s get back to what we’ve always been.
TBJ: In a talk to RE/MAX brokers / owners from around the country in mid-August, you stated that the economy right now offers “…the good, the bad, and the ugly.” Can you explain?
MK: That is true right now, because there are a lot of positive things going on in the market. GDP is going up and we’re no longer in a recession, but it’s so incredibly fragile.
There are positives, like the savings rate has gone up. I’ve read that the savings rate is about 6 or 7%; whereas in the boon times, it was less than a half percent. People weren’t saving, they were spending like crazy. The good thing is that people have gone back to saving.
I used to be kind of fat and happy as far as my income and spending, and now we’re getting back to being more conservative and only spending what we make.
As far as housing goes, there are still a lot of transactions out there. But, the mix of transactions is more related to distressed properties than it is just regular homebuyers and home sellers. Buyers and sellers need us real estate agents more than anything right now. There are a lot of businesses and a lot of opportunities, but I think we’re at the bottom; we’re going to bounce along the bottom for a while. But, it can only go up from here.
TBJ: The severe downturn in the real estate market in the past two years has little precedence. Can you discuss the issue of foreclosed properties and the time that will be required to get past this issue?
MK: It’s going to take awhile. We keep talking about distressed properties. The fact of the matter is that it’s not distressed properties, it’s distressed families. These are families that have children and families that are losing their homes, so it’s really a difficult time for a lot of people.
But, I’m going to characterize it in two ways. There are those people that made decisions and there are those people that have had bad luck. The bad luck people are the ones that are unemployed or are married to someone unemployed and can no longer stay in their homes. The bad decision people are the ones that bought a house and didn’t prove their income, didn’t put a down payment, financed it to the nth degree, and said, “guess what, I’m going to buy it for the next five years and I’m going to sell it, so I’m not going to worry about that balloon payment at the end.” Those were bad decisions.
We have to help as many people as we can, especially the ones who have had bad luck. You’re going to have to live with the responsibility of the bad decisions you made, but it is kind of the good, the bad, and the ugly; we’re all in this together.
So, there is a lot for us to focus on, but our market – and I mean that mostly in the real estate end of things – is probably going to be like this for the next two years. I don’t see prices going down much, we’re going to bounce along the bottom for a while, but we’re going to come out of this.
Homeownership is never going to go away. Homeownership is not a luxury item, that’s the American dream.
TBJ: As you are well aware, demographic changes in the population in our country will have a major impact on real estate. Can you discuss key trends involving Baby Boomers, Matures, Gen Yers, Millennials, etc. that will impact the real estate market?
MK: It’s a huge impact, not only for housing but for employment. Because, for many of the Baby Boomers who normally would have retired, their 401(k) went down in value, they lost some of their savings, and they can’t sell their house and downsize. So, Baby Boomers are actually staying in their jobs longer. The longer they stay in their jobs, the longer college graduates aren’t going to be able to move into the jobs; this is kind of stagnating some of the growth market, which is part of the unemployment. Teens and people out of college have a higher unemployment than overall. So, that makes it kind of difficult for us.
People think that we’re going to be a nation of renters. We’re not going to be. The Gen Y right now is as big as the Baby Boomers. We know how big the Baby Boomers are and their impact on the economy, and the Gen Y are going to do the same thing. They’re anywhere from 14 to 29 right now, and they’re the ones who want to buy homes. So, we may be having a little tough time right now, but it’s most definitely going to grow and be very positive.
People will look back at this time and wonder why they didn’t buy a home. Low interest rates, high inventory, good prices, it’s a phenomenal time.
TBJ: Can you share your connection with the Susan G. Komen Race for the Cure?
MK: RE/MAX is a proud sponsor of the Susan G. Komen Race for the Cure. Going back 37 years, to when RE/MAX was founded, the big real estate companies in Colorado and Denver only hired white males. Women were not allowed to work there. But, RE/MAX hired women. In fact, in the early days, 80% of our agents were women.
So, when Komen came to us in 2002 and asked us to be a sponsor of its Survivor Series, we said yes, what a great tribute and way to pay back the women who helped build our company. In fact, about 55% of our agents right now are women. So, it was just incredible.
Nearly every single person has been touched by breast cancer. It touches so many people. I’m a survivor, a sponsor, and a spokesperson. Ten years after I was diagnosed with breast cancer, my sister who lives here in Toledo was diagnosed. So, [I came] to Toledo to walk in the race with her for the very first time.
Nancy Brinker started Komen for her sister, Susan G. Komen. And it was a promise she made to her sister about fighting the disease. She just wrote a book on it, and I am the national chairman of her book club; it’s so cool that, as the book came out, [I was able] to walk with my sister in the race. To me it’s one of those full circle things, so I was thrilled to be here.