June 09, 2009

The State of the Relocation Industry

“THE STATE OF THE RELOCATION INDUSTRY”………………as seen by relocation professionals who gathered recently in San Diego, CA during Worldwide ERC’s Spring Meeting….

The US Advisory Council, composed of individuals reflecting the breadth of the US Domestic workforce mobility industry, facilitates open communication, highlights emerging trends, and identifies opportunities for the growth and betterment of the mobility profession.

The following is a synopsis of questions and answers that focused on trends and forecasts for the relocation industry.

The following issues were discussed:

Economy/Real Estate/Mortgage
Talent Management
New Administration – Impact of policies, proposals & philosophies
Technology/Web 2.0
Green Initiatives

Overview of Discussion Issues

Economy/Real Estate/Mortgage

What do you think will be the short and long term effects of the economic downturn on employee mobility?

Generally, all agreed that there would be a decline in the short term and lasting between 2-4 years. The current market has served as a “wake-up call” to corporations and many are projecting a 30-50% decline in relocation volume.

How are corporations adjusting their mobility polices in response to the current economic climate?

Corporations will be more strategic and selective in the process of identifying relocation candidates and provide more pre-decision research and processes. They are also projected to seek alternatives to relocation.
Most report a change in the profile of the typical transferee, citing more C-level and entry level transferees representing a shift from the traditional mid level manager.
Loss of equity is a major factor in employee resistance to move.
Most members report extended benefit periods for temporary housing, duplicate housing, willingness to pay real estate incentives, home sale bonuses and some companies are offering professional property management services, when appropriate.
Maximum listing caps 103-105%
Executive compensation is more closely reviewed by the compensation committee at a corporate level.
To help overcome deficit equity some are offering signing bonuses on internal job postings.

Are you aware of any unique programs that lenders or corporations are doing to help homeowners sell their homes (creative financing, etc)?

Corporations are willing to consider selling for less than the Guaranteed Buyout.
Mortgage buy-downs are being offered (3,2,1 buy down mortgage incentives for buyers especially on jumbo level loans).
Pre-pay HOA Dues
Some companies are offering sellers an opportunity to enhance the marketability of the listed property through a seller concession for a “Job Loss Protection” program (cost - $500) – Several programs are available, but generally the program works as follows: if the buyer loses their job within the first 24 months of ownership 6 payments of up to $1,800 per month are made for them. The Real Estate community is rapidly embracing the programs to alleviate buyer’s fear of job loss, encourage sales and to create a competitive advantage on listings in their local markets.

Have you experienced real estate transactions falling apart at closing due to credit issues?

Yes, fall through rates at an all time high, some reporting normal as less than 8% and are now reporting double the normal rate and as high as 18-22% - some are due to home not appraising for sales price, buyer credit issues, more restrictive lender qualification guidelines, more down payment required in declining markets, inspection issues, buyers asking for extensive repairs.
BMA variances reported now at 7-10% versus 4-5%
List to Sale Ratios have changed and are now 8-12%

What is the status of the talent pool for your industry segment?

The moving industry is seeing the biggest drop in move volume – industry shrinking. The industry isn’t attractive to young up and comers. Former military personnel may be a target for future hires. The industry may look very different in the future, more “PODS” type solutions. That model is growing, in part, due to increased rate of foreclosures.
Appraisal industry members also report declines in talented appraisers due to increased regulation/educational requirements and declining revenue models.
2011 and 2012 are projected to be an “Employee” market versus “Employer” Market.
Some corporations report they are still hiring, but a much different level of employee.
With the number of talented and unemployed relocation professionals, all are fearful we will lose many to other industries, but no one is in a position to take advantage of the “bench” talent and wait for the market recovery.
RMCs facing a tough future due to price compression in the industry and technology costs.
Real estate professionals are leaving the business. Many experienced agents are in their mid to late 50’s and are considering retiring now rather than invest the time and expense to adapt to the technology demands for an industry they project won’t return to “normal” for at least 3 years. The rising cost to conduct business and the declining sales prices are also factors in their decision to leave the business. Costs include increased referral fees and overall increased business expense such as E&O Insurance, cost of technology, local Realtors^® board dues, licensure expenses, lock box keys, signage, online marketing exposure, virtual tours, etc.
Some really great relocation agents have begun to reject the referrals because of high fees and the real estate relocation directors are concerned about compromised service delivery to the transferees.
Many real estate brokers are also closing their doors for many of the same reasons as well as continued erosion of company dollar after referral fees and agent splits. There does seem to be a “flight to quality” as agents have recognized the benefits of a full service real estate operation.
Loss of Culture is also a concern – a shift to the “own your own career” mentality
Affinity programs may increase with services being offered for a total employee benefit
Most participants agreed this should serve as a “wake-up call” call for re-engineering our industry.
There is need for more financial transparency in our industry.
RMCs noted the need for more online standardized client access.
50% of recruiters are teaching social networking as a key skill to job search (LinkedIn, Facebook, Twitter). It is important to establish your “Internet Identity” and make it professional.

How do you think the new administration’s policies, proposals and philosophies could affect the employee mobility industry and your industry segment?

Most agreed that everything is likely to be on the table under the new administration and the question was met with mixed review.
The audience responder results showed that most believe that the mortgage interest deduction will likely be impacted or altered from the current model, especially as it relates to second homes.
Some felt the current $8K first time home buyer tax credit incentive may be extended or increased, but were not conclusive on how impactful the tax credit has been since there is not immediate gratification. There is a movement from the Mortgage Bankers Association and NAR to provide the tax credit at the closing table.
Most agreed that results of the housing stimulus initiatives have at least slowed the rate of foreclosures.
There are potentially many more foreclosures to come as some lenders seem to be holding off listing properties that have already been foreclosed on and we may be delaying the inevitable.
Aggressive loan modification and short sales programs are being implemented by the lenders/investor to also slow the rate of foreclosure. Additionally, Fannie and Freddie have implemented “rent back” programs in an effort to keep properties occupied.

What environmentally responsible practices does your company support on the topic of “Green” Issues?

General recycling – Bill Graebel, Graebel Relocation, noted a recent project to recycle office equipment in a landfill that resulted in production of enough methane gas to provide energy for 3,000 houses for one year.
More Webinar training
More investment in video conferencing equipment to limit the need for travel.
CCE reported investing in vehicles to reduce the carbon footprint
WERC is conducting a session during the NRC “Is going Green the new Gold”
WERC also has a Green Forum on the front page of the new website – Be sure to check it out!
As it relates to the trend toward going “green” there were no major reports of a change in transferee buying behavior except that some are seeking shorter commute times when buying and some empty nesters are “buying down” and looking for smaller square footage.

Posted by:Judy Gray