Laid off. What next?

Yesterday, I exchanged emails with someone I used to work with. She recently got laid off. We both worked for a builder selling new homes. She was wondering what she should do next. She has technology background in the game industry but decided to go into real estate a few years ago. She can't decide whether or not she should continue to pursue real estate as a career or go back into IT. So she asked for my opinion.

Here's my take on real estate. Keep your license active by practicing part-time and learning what you can, but don't count on real estate to support you in the next 3-5 years for the following reasons:

1. Builder confidence is low. Construction of new homes will be very slow and might take 2-3 years before we start to see an upswing in new home construction in California. Why? Because the market will be saturated with new REOs and foreclosures in the next 1-2 years when we may have a new wave of re-sets for those who can't be helped by the stimulus package for the housing crisis. If the economy doesn't get better fast, unemployment will continue to rise and more people will be forced out of their homes due to reduced/lost income. This will add on to the existing glut of REOs and foreclosures.

2. Credit crunch. Banks are tighter with lending out their money. Loan guidelines are stricter. Unemployment up and people continue to lose their jobs. Consumer spending down. Consumer confidence low. How many qualified BUYERS do you think will be around for the picking? Not enough to buy up the glut of homes in the market. Supply will be higher than demand. How many buyers for every real estate agent? Not enough. Tough competition amongst agents even if you target REOs because every agent now wants to do REOs, but there will NOT be enough buyers for every REO and every agent.

3. During this downtime in the industry, buyers will become more savvy when it comes to shopping and purchasing homes because of the information that can be found on the internet. Unless you have a listing, buyers will call listing agents directly. Banks who own the REOs will negotiate lower commissions because they know agents need listings to survive. The internet will become a powerful tool for buyers and sellers. The real estate industry, as we know it, will change dramatically: the players, the technology and the need for agents. I think we're going to go the way of the travel agents...become customer service call centers or tech support sitting behind a terminal. Everything will be done online. Years ago agents used heavy binder filled with sheets of listings. The binder was replaced by MLS for sharing information. Paper documentation has gone electronic. Gone are the days of agents driving back and forth having paperwork signed by respected parties. E-signing is now an option.

Yes, a bleak outlook on the real estate industry. But it's reality at this time. She needs a steady paycheck to survive. Real estate will not give her that...at this time. So my advice to her was look for a technology job in any industry. Because even in this downturn, technology applications will always find ways of getting better, faster and more efficient.

That's what I did. Went back to my technology background when I got laid off. I'm still doing real estate part-time. I set up my own consulting company in January 2008. But that's reserved for another blog.