John Tuccillo – The economy's there & I don't care.

Published: August 9, 2010

As you may be aware, NAR holds a GAD Institute each year attended by Government Affairs Directors from around the country. The purpose is to bring together GAD’s to focus on common problems and challenges, learn about new resources that are available to deal with these issues and to get updated on a variety of legislative and economic issues that are confronting our industry.
One of the more interesting segments of our recent GAD Institute was an update by former NAR Chief Economist John Tuccillo. Tuccillo, who last served NAR in 1997, is one of those rare birds – an economist with a natural sense of humor. He quickly retitled his discussion with us from ‘Economies of the Housing Market’ to ‘The Economies There & I Don’t Care’. Much better.

He quickly put to rest any idea of a double dip. There won’t be one according to Tuccillo. But we are in for a long, slow recovery. A very long, slow recovery. He believes that foreclosures and distressed properties will be around for a long, long time – will actually be a factor for most real estate practitioners for the rest of their careers – not so much for financial or economic reasons but for strategic reasons. Default has entered the lexicon as a perceived financial strategy and, as such, will remain part of the real estate landscape even after foreclosures return to their customary 1% share of a ‘normal’ market.

He pointed out three major potholes in the road to recovery:

  1. Employment – there is no engine of growth on the national scene. During past downturns there has been an angel in the wings ready to propel the economy forward. Housing built us out of the tech bust, tech pulled us out of the aerospace bust, aerospace flew us out of the S & L bust, etc. This time there is no apparent growth engine yet. The public sector is the only area of growth but the private sector, that creator of jobs and stability, is lacking. Not only that we may have ‘technologized’ our way out of jobs. We are finding ways to produce more with less which means many of today’s jobs will never return.  What’s the answer? Green? Maybe but unlikely. More tech? Not this time. Housing? Not in time.
  2. Real estate – remains a pothole due to uncertainty. The ‘what-if’ factor is hurting us. People don’t know if they’ll have a job, don’t know if we’ve reached the bottom of the market, don’t know if more bank failures are imminent, don’t know if housing is the answer at all. There is a high level debate in our nations capitol regarding the inherent value of home ownership right now that has people concerned long-term.
  3. The financial sector – people believe the financial sector is broken. The financial reform bill has been passed but the perception is that while the barn door may have been securely locked, the horses are romping merrily about the fields. The financial sector is no longer unhealthy but merely disfunctional. There is a surplus of money and profits but no lending.

Tuccillo doesn’t pretend to have answers for all these questions but he does suggest some alternatives:

  1. Focus on local jobs. He encouraged us all to get more involved in the local economic development process. An economic angel may appear but the most likely source of immediate new jobs is with local new or expanding businesses developing niche products or services based on current economic realities. Things nobody yet has thought of in an evolutionary process to replace outdated or irrelevant products and services. Insofar as possible, effect the creation of jobs at a state and local level and don’t look to the federal government for all the solutions.
  2. Focus on the ‘complete environment’ that will make our members most successful. Learn to play by the new rules of financial regulation, understand new technology – beyond websites and email, develop effective social media channels to supplant or replace older media channels, understand the post-boomer market. The greatest economic engine of a generation is exiting stage left (not always gracefully) creating marketing opportunities as it goes as well as creating a vacuum for new opportunities yet to be explored.
  3. Understand that Wall Street ALWAYS trumps Washington. They an hire smarter people, pay way more and offer entrepreneurial opportunity Washington can’t begin to match. Whatever solutions or impediments Washington puts in place, Wall Street will find a way around, over or through within a brief window of opportunity. As long as you understand that you will never be disappointed.

His prognostication for 2010-2011:

  • Growth – 2% – 2.5%
  • Inflation – 2% – 2.5%
  • 1 million + new jobs added (we need 150,000 new jobs/month just to break even with population growth so 1 million this year is almost break even – not real progress).
  • Home sales – 10% – 15% increase
  • Home prices – flat
  • Shift our perception of median price. Median price only measures the composite of what has sold – not the true measure of market value. It can be very deceptive and unduly negative. Tuccillo argues that unit sales are the only true measure of a market’s strength. Price is secondary to whether homes are actually selling. If homes aren’t selling but median prices remain high, is that really a stronger market than one where the median has fallen but homes are selling like hotcakes? Which market would you rather be part of?

If you have an opportunity to hear John Tuccillo speak, I encourage you to take it. He understands our business but he has enough separation that you don’t get that rosy glow that sometimes accompanies current NAR economists. The presentation at NAR two years ago featuring Tuccillo and Stefan Swanepoel was one of the best I’ve ever seen. The more you know, the better prepared you are to grow your own business.


Last modified: August 9, 2010 at 3:37 pm | Originally published: August 9, 2010 at 3:37 pm
Printed: September 29, 2020