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Hot Housing Market May Drive Moves

Today's housing market provides favorable conditions to reassess your relocation program. Target likely candidates, lower costs and partner with savvy realtors.

March 1, 1999
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Relocation benefits, compared to most, are relatively flexible. They contract and expand according to a company's needs. Factor in a strong housing market, and it's worth thinking out of the box. For example, say you want to expand your sales force in the South, but Ben Stuck resists the move. Have you informed him how quickly his home is likely to sell today?

That's not to say relocating employees is cheap. It's always been an expensive venture-approximately $50,000 per homeowner, according to industry sources. But in today's housing market, one thing's for sure. HR has greater leverage in transferring reluctant employees and moving the new recruits. If you can save thousands of dollars in the course of it, what's to lose? The operative words here are adaptability and effective partnerships.

"I would suggest HR look at its relocation policies to see if there are areas that can be changed to take advantage of the housing market," says H. Cris Collie, executive vice president of Washington, D.C.-based Employee Relocation Council.

Home sales soar to record levels.
Follow the news. Last year's new home sales were up 10 percent from 1997's total of 804,000. And rates for 30-year mortgage loans were at 6.83 percent in January of this year. High consumer confidence and cheap mortgage rates have definitely fueled these record new home sales. Forecasts for this year continue to be optimistic-with California, Texas and Florida driving the national housing market. Other strong markets include Las Vegas, Boulder, Chicago, Cleveland and Minneapolis. Analysts also attribute the housing trend to the stock market's apparent recovery from its swoon last fall, and the fact that unemployment remains below 5 percent.

"We haven't had a monolithic national market until a year ago," says Chip Roach, vice chairman of Philadelphia-based Fox and Roach Realtors and a board member of the Employee Relocation Council. "[Employers] feel comfortable transferring people because their businesses are good."

Granted, housing costs aren't the most significant factor holding back today's transferees. Family ties and a spouse's employment usually top the list. In fact, based on findings of Atlas Van Lines' 31st Annual Survey of Corporation Policies, elder care inched upward from one year ago. It's not surprising since the boomers began turning 50 in 1996. With more children leaving the family nest, boomers today increasingly are assisting their aging parents. Also, in the past, relocations were often attached to promotions. These days, most relocations are lateral moves, thus reducing incentives even more.

To take advantage of today's market, however, HR can consider several viable strategies: take stock of your most likely transferees, lower relocation costs by placing the burden of home-selling back to the employee, and partner with relo-savvy realtors and mortgage lenders.

Zero in on younger, more mobile recruits.
Given today's housing market, HR relocation managers may face less resistance, especially among those most likely to be incented. For example, have you considered moving younger employees and those open to the technical frontier?

Bob Ludwig, vice president and director of sales and business development at Philadelphia-based Commonwealth Relocation Services, observes current movement on the lower end of the corporate ladder, including recent college graduates. "We see a whole new demographic when it comes to the types of transferees emerging-the Generation Xers." According to Valhalla, New York-based Prudential Relocation, this group of 45 million individuals born between 1965 and 1977 are having a major impact on relocation policies. Progressive companies are responding today, rather than waiting to play catch-up tomorrow.

The traditional image of a home-owning, white, male relocating employee, who is 35 to 45 years old and married with two or more children, is waning. This new generation of transferring employees has a new look. They're more likely to be renters, female and/or non-Caucasian, unmarried and in need of two incomes to "make it."

The new generation of transferring employees are more likely to be renters, female, unmarried, and in need of two incomes to "make it."

Below, you can see why today's housing market may be better aligned with this group's economic profile. According to Prudential's newsletter, "Advisor," the new and diverse needs of Generation X transferees call for a wide range of HR and relocation considerations. Given today's strong housing market, it just might be the right time to reassess how progressive your policies really are. Remember:

  • College debt is a major concern. Most Gen Xers graduate into staggering sums of debt, despite the fact that 40 percent of today's students combine school with part- or full-time jobs. Consider this: Create an incentive-driven relocation policy that rewards relocation risk-taking with sign-on bonuses to pay off student loans liabilities. Such bonuses can be paid in quarterly increments, based on the assignment's length.
  • Many Gen Xers are still living with their parents. A 1997 Time magazine article cited the fact that 30 percent of men and women in their 20s live with their parents. Consider this: innovative companies are modifying policy language to permit flexible exceptions for single individuals, enabling them to take one of their parents on a home-finding trip or visit during temporary living.
  • Most require dual incomes. Today, 84 percent of all married couples have dual incomes. More than 50 percent of employees who are offered a transfer refuse due to a spouse/partner's career. Gen Xers are no exception. Consider this: Spouse career assistance has been traditionally reserved for senior- and executive-level transferees. More recently, however, companies that don't offer life partner/spouse career-assistance counseling to all employees may be considered "behind the curve" or noncompetitive in terms of a total relocation package.
  • Many have been there, done that. Gen X employees are typically children of parents who were frequently transferred during the '70s and '80s. With firsthand experience in switching schools, making new friends and moving again, it's no surprise some reject relocation offers despite generous compensation. Consider this: Low-cost, high-value solutions such as establishing a "host network" of young, professional co-workers in each office may be advantageous. Provide time off for local employees to show new peers around town and point out the best places to live.

Lower employer's relocation costs.
Targeting Gen Xers is only one way of taking advantage of today's housing market. Where employers can really lower their costs is during the home-selling stage of the relocation process. You know the game. Relocation and operation managers typically want a transferee to be up and running ASAP, says Roach. Very often, the leap from the point of departure to the point of destination can take months.

"What creates the most anxiety is the difference between selling a house in 90 days versus 200," he says. And in today's market, homes are going as fast as they come on the market. Says Daniel Bloom, president of Largo, Florida-based Daniel Bloom and Associates Inc., a full-service human resources and management consulting firm: "I know of a house that needs $15,000 worth of work. Yet we had three offers the first day it went on the market." With prospects as good as this, employers can't afford to ignore the payoffs.

Most times, employers often end up paying for the separation of families: temporary housing for the employee, duplicate housing costs, back-and-forth trips, closing costs on the new house, moving fees-not to mention the emotional toll of your employee's unsettled personal and financial matters. It's hard enough when things go well. But when the employer also has to step in to buy the employee's former home, think of the additional time and costs. Conservative estimates, mentioned earlier, run in the five-digit range.

Given today's housing market, however, employers can place the responsibility of selling one's home back on the employee. But HR managers need to warn their employees to price their houses right. Why? Because the security of knowing how much money they'll have to spend enables the employee to estimate his or her available resources at the point of destination. That's the second hurdle. Selling a home in Phoenix is one thing. Buying in Boston is another. Says Ellie Sullivan, vice president of consulting services at Norwell, Massachusetts-based Relocation Resources International: "A strong housing market may help on one end, but not on the other end."

HR can help employees by developing a reliable home marketing assistance program. The key is to work with agents who have relocation expertise.

Transferees to a high-cost area may find it harder to find and afford a new home. "They may not get the attention they need from agents who already are busy with other buyers," adds Collie. A few basics will help them make wise decisions. Employees need to be reminded not to overbuy-that is, don't overpay for a new home out of desperation. Within a few years, there's no guarantee the employee will still be working for your company. If he or she purchases a home for too high a cost, the employee may have trouble selling it the next time around.

Larry Gersch, manager, residential real estate for Northfield, Illinois-based Kraft Foods, describes a likely scenario: "An employee sells quickly in Chicago and moves to New Canaan, Connecticut, where it's an unbelievable market-a home can go on the market Monday morning and there will be four immediate offers within hours. It ends up in a bidding war. The employee is only thinking about his or her family. Even though the price is high, the family buys. But when [the employee sells the house] later, there's no way the market can substantiate that price."

HR can help employees by developing a reliable home marketing assistance program that includes destination appraisals. "There's a definite dichotomy between the need to be competitive and the need to keep costs in line. Using home marketing assistance is one way to bring those two ends of the spectrum together," says Bloom. The key is to work with realtors who employ agents with relocation expertise.

Partner with relo-savvy realtors and mortgage lenders.
Corporations and relocation management firms need to do a better job at identifying reliable real estate brokers, says Bloom. "A number of real estate brokers don't have the vaguest idea what relocation is about."

HR should identify vendors who are willing to learn and meet the demands and needs of their corporate clients. Relocation, he says, requires specific knowledge. One indicator of a relo-savvy real estate firm is the quality of its staff. "[Working with] companies with strong relocation departments is very, very important," adds Gersch. Agents who are familiar with relocation are significantly different from everyday agents, he says. "Time is of the essence. You're only given a certain number of house-hunting days. You need to move quickly and utilize as many resources as possible, including the Internet."

One recommendation is for HR to contact the Relocation Directors Council (RDC) based in Riverside, Connecticut. Gersch says the organization comprises some of the best relocation directors and departments in the real estate industry. According to Marge Fisher, executive director of RDC, the relocation director of a real estate firm manages the sales associates who work with the corporate transferee. The employer and transferee benefits are enormous, she says.

"There is a single point of contact that's directly accountable to the corporation," Fisher explains. The directors frequently partner with corporate personnel to implement the relocation program. The corporate contact would be responsible for administering the relocation policy and identifying the employees who've been or will be offered positions that require transfers. The relocation director would work with the sales associates by providing materials about the area, cultural resources, housing options and the like.

Real estate companies with a dedicated relocation staff have made financial commitments to relocation, says Pandra Dickson, relocation director at Raleigh, North Carolina-based Howard, Perry & Walston realty firm. In addition to promoting ongoing training of their staff, relocation directors also package relocation material, provide toll-free numbers for the convenience of their clients-and even put company policies in place to set forth how a relocation transaction is to be handled. "The [realtor's] relocation department can take a tremendous amount of stress off of HR as well as save them dollars through their existing vendor relationships," Dickson says.

Identifying reliable mortgage lenders also is critical. Trish Berube, second vice president of Southport, Connecticut-based PNC Mortgage, says the relocation mortgage industry has kept pace with economic and demographic trends. "We've created customized programs to assist relocating employees," says Berube.

One of PNC Mortgage's most helpful programs is streamlining documentation from the relocating employee and co-borrower. With a reasonable credit history and a minimum down payment of 10 percent, PNC Mortgage is able to extend a 120-day commitment to the employee. The only documentation required prior to closing is a contract of sale. If an employee has a 5 percent down payment and a reasonable credit history, PNC Mortgage requires slightly more documentation, including a recent paystub and W2 form. The 120-day commitment can begin prior to the employee finding his or her home. Berube encourages her clients to have the employee contact the firm as soon as he or she is notified of the relocation. "With personalized counseling and pre-approval, we're able to ensure the employee's first house hunting trip is extremely valuable because he or she knows exactly how much of a home he or she is qualified to purchase."

The co-borrower income consideration, Berube says, is almost a standard program with all national relocation mortgage providers. If an employee has a minimum 10 percent down payment, PNC can use 100 percent of the trailing wage earner's income. With a down payment of less than 10 percent, PNC will use 75 percent of the trailing wage earner's income. "We don't need any letters signed from the trailing wage earner nor paystubs from a new employer," she says.

Moreover, national relocation mortgage programs also offer direct bill of closing costs. PNC Mortgage, for example, advances closing costs at the closing table on behalf of the corporation. The employer has agreed upfront to pay certain closing costs. After PNC advances those required dollars, the firm then bills the corporation. "The employee doesn't have to account for these closing costs prior to the closing, which further eases the last minute closing details for the employee," say Berube. "We do everything we can to make every minute count."

Flexibility and prudence pay off.
Even with today's strong housing market, HR relocation managers need to look at their company's overall goals first. If moving employees is a priority, take advantage of the current economic forecasts. By saving costs on home sales, you might also be able to provide increased benefits for spousal assistance or elder care. "You can play the market to enhance other benefits that address the employee's other personal needs," says Ludwig.

Generally speaking, though, it's not advised to make relocation benefits a free-for-all ("If I save you money on this, will you give me more for that?"). HR can provide flexibility by educating employees on how to get the most money for their homes and leverage their discretionary funds at the point of destination.

Smaller companies, on the other hand, can use today's favorable situation to evaluate their total relocation package. If your executive management team hasn't paid attention to your memos about relocation, now's the time to show them what you know and understand. By talking dollars and sense, relocation can be a win-win for all parties concerned. Just remember to toot your own horn. It's not every day HR scoops the bottom line.

Workforce, March 1999, Vol. 78, No. 3, pp. 84-88.

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