Last Monday we had another guest in our class: Mark Dotzour, Ph.D. He is Chief Economist and Research Director at Texas A&M University's Real Estate Center and he has been working there for 15 years. He got his Ph.D from the University of Texas.
In his presentation he talked about something that we probably already know is important, but we usually forget to take into account: The big picture.
Dr. Dotzour showed the class how everything is correlated in the economy, and how changes in any of the components of the economy will have an effect in the markets, like when you change an assumption in your Excel Model. This became even more interesting because he emphasized on how these economic components have an effect on the Real Estate Market specifically. Now, what are these important components?: the consumer, the government and the businesses. This 3 components interact and are responsible for the well being of the market.
He emphasized on how important it is to understand the consumer's expectations and to exceed them. He also showed charts to illustrate how important it is to understand the job growth in the economy: When the corporations are making profits they want to hire workers: but when they are not making profits then they start laying off people.
He also mentioned the fact that in the case of the Real Estate industry there are not enough skilled laborers. I do not really know how the Real Estate development works in terms of hiring. I know in Peru, it is pretty informal, the workers from a construction site are not payed per hour, are payed per day and poorly. Sometimes they are people that learned with years of experience and necessity; and sometimes they are just young people that need to work.
I would also add the fact that corporations look for cheap workforce and they sometimes do not care as much about the skill of the worker. I saw this myself when I worked for a winter as a lifeguard during my school vacations. Some students did not care as much about the job, some others barely passed the chemical exams or basically cheated because the whole course was in English and they barely knew the language. Yet, they were still hired for 7 to 8 dollars an hour. This happened during the winter from 2009-2010, no idea if this has changed but I have heard from other experiences that these situations are kind of common in the U.S.
Now, to end this entry, here is some good advice that the class learned from him:
First if you do not understand how a certain area of the business works then do not invest in it. You need to know how the business work in order to trust it.
And finally, the best investment is in your own education. This is true, just like my grandpa used to tell me: "People may take everything away from you, but there is something that anyone will be able to take away from you and it is your education. It is stored in your brain, and that is the best we can give you because it will be bound to you forever." And that is why I am very happy to be here and I appreciate every dollar my parents are investing in my education.
