I got this question in my in-box from a market rep the other day.

Hey Dan,
I am just trying to figure out here who is the enemy here.The recession or to much free media for the realtors ?
While other busineses are fighting the recession only, and will come back. We are fighting free platforms all over the place. What say you ??

Here’s my answer.

Charles,

I’m sorry for being so slow in getting back to you on this. I’ve been swamped and then lost track of the e-mail.  I apologize.

We’re fighting heavy headwinds and they are coming from multiple directions.  It’s frustrating.

The proliferation of free web listings makes it easier for agents/brokers to say that they don’t have to do any paid advertising.  That works for them when they aren’t making any real money from commissions.

But it doesn’t help them stand out.  It just gets the listings out there, into a bunch of different searchable database, just like every other listing in the market.

When I search the homes for sale in my home town, more than 100 are returned in just one price bracket.

How do I pick the agent?  What makes them stand out?  Do I want to spend all that time researching 100 homes?

There’s still a place for marketing solutions that help agents stand out so that they get more than their fair share of the business.  That’s what The Real Estate Book offers.

Our challenge today is that agents aren’t seeing their incomes rise.  So they don’t want to spend for high-visibility, quality advertising.  As a result, a lot of people are saying there’s no need for that kind of advertising.  Those people are being self-serving.

There’s a need.  There just isn’t enough business to justify it.

When the market turns, we’ll see our fortunes turn.  That will be a good thing.

Dan

The challenge is being able to wait through the downturn.

I found myself wondering the other day about the economic impact of the decline in the real estate market on agents.

The reason for my curiosity is pretty clear: The Real Estate Book business depends on the income of real estate agents. The agents who are going to invest in high-visibility, high-impact marketing tools like The Real Estate Book are going to be among the high-earners. Over the past three years, the scale of our business has dropped dramatically and rapidly. How much is a decline in income driving that decline, I wanted to know.
A lot.

Fortunately, the National Association of Realtors is exceptional at gathering a lot of information consistently. The association does several different annual surveys and is smart to keep their questions consistent, so that you can compare trends over time. While their Survey of Home Buyers gets a lot of attention, they also do an annual survey of realtors that has a lot of rich detail on how realtors are managing their business.

So I dug into the NAR data to try to scale the market. There were three clear conclusions: Commission income has dropped dramatically; the number of high-earning agents has dropped just as dramatically; and marketing spending has dropped dramatically.

First, commission income. To extrapolate trends in commission income, I took the average home price and total number of transactions from 1996 to 2009. I then applied a uniform commission rate over the series. (One could argue that average commissions are down the past two years because of the influx of bank-owned properties in the market.)

Using this formula, commission income peaked in 2005 and dropped like a stone to 2009. About 10 years of commission growth was lost in the 24-month period.

Commission income should be roughly flat in 2010, based on NAR home sales projections and a 15% drop in average price. The good news for top earners is that there should be fewer agents competing for the commission dollars, and that consumers are likely to gravitate to agents who have reliable track records and are clearly in the business full-time.

How many agents is that, I wondered? That led me to create another extrapolation to estimate the number of high-earning realtors. To calculate this number, I used the percentage breakouts from NAR’s realtor survey and applied them to the total number of realtors in each year, according to NAR.

According to this approach, the number of high-earning realtors has declined by more than 40% from the peak of the real estate market. All told, there are about 178,000 agents that make over $100,000 per years, compared to 312,000 in 2006.

This is an incredible loss of earning power. The drop in commission revenue has been accompanied by a drop in marketing spend. All told, the number of realtors that spend more than $2500 a year on marketing and advertising has declined 45% to about 200,000.

A couple of interesting trends surfaced when I dug into the distribution of annual marketing spend over the past few years, according to the NAR survey.

First, the median marketing spend was down 31%, less than the drop in commission income over the same period. This is a byproduct of realtors trying to keep up a subsinence level of marketing. The larger marketers cut their spending by 50%.

Second, realtors have not expanded their investment in online media, keeping it at about 10% of overall advertising and marketing spend.

I’m a glass-half-full kind of guy, so when I look at these figures, I’m struck by the opportunity for higher-earning realtors to increase their investment in marketing in order to increase their share of the market. But, by any account, the contraction in marketing spending by real estate agents over the past two years is difficult to process, it is so large, pervasive and complete.

Real estate agents and brokers are faced with more choices — and more contradictory claims — than ever in how they distribute listings, connect with consumers and promote their brand. Real estate marketing used to be a pretty straightforward activity; now, it can consume big chunks of a realtor’s time, energy and money if not managed in a focused and sensible way.

I was asked recently to give a speech on how print media fit into a multi-channel real estate marketing program. Preparing my remarks, I realized that you couldn’t justify the inclusion of one marketing outlet over another in any program until you’d created a solid set of principles for the overall marketing program. And, with so much complexity and choice, those principles needed to be clear and simple.

In order to compete effectively and to leverage new tools efficiently, a realtor needs to apply three basic rules to their marketing program:

• Distribute your listings everywhere on the internet, so that your properties are included in as many consumer searches as possible;
• Invest in marketing outlets that let you stand out from the crowd and create tangible leads for your personal business;
• Commit energy and focus on networking, particularly on digital platforms.

Applying these three rules make its much easier for realtors to decide how to take advantage of the  alternatives that are available to them and helps to drown out some of the noise generated by passionate advocates for specific solutions.

Each of the rules benefits from a little context.

Rule 1: Place your listings everywhere

The first rule is designed to take advantage of the way that consumers are using the Internet — as a limitless database of home-specific information.

While the “Internet” is a huge real estate space, it’s also a fragmented space. In February, for instance, there were more than 226 million searches on Google for “real estate.” More than 55 million consumers visited a real estate web site in February, according to Comscore/Media Metrix.

That activity, which is fairly consistent with prior months, came in a month when only 308,000 homes were sold.

So, while consumers are doing an incredible amount of research online every month about real estate, only a fraction of them are actual Buyers and Sellers.

From a marketing perspective, it’s difficult to find an affordable way to have a maximum impact by paying to promote enhanced internet listings. The first challenge is how many different sites consumers go to. You can’t find any one site that delivers the majority of the 55 million people who visited a real estate site. Realtor.com and Zillow are the two largest, with more than 6 million unique visitors, according to Comscore/Media Metrix. The third most visited site is MSN, at 5 million, and more than 11 sites have more than 1 million visitors each month.

In fact, the top 5 real estate sites have relatively little overlap in visitors.

This fragmentation means that a realtor has to focus on inclusion of their listings in every site, not over-relying on one or two sites.

Consumers expect to find listings in the leading web services. For a realtor who wants to be successful in working with consumers, internet presence is a baseline requirement.

This emphasis, however, can drive misdirected marketing investments, which leads to the second rule of realtor marketing.

In our research of home buyers and sellers at NCI, we’ve found that a visible commitment to advertising and marketing is a key decision driver for why consumers work with specific realtors.

75% of homes sellers said that an realtor’s ongoing advertising program was very or extremely important in their selection of a listing agent. In fact, 76% said marketing skills were one of the most important selection attributes. Home buyers reported high recall of agent advertising and that visibility was a primary driver of their selecting a specific agent to work with.

Rule 2:  Stand out from the crowd

When a realtor considers paid advertising, their focus needs to be on how visible their advertising investment makes them and how many measurable instances of business activity they will get from that investment.

Think about it: if 54 million people are searching real estate web site, but only 308,000 homes are sold in a month, that means that a lot of people are going to be looking at listings — and seeing a realtor’s personal information — without taking action. Being a frequent and visible presence in their search is going to benefit a realtor.

The challenge is how to find cost-effective and time-saving ways to become frequent and visible.

It doesn’t always mean trying to enhance your personal profile wherever real estate information appears. It means investing in a marketing platform that makes you stand out.

This was the point in my presentation that I highlighted the benefits of The Real Estate Book’s integrated media approach, combing print presence in a four-color catalog of homes with distribution of listing data to more than 40 web sites, including therealestatebook.com, with more than 1 million unique visitors a month.

The Real Estate Book makes a real estate agent stand out. We can demonstrate that the book is getting looked at by consumers. We can demonstrate that we drive phone calls, e-mails and web traffic to realtors. And, we can demonstrate that we do this at a reasonably cost in a format that takes very little time to execute.

The Real Estate Book isn’t the only way to stand out. Many realtors still use traditional signage at grocery stores, on benches or on billboards. The key is that these realtors understand that just having their listings appear in web searches doesn’t make them stand out enough to increase their share of their real estate market. (Of course, I do believe that The Real Estate Book is the BEST way to stand out in the local market!)

The explosion of home information on the Internet has not just changed the way that realtors need to think about marketing, it has also changed the way that they need to think about networking with consumers.

I’ve heard many agents bemoan the challenges of working with home sellers and buyers who have too much information from online sites and who think that they are experts.

The important thing for all of us to understand is that the consumer isn’t just get smarter, they are becoming more enthusiastic.

The National Association of Realtors has an interesting fact that shows that home buyers who rely exclusively on the internet for home information take twice as long to buy a home and visit three times as many homes as other home buyers.

This is the description of an enthusiast — they love to get deep into the topic, love to gather information and love to experience things.

Rule 3:  Network — in person & digitally

This expanding passion for home information creates a priceless opportunity for real estate agents to engage and excite potential buyers and sellers.

With the explosion of social media tools, this kind of enthusiast networking can shift onto digital platforms, like Facebook. This social networking activity is the core of the third rule of effective real estate marketing: increase your networking activity by leveraging digital tools.

Too many real estate agents believe that they can show their expertise by mailing out data about market trends and other real-estate topics. In fact, the best way to keep the interest of prospective buyers and sellers it to communicate your passion for real estate by sharing updates on social networks like Facebook that show you being active and engaged in the business of homes. These networks can share a new listing that you saw, or an interesting sale that occurred, or the reason why a new part of town has become so attractive. They are short, smart and informative updates. They help people who have connected with you through all your other marketing activity to see just how active a realtor you are.

One of the key points of my speech was that the proper application of these three rules should balance effort, cost and return. The graphic above outlines the relative relationship of these three elements.

The broad distribution of your home listings should be very low cost and should go very wide. Marketing opportunities where you stand out and create business activity will require more cash investment and should have more measurable results. And your networking activities should be at the core of your marketing program; these will be of varying cost, depending on the approach you decide to take.

The component of the program that is more variable is the opportunities that make you stand out. A realtor can build a practice out of broad distribution of listings and very strong networking. Our experience shows us that there is a limit to how large that practice can be, because consumers maintain their bias towards working with realtors who are visible marketers, and any kind of high visibility requires some investment of cost.

Inevitably, when I make this last point, someone points to their blog and social media activity and says, “I am able to get a lot of visibility without spending money.”

Time is Money. If you have the time and the talent to build visibility using social media tools and creating your own content, then you have been able to drive a sweat investment into a real asset. The reality is that most realtors don’t have the skills and disposition to do that kind of work. It’s important to the future of those realtors business that they can apply a set of principles to their marketing that makes them relevant, current and successful.

Real estate advertising is set to rebound in 2010, after a devastating decline in 2009, and traditional media such as newspapers and print catalogs will be a surprising beneficiary, according to a forecast released this month by Borrell Associates, a long-time observer of the local advertising market.

Borrell has been in the business of analyzing local advertising trends since the 1980′s. I actually competed with Gordon at Communications Trends, Inc. in the late 1980′s, when both our companies began to look at the emerging competitive trends in the yellow pages industry. Gordon’s work is solid, and his firm has been on target more often than not with their forecasts. He accurately forecast the scale of the shift to online in the real estate business, for instance.

As a result, I was particularly interested in seeing his firm’s forecast of real estate advertising for the next year. There are three big take-aways from the analysis and surrounding discussion: An over-correction in ad spending disproportionately hit traditional print media; the share shift between print and online is essentially over, with a slight correction back to print in the year ahead; and a new secular shift is underway moving real estate marketing dollars out of media and into other promotional spend.

Overall, advertising by real estate agents and brokers is set to increase 2.7% in 2010 to $8 billion, following a 19% decline to $7.8 billion in 2009, according to Borrell. Newspapers and other print (including home catalogs) are set to have strong rebounds in 2010, following dramatic declines in 2009. In fact, in 2010 traditional print media will recover a small percentage of the share that it lost to online media over the past several years.

In a webinar discussing the forecast, the Borrell team addressed the factors driving the recovery of print. Agents and brokers recognize that the Internet has become a free source of distribution, but that investing in internet media provides only a minimal lift in business activity. Print advertising remains the most effective way to stand out in a local market and drive leads, Borrell’s research with agents and brokers shows, and in the next a number of realtors will return to using print in order to help drive their market presence.

Since we publish The Real Estate Book, the forecast obviously was music to our ears. But more importantly, it was confirming to what we’ve been hearing from a lot of our customers and consistent with what our internal research was showing. While print advertising doesn’t deliver the total market, like the Internet does, it does deliver a responsive market, giving our customers market recognition, brand awareness and a valuable source of leads.

To reinforce their observation that the market shift between print and online is essentially complete, Borrell presented a projection through 2014 of the relative share for both media across all real-estated related ad spending, including realtors, financial services, multi-family and commercial.

A third market shift is occurring, Borrell cautioned.

Within online real estate advertising, money iis moving into marketing activity that do not rely on a media company to bring buyers and sellers together. Thanks to the proliferation of inexpensive database marketing tools and techniques, real estate advertisers are developing direct, one-on-one relationships with their prospects and customers through e-mail marketing, social networking and various promotions and public relations efforts.

You can order the full report, with detailed forecasts of each category, a demographic analysis of the home shopping consumer and local observations and projections, here.

As the year winds down, I was curious which posts over the course of the year were the most popular. I was pleased to see that the posts that had resonated the most with all of you were ones that I felt like I’d achieved some clarity around an idea that I’d been working through. (It’s also interesting that these posts are among the most frequently accessed through search.)

The number one post was from March: Social Media Can be A Marketing Platform. This was when we were taking Network Communications into its Project Massive Network, an effort to get every person in the company using social media to broaden and intensify their professional connections.

Through the year, I kept meaning to come back to the concept of Evangelist. The word too easily connotes intense passion, while I believe that the most effective Evangelists are the ones who have completely integrated their nature with their passions, so that they communicate a relaxed enthusiasm that inspires and attracts others. Evangelism is too often associated with a mania and mono-focus that can be off-putting.

The number two most-popular post was a very detailed case study that I did in June about migrating our marketing strategy at Apartment Finder to a social media focus. My intent with this post was to demonstrate each of the steps that we had taken to extend our communications with the multi-family marketplace to multiple platforms, and our efforts to modify and adapt our messaging to the unique attributes to the platforms. This effort continues today and deserves a follow-up: the most challenging aspect of the initiative is maintaining continuity and assessing its effectiveness. Despite our intent focus, we have areas of spotty execution with our own program.

The third most-popular post was my first attempt to consolidate the thinking that I’d been doing about how a traditional publishing content workflow needed to adapt to accommodate the inclusion of social media platforms. In Thoughts on Evolving the Content Strategy in Publishing to Leverage Social Media I outlined the Sharing Model of content creation. This model outlined here as served as a framework for developing new processes at our regional home design brands, and in some instances we’ve seen significant impact on audience and enthusiasm. The process is a living work in progress.

The fourth most frequently viewed post is an down-and-dirty analysis of State Farm’s presence on Facebook. This was a period when I was trying to understand the challenges that face traditional marketing departments when implementing social media programs. The post was published in April and is one of the two most-frequently accessed posts through Google search. I recently re-visited the State Farm Facebook sites and little had changed.

In the Spring, I was doing a lot of work to try to quantify the impact of the economic decline on consumer spending, marketing outlays and media allocations. In an early April post, I pointed out the contradiction between industry research showing the effectiveness of TV and magazine advertising and the steep declines in revenue. The point: When marketing budgets shrink, the most expensive media goes first.

I’m kind of proud that a self-serving post doesn’t show up until the number 6 spot. Over a period of 6 months, we radically shifted our traffic strategy at ApartmentFinder.com in order to leverage what we percieved as our core strengths. This shift was rewarded in April when Comscore reported ApartmentFinder was solidly in the top 5 destinations for apartment shoppers on the Internet. Our work put us solidly in the consideration set for online-only marketing in the multi-family industry, and we did it despite being heavily outspent on search engine marketing traffic by our competitors.

The seventh most-popular post, from July, demonstrates how powerful social media can be. I described a disappointing customer service experience with American Express. A couple of days later, I heard from the Chairman’s Office. It doesn’t match Jarvis’ Dell experience, but it was an instructive moment in the new age of marketing and media.

A May post reporting on research that shows how effective print advertising is in driving web traffic came in at number 8. Despite multiple instances of independent research like this, many people insist of maintaing a very simplistic “Print Is Dead” position. At this point, I just shake my head and wonder why the concept of using multiple platforms to intersect with consumers to drive business activity is so hard to accept. [I very accepting of marketers who say they don't have the money to invest in premium marketing choices, whether they are online or offline. Then we can have a conversation about how to leverage their marketing resources to build their business. Just sitting around arguing about living or dead media gets old very fast.]

An October post made the top 10 and is a big search favorite: The Current State of the Economy in 5 Pictures. I realized doing this analysis that I should update the post in January to reflect the fourth quarter results. Lesson: People like pictures.

The number 10 position is taken by a post where I ranged outside of my limited sphere of knowledge to speculate about how social media platforms would change the way that people searched for information. The premise was that “human search” would develop through the filtering of content by overlapping social graphs. This is happening on Twitter and is expressed by many as crowd-sourcing. I had fun thinking about the problem and putting together the schematics. The post attracted a broad readership and started many conversations. I’m sure that those followers soon dropped off as I returned to my more mundane noodling about business models, business processing and marketing approaches.

I visited the National Association of Realtors convention in San Diego last week.

The show was markedly different than the year before. The footprint was smaller, but the energy was higher. Fewer vendors were serving the market, but the vendors that were present focused on very specific utility that would produce benefits for brokers and agents.

Talk with agents and you heard a firmness in their tone and a positiveness in their approach that was absent the year before.

The market isn’t bouncing back anytime soon, they said, but there was consistent activity and the opportunity to make money.

My colleague Todd Dubner had many of the same impressions, which he shares on his blog Being Present.

Todd was particularly struck by the approach of the entrepreneurs he met during the show:

Creative vendors are getting their mental juices going. At NCI, we believe in the intelligence of the entrepreneur. We pay attention to what innovative thinkers are chasing and try to find where people are showing signs of profit. There was just more of that at the show this year than last. The ideas that were being shopped felt more concrete and actionable with a clearer value proposition than those in the past. No one was doing the, “if I could get 80% of agents to give me a dollar” math that never works out.

We’re hearing more positive reports from the field across our company as well. More is a relative term: for the past 18 months, positive reports have been few and far between in our real estate media business. I sat down with one of our business partners in the northeast over the weekend. He’s been with our company for more than 15 years, and the anxiety that he had expressed a year ago had been replaced by a confidence that the market was recovering, slowly and fitfully, but consistently.

These are anecdotal and ground-level reads. As such, one should be cautious to not get swayed by isolated instances of positive emotion. But, the repetition of these instances, in the face of continuing negative macro conditions, suggests that the pace of business activity is picking up in such a way that people who make their living from it are feeling like they are going to be able to make their living better.

Last Tuesday I spoke on a panel at Folio:’s ConnexLive conference. Tony Silber moderated, and steered the conversation with some urgency to simple questions about the future of the business we have all made our living from for a long while — magazines.

One of the panelists was Bernie Mann, a successful radio entrepreneur from North Carolina who publishes Our State, a high-quality glossy serving North Carolina. (Interestingly, some of the most practical and successful people I’ve met in local publishing have come out of the radio business.)

Tony kicked off the questions by asking when we might see a recovery in the ad market, and whether there will be a place for magazines when it happens. Bernie kicked off the dialogue by highlighting two basic themes: Advertising is about hope, and it’s hard to hope when things are hard; and, there’s a place for high quality, highly-focused magazines that offer things that people care about enough to pay for.

Advertising is about hope.

I struck this theme several times during conversations in the following through days as I travelled through Kansas and Missouri visiting with clients and our offices. Placing an ad is about the future. You’re betting that something good will happen AFTER you advertise. Experiencing a prolonged recession is about the past, about wondering when things will get better, about being wary about the future.

The theme resonated with the sales teams. It led to my sharing a bit of research I’d seen recently that concluded that the primary factor indicating whether people will live to an old age is their attitudes about age when they are young. The science is loose, but the conclusion makes sense: If, when you are young, you have negative perceptions about old people, you are less likely to live to be old.

The relevance to our business? You can’t have hope if you have negative perceptions about what you do, about the product that you represent, about the promise that you make in your business to your customers.

The challenge is proclaiming that hope even in the face of skepticism and negativity.

A good example is in our Real Estate Book Business. In the middle of the greatest housing crash on record, we offer a color catalog of homes that people peruse during the process of a home search. A common observation from many people is that the printed catalog is obsolete, given that 87% of consumers use the Internet during their home search. Hearing that observation over and over again, while watching real estate agents in their market struggle to stay in business quickly saps the confidence of the sales organization. In a meeting with our St. Louis TREB team, one woman asked candidly: When the real estate market comes back is their going to be a place for us? Will we have jobs?

The question is simple and honest.

I answered with some facts that we’ve accumulated over the past several months. In order to find out whether our magazine and print distribution works in achieving our primary goal of delivering business activity to our real estate agent customers, we did an extensive call tracking project with ads in multiple books. The results: An ad in the The Real Estate Book generates an average of 80 calls over three months, a $15 cost per lead at $400 per page.

We have to understand what our purpose is in the market, I explained. Our product exists to help agents with their marketing, and it takes advantage of people’s natural inquisitiveness when they are looking for homes. We distribute 8 million copies of The Real Estate Book with advertising from about 15,000 real estate agents. Our goal isn’t to provide a comprehensive listing of homes to the more than 30 million people who are searching for homes every month. The Internet is a great source for that. We’re distributing our listings to about 30% of that audience, when you include our TREB.com traffic. Our goal IS to make our agents stand out and to support their business activity: By showing home owners that their listing will get visibly marketed, by driving traffic to agent web sites (about three web visits for every phone call) and to drive phone calls.

In a market with ubiquitous information, that highly focused purpose is easily lost and market reps can easily get discouraged. When you look at our business, I told the team, you see that 75% of our customers have been with us a year or longer — they use our product because it helps them achieve basic goals that are important to their business.

Which brought me to Bernie Mann. I shared his comment with them. And suggested that until we can have hope, we can’t hope to inspire our customers.

You can find a video here with Bernie talking in simple and focused terms about what he has tried to accomplish with Our State. It’s compelling.

Look around and you’ll see ground-level signs of activity everywhere in the housing market. Traffic at open houses are up; we’re seeing more users and more leads from TREB.com and The Real Estate Book; mortgage applications and homes sales numbers are lifting from their winter lows.

The tone is neatly captured by a post on Seeking Alpha this weekend that couples some long-term trends in the stock market with mother-in-law research into the housing market.

My brother in Indianapolis says he has a number of buyers who are ready to buy, but they cannot sell their houses. That may not sound like good news, but it is. Just a few month ago, he said things were completely dead. The fall in mortgage rates is definitely putting more people in the market, and I’m hoping that one of them is interested in one of my brother’s clients’ homes, so a fortuitous chain reaction can begin.

My sister-in-law in Arizona says she has had more activity in the last few weeks than she has seen in months.

What’s driving the shift in perception and how sustainable is it?

Hanley-Wood Market Intelligence quickly captures the state of the housing market in their most recent market update. This table tells it all:

Every metric related to affordability is at an exceptional level: mortgage rates, as well as existing home and new home affordability ratios.

The metrics related to demand? Low consumer confidence, high unemployment and a glut of inventory are the key drivers of a reluctant home buyer. The immediate outlook for individuals is uncertain, and there appears to be more than enough homes: Why take a risk and act now.

Big Research’s April Executive Briefing shows a consumer who is feeling better about things, but still watching the purse strings tightly.

Although unemployment rose in March, increasingly confident consumers are holding out hope for improvement over the next six months… although more than half (51.9%) contend layoff levels will rise, this figure fell more than six points from the previous month (58.2%). One-third (34.5%) predict layoff levels will remain the same (v. 30.8% in March), while 13.7% are holding out for a decrease, up from 11.0% last month. Concerns with becoming laid off are also moving downward…8.1% fear the pink slip in April, compared to the 9.0% who felt the same last month.

While consumers are predicting a silver lining economically, they are remaining realistic with their finances over the next three months…decreasing overall spending is the top financial priority for April (among 36.4%, rising from 33.6% in March), while paying down debt is a close second with 35.6% (down slightly from 36.1% last month). Additionally, more than a quarter plan to increase savings (28.2%) and/or pay with cash more often (25.2%). With mortgage rates reaching record lows, refinancing homes is also becoming more popular…6.0% plan to refinance in the next three months, almost double the amount from a year ago (3.2%).

That absence of a firm demand foundation will continue to hold the housing market back. A recovery will develop as the factors holding down demand strengthen: more confidence around jobs, a growth in consumer confidence and a working off of inventories. These factors won’t fall in place like a puzzle; they’ll firm up gradually, like setting concrete.

That’s a pretty stark quote.

It’s from a good article that ran on CNBC last Friday putting some color on shifts in momentum in real estate markets around the country.

Over the past month or two, there’s been a significant uptick in consumer activity around real estate. We’re seeing it in our web site traffic and lead generation on TheRealEstateBook.com. From a moribund low in January, activity has been intermittently increasing over the past couple of months. But in March we’ve seen a pretty significant boost.

The CNBC article points to Florida, the first state into the crash.

In housing markets around the country, there are signs that perhaps the bottom has been reached, and sales are beginning to come back up — with prices hopefully to follow.

To get a handle on these rebounding markets, we asked real estate search firm Trulia to tell us the cities in which they have seen the greatest rise in searches — a proxy for buyer interest — over the last year

The result: Seven of the ten cities were in Florida, a poster state for the real estate boom and bust, and five were on the Gulf Coast side of the state.

Remember, this search activity on a web site, not visits to houses, or bids, or any other kind of activity that creates a commitment to buy. But it’s a good sign, that’s for sure.

One of the key premises of my presentation at Kelsey’s Interactive Local Marketplaces conference is that we are experiencing a shift in the modularity of local media that is an inevitable by-product of the expansive period that we have just exited.

Over the past five years, as local marketing budgets have grown in pace with the increase in consumer consumption, marketers had more money to try more things. But they also had enough money to market in all the conventional ways. So, while entrepreneurs and venture capitalist were investing time and energy in new technology and ways of organizing the local marketplace, most marketers were plowing the majority of their dollars into traditional media, like newspapers, yellow pages, direct mail and other outlets.

With the current sharp drop in consumer consumption, local marketers don’t have the luxury of advertising everywhere. In fact, they don’t have the confidence to advertise anywhere. They want to spend as little as possible; ideally, they will spend nothing at all, but still keep enough activity around their business so they can make some sales.

Long term, not advertising at all isn’t a sustainable strategy. But, in the meantime, the relative value of media is shifting markedly in the local marketplace. Advertisers are drawn inexorably to low cost; recent new media launches supply attractive, low-cost alternatives. Share is shifting because resources are shrinking, and new business models — often still operating at a loss or a minimal profit — provide increasingly effective alternatives.

I’ve reproduced here the slide from my presentation that refers to relative value of different local media. I focused on the real estate category in my talk because this sector is two years into the housing contraction, and the behavior that I believe is going to play out in other local media sectors has already happened here.  For illustration purposes, I have intersected the X and Y axes of the slide with a downward sloping diagonal line, which roughly replicates the trajectory of agent commission earnings over the past three years.

My point during the talk was that during the boom years, when realtors had a surplus of money, they were comfortable focusing their marketing energies toward the top half of the square. As a result, media in the upper right quadrant had a large pool of willing advertisers. Revenue rose as a result.

As resources for marketing have been cut, advertisers are focusing their attention on the bottom half of the square, looking for marketing options that preferably will cost them nothing. The second chart reproduced here shows the shift in the pool of potential customers. This shift helps to explain the increased time and energy that many real estate agents are making in social media and blogging: these are options that have no hard cash cost, and that give the agent comfort that they are working to keep their name and reputation out in the market.

I do not want to give the impression that I believe the relative value of all the media  on the matrix has changed. You can look at this chart and conclude that there isn’t a role for traditional media. In fact, my company is highly invested in multi-platform media based on a traditional specialty magazine brand, The Real Estate Book.

My point is two-fold. First, advertisers will invest more time in low-cost or alternative options in bad times than they will in good. This will lead to a shift in the way that they get leads. Second, as advertisers get more leads from alternative sources, they will put price pressure on traditional media. This is bad news for high-priced media like newspapers. For more efficiently priced media, like specialty magazines, price will be an issue when advertisers feel like their income is consistently at risk.

There is a long-term role for traditional advertising — that was a key point in my talk. The challenge will be to survive through a very dark winter, while the market adjusts and begins to recover.