‘It’s Like Crickets’

Six months ago, people were buying luxury homes without batting an eyelash.

Good morning!

Here are today’s highlights:

• In Massachusetts, small businesses are still struggling to get back to pre-pandemic levels.

• FedEx is raising its rates, and businesses are finding alternatives.

• There’s been a shift from outside sales to inside sales.

• A Houston restaurant has become an incubator for Black chefs.

THE ECONOMY

The luxury home market has posted its biggest decline in a decade: “A new report by real-estate brokerage Redfin shows that in the three months ending August 31, sales of luxury U.S. homes dropped 28.1 percent from the same period last year. That marks the biggest decline since at least 2012, when Redfin’s records began, and eclipses even the 23.2 percent decrease recorded during the onslaught of the pandemic in 2020, the report said.”

• “‘Six months ago, people were buying homes over-ask and with no appraisal,’ said [Nancy] Lam’s real-estate agent, Herman Chan of Golden Gate Sotheby’s International Realty. ‘They didn’t even bat an eyelash. Now, it’s like crickets.’”

• “Mr. Chan said he believes the slowdown in activity is more severe in the luxury market because high-end homeowners have a greater degree of discretion about when to sell and at what price. Often, sellers face no financial pressure to move, he said; they can just wait it out.”

• “Scott Lennard, an agent with Compass in the Seattle, Wash., area, who is listing a $12.5 million estate on Lake Washington, said his client is willing to hold out for the right price and is in no rush to sell, though the property has been on the market for about eight months.” READ MORE

Suddenly, home sellers are scarce: “Homeowners with low mortgage rates are balking at the prospect of selling their homes to borrow at much higher rates for their next homes, a development that could limit the supply of houses for sale for years to come. Housing inventory has risen from record lows earlier this year as more homes sit on the market longer. But the number of newly listed homes in the four weeks ended September 18 fell 20 percent year-over-year, according to real-estate brokerage Redfin. That is an indication that sellers who don’t need to sell are staying on the sidelines, economists say.”

• “The lack of housing inventory is one of the major reasons home prices have remained near record highs, despite seven straight months of declining sales as interest rates have roughly doubled since the start of the year.”

• “‘I like to call it the ‘golden handcuffs’ of mortgage rates,’ said Odeta Kushi, deputy chief economist at First American Financial. ‘You’ve got existing homeowners who are sitting on these rock-bottom rates, and what is their financial incentive to move and lock into a rate that’s potentially as much as 3 percentage points higher than what they’ve locked into?’” READ MORE

In Massachusetts, businesses are struggling: “Small businesses in Massachusetts face a long road to recovery coming out of the pandemic, as well as an array of inflation-related problems, according to a survey released Thursday. About half (53 percent) of the respondents said that revenue is lower now than before the pandemic, despite multiple rounds of federal Covid relief funding. Eighty percent reported receiving some relief money, though smaller and non-white businesses were more likely to miss out, according to the survey.”

• “The results showed that small businesses owned by people of color have been disproportionately affected by pandemic-related financial issues. Many reported having more trouble finding and raising money compared with white-owned businesses.”

• “Small businesses also are still struggling to fill job openings. Some 46 percent of respondents said hiring was a major concern, while 25 percent said it was of some concern.” READ MORE

LOGISTICS

FedEx is raising shipping rates: “FedEx said it plans to raise shipping rates by an average of 6.9 percent across most of its services starting in January as the delivery giant copes with a global slowdown in business. The rate increase is higher than previous years and comes days after the company slashed its profit and sales forecasts. FedEx and rival United Parcel Services raised shipping rates by an average of 5.9 percent for 2022—the first time in eight years that either had strayed above 4.9 percent.”

• “The average number of packages FedEx handled daily in the quarter ended August 31 fell 11 percent from the prior year, the third straight quarter of declines.”

• “Jack King, a denim-apparel maker in Bristol, Tenn., said his firm, L.C. King Manufacturing, used to ship solely with FedEx Ground because the delivery giant helped his company diversify from being solely a wholesaler to becoming an e-commerce retailer too. ‘It brought us to the dance,’ Mr. King said.”

• “But the increases in fuel and peak delivery surcharges were too much for his daily operations of shipping more than 100 packages. Stamps.com, a partner of both USPS and UPS, helped his company save $4.50 per package, according to Mr. King. ‘We were stunned by how much cheaper it was,’ he said.” READ MORE

SALES

Since Covid hit, there has been a shift from outside sales to inside sales: “If you were to ask why this is, the stock response would likely be Covid-19-related. And while it’s true that the lockdowns that restricted access to in-person meetings certainly played a part, that’s not the full story. The pandemic merely acted as a catalyst for an already prevalent shift toward inside sales vs. outside sales approaches. Today’s marketplace is moving increasingly online, and customers expect instant access to product information, easy price comparisons, and customer assistance on a 24/7 basis.”

• “Inside sales strategies leverage technology to connect with leads and convert them into customers without the need for either party to travel or meet in person. If your mind jumped straight to old-school single-strategy methods like cold calling and email tactics, you can relax; it’s not that. Nor is inside sales the same thing as telemarketing. Unlike telemarketing which is scripted, inside sales require skilled salespeople.”

• “Outside sales, also known as field sales, is the practice of selling products and services via face-to-face, in-person interactions, and it’s not uncommon for outside sales reps to travel extensively. With advanced sales tools, collaboration software, and automated workflow technology at their disposal, it’s now possible for outside sales reps to spend more time at home or in the office than before.” READ MORE

OFFICE SPACE

Employees are returning to the office, but the remote-work debate isn’t over yet: “The early results are in: The return to work is working. Office occupancy hit a pandemic high over the last week according to data tracked by Kastle Systems, a security company, with 10 of the country’s top metropolitan areas seeing an average of 47.5 percent of workers swiping into offices compared with pre-pandemic levels. That’s up more than nearly 4 percent from the week before Labor Day, when bosses drew the latest line with the push to return to offices. At the same time last year, the national average was less than 31 percent.”

• “Wednesday of last week was the busiest yet across the country, with the national average creeping up to 54.5 percent of pre-pandemic levels, the highest since early 2020 according to Kastle.”

• “Even so, office occupancy in the United States remains below half of what it was in 2019, according to Kastle’s data, with a growing divergence between office attendance on the coasts and elsewhere.”

• “The long-term verdict on offices remains up in the air, and it’s going to take awhile to work itself out, according to Jeff Adler, vice president of the data division of Yardi, a property management software company that works with offices around the globe.”

• “‘Nothing is happening quickly,’ Adler said. ‘We’re in the messy, mushy middle.’” READ MORE

FOOD & BEVERAGE

A Houston restaurant has become an incubator and for Black chefs: “Kulture began in 2018, with [Marcus] Davis, the owner of other successful restaurants like the iconic Midtown brunch spot The Breakfast Klub and Reggae Hut, leading the charge and Top Chef alumna and finalist Dawn Burrell serving as the executive chef. The restaurant was innovative and received rave reviews for serving up a beautiful fusion of Caribbean-Southern cuisine in a casual but elevated atmosphere. But in 2020, things changed. The Covid-19 pandemic hit the restaurant industry hard, and like many restaurants, Kulture was forced to temporarily close its doors. For months, Houstonians wondered about the state of Kulture.”

• “Today, Kulture’s restaurant space largely operates as a performance space for Black chefs from across the country to truly express themselves while showcasing their talents and individual cooking styles and addressing head-on the under representation within the restaurant industry. Each month, hand-picked chefs create multi-course dinners on set nights, for which patrons can purchase advance tickets.”

• “Past menus have explored a plethora of cuisines within the African diaspora, ranging from ChopnBlok chef Ope Amosu and James Beard Award winner Kwame Onwuachi’s collaborative take on West African cuisine to Uchi Houston chef Jeff Taylor’s spin on the Puerto Rican staples from his youth and Griggs’s ode to her Caribbean upbringing. More events are on the horizon.” READ MORE

RETAIL

The move back toward brick and mortar continues: “Two years after the coronavirus pandemic closed the doors to many small businesses and jump-started a remote workforce, brick-and-mortar retail locations are growing in popularity again. In fact, U.S.-based retailers announced more than 8,100 new store openings last year, according to the National Retail Federation. While rent hikes plague many commercial storefronts, some business owners insist on opening up brick-and-mortar shops because of the positive effects it can have on sales and business growth, entrepreneurs told Insider.”

• “When [Shawn] Brown first started selling sweets 10 years ago, she worked from her home kitchen and shipped desserts to restaurants and other customers. As [CheeseCaked] grew, she came to view having a physical space as crucial for her brand image and her customers' experience.”

• “Leasing two storefronts in Atlanta, which costs her $3,000 a month, has allowed her bakery to become a place of celebration and has helped strengthen the bakery's branding, she said. For the first two quarters of this year, CheeseCaked averaged more than $12,000 a month in sales, documents show.”

• Before launching his painting startup Seal Pro Painting, Brandon Sewell worked for another painting company as a remote worker. While there, he says, he experienced a lack of comradery that he wanted to change when he started his own business.”

• “Earlier this year, he signed his first lease for a 600-square-foot Florida office space for just over $600 a month. He spends each day working there alongside his sales rep, administrator, and project manager. Additionally, the office is used for weekly company-wide meetings and for interviewing or onboarding new employees.”

• “In 2021, Sewell booked just shy of $500,000 in sales. But this year, the first year of the office lease, Seal Pro is on track to net $675,000 in annual sales, documents show.” READ MORE

THE 21 HATS PODCAST

This week, Karen Clark Cole, Jay Goltz, and Sarah Segal talk about hiring an HR person: At what size does a business need a full-time person? Do you hire someone who has experience but who might not be used to getting his or her hands dirty? Or do you hire someone you can mold to fit the culture of your business?”

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren