The National Association of Realtors® (NAR) Strategic Issues Workgroup held a series of structured discussions last February with brokers, sales associations, real estate consultants, economists, and technology experts and asked them two questions: What do you see as the future of real estate over the next few years? What will be the major changes in the real estate business ahead? From the responses NAR has issued a report titled Simplify! Real Estate Trends in a Time of Uncertainty.
The report says today the real estate field is filled with "fruit flies" and "zombies." Agents, brokers and consumers tend to focus on the short-lived trends which are proliferating like fruit flies such as a hot New Mobile app. A controversial blog or a twitter tweet generate immediate interest and excitement then disappear. Zombies, on the other hand, are real estate professionals who are simply going through the motions without thinking about what may lay ahead saying that this will pass and everything will be back to normal again. That attitude is a powerful obstacle to meaningful change on any level.
In their research, the authors say, they saw many creative brokers and agents redefining their business model. Some have left one business behind to create what they think will be the future. Business cycles always seem to produce the most creative responses on the downside; as one broker said, 'I am taking the leap what do I have to lose?'"
Through the discussion groups the authors identified eight words that encapsulate trends in the industry.
Simplify: Brokers agents and associations are leaner and more focused.
Consolidate: Firms and associations are consolidating and merging.
Collaborate: The new business culture is collaboration.
Enrich: Consumers are demanding are richer transaction experience.
Dream: Homeownership is losing its appeal as a promise dream.
Embrace: Technology must be embraced as it impacts everything.
Leadership: Times of uncertainty call for leadership at all levels.
Evolve: Real estate and association business models are evolving.
Simplify
The authors stress the value of simplicity because consumers today are bombarded with information about real estate, the economy, and financial markets while dealing with concerns about their own jobs, savings, and retirement plans. The real estate industry clearly has an opportunity to simplify the customer experience, and bring greater clarity to the transaction and provide trusted advice. The need for simplicity is already driving trends in real estate
In an era of digital mobile and social communication buyers and sellers have no problem gathering vast amounts of information but in many cases they don't know what is accurate, relevant, or important when buying or selling of a home. The same problem exists in other areas of the real estate industry; it's not always easy for instance for a buyer or seller to understand the nuances of the agency broker relationship. Products studies show that simplification often results in increased sales.
Consolidate
The industry is also simplifying through consolidation. Participants said there were too many agents, brokers, associations, and MLS organizations and some forecast a steady reduction in their numbers over the next few years. The extended downturn has been particularly difficult for brokerages with modest profitability where cutting expenses even further is no longer an option. Technology has also made it easier for agents, brokers, and associations to operate effectively with fewer people. Other factors leading to consolidation are aging professionals who must decide whether to groom a successor or sell the business while larger companies with access to capital can pick and choose acquisition and merger targets.
The consolidation trend has also impacted associations and MLSs and many are considering mergers or consolidations citing reasons ranging from making life easier for members to enhancing the value of membership. Like brokerages many associations have cut all possible expenses and overhead and now face tough decisions on core services or even survival.
Collaboration
Another rising trend is collaboration. Traditionally the real estate industry has been extremely competitive as agents vie for customers and brokers seek productive agents. While that isn't going to change anytime soon there are clear signs that collaboration is an emerging trend particularly with younger real estate professionals who are used to working in teams.
One of the benefits of collaboration for brokers and team leaders is a smoother more consistent delivery of services to the customer and another is an increased sense of belonging which can reduce agent turnover and improve customer acquisition.
Enrich
The participants saw as a consumer trend the seeking of trust, transparency and an enriched experience. "Mobility speed and personal service are critically important for serving today's consumers. But understanding local markets and building relationships with buyers and remain the keys to success in the real estate industry".
Establishing trust remains a vital issue for buyers and sellers. Along with trust consumers want greater transparency at every stage of the process. Real estate professionals need to be straight shooters with their customers.
Due largely to the trust issue some buyers prefer to spend hours searching for homes on third party sites before contacting an agent and then are reluctant to provide personal information for fear they will be bombarded with unwanted sales materials. Yet when they are ready to act they want immediate attention. Once contact is made it is important that the agent stay in touch using the consumers preferred method while helping the customer sort through data, negotiate the transaction, and navigate the rest of the process.
Dream
There is a pronounced trend toward more renters and fewer owners. Demographics drive the housing market and they are changing. "Millennials" have not entered the market on schedule, preferring to live in urban condos or rentals and are also a generation saddled with debt and problems entering the job market. Some professionals are concerned that the nation's long period of economic and financial stress has trained a generation that home ownership is not worthy of pursuit.
Other factors are impacting homeownership. Experts expect an increase in non Caucasian households some of which are comfortable living in multi generational households, impacting household formation. Homeowners expect to stay in their homes longer, an average of 15 years compared to eight only six years ago. Meanwhile the housing market continues to change; home ownership levels have fallen to the 64% range from their peak at 70% five years ago. Homeowner attitudes have been affected by concerns over foreclosures, falling home prices and shadow inventories. At the same time there are indications that global buyers they pick up some of the slack as investing in the U.S. is becoming more attractive to a fluent overseas buyers.
Embrace (Technology)
Many new types of technology companies have entered the real estate industry over the last 10 years. These companies compile information, build databases, and develop tools to attract consumers and generate revenue from agents, brokers, and advertisers'.
Gathering and storing data is much easier than turning it into knowledge and wisdom. Being able to ask and answer consumer questions he's one of the uniquely valuable services provided by real estate professionals. Advanced technology is more likely to improve agent and broker productivity than replace those players but massive shifts in technology present particular challenges to an industry that has historically challenge lagged in innovation.
Leadership
Theirs is much uncertainty in the industry; will the recovery continue? What will happen with foreclosures and the shadow inventories? Brokers and agents tend to have three visions of the future; gloom and doom, a steady state, or cautious optimism. Since there is evidence for each of these it will be important to professionals to pay attention to shifts in consumer sentiment and policy positions and to stay in touch with the lending community.
Underlying all three visions is a feeling that the industry's problems are beyond its ability to correct. Massive institutional problems and governmental influence and control create a feeling of impotence and anger; nonetheless agents, managers, and associations need to make wise business decisions in this time of uncertainty.
Evolve
Simplification, consolidation and collaboration are blurring traditional roles and workflow models will have to improve. Traditionally there is a hierarchy of services within real estate; agents serve consumers, broker serve agents, and real estate associations and MLS organizations serve their members. That model has been challenged by Internet-only brokers, companies that focus on For Sale By Owner listings, and lead generation companies.
There are other signs the structure may be changing; many agent teams operate as virtually independent businesses; some brokerages are taking more control over agent training, technology, and service delivery to create a new consumer brand, turning the focus from the agent to the brokerage. Brokers have to generate online traffic to compete with the lead generation companies and find other ways to provide value to their agents. Some companies have developed segmented business models offering agents a choice of "full service" or "freedom shops." MLS sites now offer gateways to the public and associations are also engaging directly with consumers such as publishing market updates advocating housing issues and watching neighborhood improvement projects.
From the standpoint of the consumer, a simpler real estate industry makes a lot of sense, providing greater transparency and streamlining the transaction. Technology has made consumers less dependent on agents, brokers and an MLS Systems for information. Having fewer players in the mix could also reduce the number of transaction-related charges and fees for buyers and sellers.
