Future Shocks and How to Deal with Them

Future Shocks and How to Deal with Them Summary of Key Issues Facing the Residential Real Estate Industry Steve Murray REAL Trends 2014

Steve Murray Castle Pines, CO President, REAL Trends Future Shocks and How to Deal with Them

Unfounded Fears and Future Prosperity • What are some unfounded fears? • Homeownership rate declines further • Referred rate drops measurably • Agent usage declines • Disparity between high and low producers Future Shocks and How to Deal with Them

Homeownership Rate Declines • The homeownership rate has declined from a high of more than 69% in 2004 to 64% in 2013. • The financial difficulties of the millennial generation reduce their ability to own their own home. Future Shocks and How to Deal with Them

Homeownership Rate Declines • Homes will still be owned by someone. • Investors are mostly private individuals owning 1 to 3 units. • They still buy and sell houses. Future Shocks and How to Deal with Them

The Referred Rate Drops • Currently, nearly 70% of all consumers chose an agent because they know one or someone they know referred them (the referred rate). • Technology, generational shifts, and agent ratings could all play a role. Future Shocks and How to Deal with Them

The Referred Rate Drops • Performance begins to matter and further consolidation takes place. • Establishing a career in real estate becomes more difficult. Future Shocks and How to Deal with Them

The Referred Rate Drops • Still, a majority of real estate consumers base their decision on a personal relationship. • Sphere marketing shifts gears. Future Shocks and How to Deal with Them

Agent Usage Declines • Currently, more than 80% of all consumers use a real estate agent to buy and sell their home. • Technology and online systems make it feasible to shop, purchase, and close a home purchase or sale. Future Shocks and How to Deal with Them

Agent Usage Declines • Gross revenues of industry decline and along with it the number of sales agents. • The infrequency, complexity, and cost-of-failure issues facing consumers restrains the growth of the do-it-yourself segment. Future Shocks and How to Deal with Them

Agent Usage Declines • New forms of realty advisers surge to fill the need for more limited service. • New forms of realty firms seek to service the niche. Future Shocks and How to Deal with Them

Disparity Between High and Low Producers • The 80/20 Principle is close at hand—and consolidation of agents and brokerage is close behind. • Teams are becoming more formal business units and grabbing larger shares of local markets. Future Shocks and How to Deal with Them

Disparity Between High and Low Producers • Large producers form their own private MLS networks and form their own marketing alliances. • Cooperation within the industry is severely challenged. Future Shocks and How to Deal with Them

Disparity Between High and Low Producers • Realty firms, MLS, and Realtor® organizations reform their platforms to accommodate the consolidation of the market. • New agreements for cooperation and compensation arise to reflect the new requirements of the market. Future Shocks and How to Deal with Them

Thoughts • These issues and others are all real and the status quo is being challenged—change will happen. • However, it is only at the margins that change will occur—not in the core. Future Shocks and How to Deal with Them

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Future Shocks and How to Deal with Them