Real estate brokerage owners are bullish about the housing market but continue to run a lean firm and are concerned about inventory issues.
The real estate market is moving full speed ahead according to brokerage firm leaders who responded to the REAL Trends Q1 2021 Broker Sentiment Survey. Some 61.4% predicted that home sales will be up more than 5% in their markets, that’s held steady from Q42020 when 62% of those surveyed felt the same. Another 34% felt like sales would be flat in the next three months, up from 25% in Q42020. Prices, on the other hand, are predicted to rise. Some 58% of brokers interviewed felt that home prices would rise 1% to 5% in the next three months, while 37% felt they would rise more than 5%. Both are similar to Q42020 which showed 53% and 33% respectively.
When it comes to challenges, the No. 1 challenge by a long shot is finding inventory. It’s also what keeps brokers up at night, with about half mentioning the lack of housing inventory as a write-in answer for current challenges. “The historic record low inventory is reaching a crisis point in our markets,” says Chad Ochsner, broker-owner of RE/MAX Alliance in Denver. “We’re seeing rapid, unsustainable price acceleration as a result of the inventory shortage. Multiple offers, often well over asking price, are leaving many frustrated buyers on the sidelines. I’m concerned about this log jam and hope we see something break loose as we approach the spring. We need thousands of more homes to sell.”
For David Jones, CEO of Coldwell Banker Howard Perry and Walston, “We’re wondering when the lack of inventory is going to put the brakes on sales. So far, it’s incredible how low inventory and days on market can go, yet year-over-year sales have been going up 20+%.”
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Challenges (ranked biggest challenge to smallest)
- Finding Inventory (ranked No. 1 challenge by 86% of those surveyed)
- Pressure on net and/or gross margins
- Difficulty in recruiting
- Reducing our costs
- Increasing capture rate on core services
- Restructuring office space
- Building or implementing a new technology platform or business model
- Building more diverse and inclusive brokerage
- Increased regulation and rising interest rates
Other challenges mentioned in write-in section were (in order of number of times mentioned highest to lowest):
- Competing with new business models/ Competitors with unlimited capital or those willing to “give away the shop”
- Fee discounting
- Current administration and overall political climate
- Low-cost brokerages
- Competing for agents against virtual brokerages
- Staying connected to agents and loss of office culture
- Lack of loyalty in sales force
When we asked what cost-saving measures brokers implemented to market-proof their businesses, overwhelmingly they mentioned restructuring office space and renegotiating leases.
At the beginning of the pandemic, CENTURY 21 Judge Fite Company went into “recession mode,” according to Jim Fite, president and CEO. “We took [almost four] days to analyze every expense from smallest to largest. The most money was saved by merging two underperforming offices into two closed by offices. As we went virtual, our training expenses were reduced by room rentals and food expenses. Also, travel was greatly reduced.” That allowed the brokerage to reduce costs “over $1 million annually.” Some of those costs will come back, such as travel and in-person training, but others, such as office consolidation are lasting cuts.
Cost-saving Measures to Market-proof Business
Brokers are carefully considering their budgets and coming up with innovative ways to cut costs and increase services to agents.
Here’s what they reduced to save money:
- Centralized or consolidated services
- Restructured and reduced office staff
- Reduced or eliminated print advertising
- Renegotiated advertising contracts
- Limited discretionary spending
- Reduced in-person training
- Cancelled unused services, including some telecommunications service
Here’s what they increased their spend on:
- Digital and virtual technology
- Video Platform
- Digital marketing and advertising
- Cloud-based help desks
- Relocation services
- Hired a marketing company
- Ancillary services
- Virtual training platforms
It’s clear that the one issue brokerage firm leaders are most concerned about—housing inventory. With new construction costs high, it’s up to real estate professionals to get sellers off the fence. In the recent REAL Trends newsletter, Larry Kendall of Ninja Selling recently wrote about how the best real estate professionals become puzzle makers. He offers strategies for getting off-market transactions. It’s worth passing along to your agents.
For business owners, challenges will always exist. The key is to turn those challenges into opportunities—it’s the mindset of some of the most successful brokers.
The Q2 2021 Broker Sentiment Survey will open April 1, look for it in your inbox. Questions about the Survey, email Tracey Velt, managing editor, at firstname.lastname@example.org