REAL Trending Episode 62
Importance of Hard Evidence, Coming Soon and Pocket Listings, Inventory Challenges
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending, Episode 62. We’re breaking down the trends of the week, and showing how they impact brokers and agents, I’m Steve Murray, President of REAL Trends. Today we’re discussing the importance of hard evidence, the whole issue of coming soon and pocket listings, and inventory challenges appear to be multiplying. First a quick message about an upcoming event.
Importance Of Hard Evidence
A November 4th article in the Wall Street Journal about Michael Crichton, the gentleman author who unfortunately passed away years ago, but brought us Jurassic Park and other fascinating novels, wrote about the need for hard evidence before everyone jumps on a new bandwagon. They cited years ago cases. The first one being for instance, how deadly secondhand cigarette smoke is in restaurants and offices.
But in fact, at the time the alerts were all issued, there was actually no evidence from the EPA or otherwise that in fact secondhand smoke caused cancer. Second, a number of scientists stated as far back as the ’70s that in a nuclear exchange between the Soviet Union and the U.S. there would be a nuclear winter that would devastate life throughout the Northern Hemisphere causing a nuclear winter. Again, even though there was no hard evidence that such a thing would happen.
What does that have to do with our industry? There have been numerous articles written about how buyers are bypassing buyer agents and going straight to listing agents in the attempt to do something, or accomplish something. Second, numerous articles talking about the death, and disappearance, and dismemberment, of the MLS. Third, numerous opinions written about the death of brokerage companies with the rise of teams and agents. Yet in every single case, the opinion makers cite no research, no evidence, no facts, that in fact any of these three things are happening.
Are they all changing? Absolutely. Redfin’s Direct program encourages people to go direct to a listing agent to save money. But in fact that’s been going on for dozens of years. There are buyers who perceive they can save money on the purchase price of the home, or get a rebate of part of the commission from the listing agent, if they cut out the buyers’ agents. But there is no evidence that is a growing trend, or that a preponderance of buyers actually do that. MLS going away? Pardon me? I haven’t noticed actually any of them just out-and-out closing their doors at all, anywhere.
Last, the death of brokerage companies because of teams and agents? Pardon me. What we are seeing is teams forming their own brokerage. So isn’t just adaptation the story of the day that brokers are reorganizing and adapting? Yes, some are going out of business. Yes, some are selling and merging with others. But ladies and gentlemen, from 2005 to 2010, 25% of the REAL Trends 500 disappeared in that recession. Had nothing to do with newfangled brokerage or technology trends.
It had to do with a wipe out of housing markets, and brokers caught unprepared for such an event. What’s the point? For everyone who cares to listen to this, be very careful when reading information about the death of this, or the change in that. What you really need to do is do critical thinking and research, if it matters to you to do so, before you accept any such statements at face value.
Coming Soon And Pocket Listings
Second, the issue of coming soon, off-market. This editor does not have a firm fixed opinion at this time. Still reading, and listening, and asking questions, more than expressing an opinion, and I have many friends and clients on both sides of the issue. We used to call this “pocket listings”, now it’s “coming soon”.
It’s like we changed the term from “scrubbing leads” to “curation of leads”, as if putting different window dressing on something that’s going on suddenly makes it acceptable, or more acceptable. My only feeling, and my only sense about the whole issue of coming soon is if we are proponents of coming soon solely because we think it benefits consumers, then we’re probably doing the right thing.
If however, we are proponents of coming soon because it protects us competitively, or because other people are doing it, then my instinct tells me we’re going down the wrong path, and in fact that coming soon should not be recognized as an acceptable way of doing business. But as I started off this conversation, I don’t have a firm conclusion on that, but my instinct and 40 years of experience tell me if we are doing it because it “protects us”, that is the wrong reason. We can relate back 20 years ago when the internet became a big, big issue in our industry, how some people in the industry went to the moats and the barriers as opposed to embracing and competing.
Lastly, inventory challenges are multiplying. Article in the Wall Street Journal, November 4th, one of their primary writers talked about people are staying in their homes longer, a big reason for slowing sales. It turns out a number of economists are noting that the average time homeowners are staying in their homes is increasing. Homeowners nationwide are remaining in their homes typically, for example, 13 years, which is five years longer than they were staying in 2010.
This from research done by the chief economist of Redfin, and supported by other sources as well even though the numbers may be different. The problems are myriad. People who live in homes that they bought 25 years ago that were worth $150,000, now find they’re worth $600,000. The taxes, and other costs of moving from that home to a different home would increase their cost of home ownership, not decrease it.
We can go on, and on, and on. There are numerous problems related to people moving, particularly baby boomers moving to downsize. Having experienced it personally in our town of Castle Pines, Colorado recently, taking almost 18 months to find anything that my wife and I could downsize to. Where, by the way, we were downsizing not just in space, but in the price of the home, and the cost of maintaining the home.
Very, very difficult to do. That’s going on throughout the country. The problem is only going to get worse in so far as we’re creating 1.4 to 1.5 million net new households a year, while the builders are only building 1.1 to 1.2 million single and multifamily new homes. And it doesn’t factor in people staying in their homes longer because of the cost and complexity of trying to find replacement housing.
In many ways however, the advent of the iBuyers, if you will, and others like Knock, and Ribbon, and others who are doing purchase rent-to-own, and others who are investing in homes, enabling people to get liquidity without having to leave their homes. All of these may well be part of a solution as we move forward to provide liquidity, to decrease friction, and to force all of us in the industry to get far better at what we do in helping people make decisions, and affect a move from one home to another.
Learn more about industry trends, marketing and technology strategies, as well as listen to past REAL Trending on Apple Podcasts, Spotify, Google Play, and more. Visit www.realtrends.com/channels/. This has been Steve Murray. Until next time.