Steve Murray, president of REAL Trends, and today we're discussing technology and real estate, the REAL Trends 500, and the American dream fading. What does it all mean?
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending, episode 28. 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, and today we're discussing technology and real estate, the REAL Trends 500, and the American dream fading.
Let's Jump In.
So, technology and real estate, everybody's favorite topic. You know, the original synthesis of technology is to create higher productivity, new processes, increase capital expenditures that result in higher levels of profitability and on, and on, and on. But really in the last 10 years, there's a new term when you combine technology and money in any industry, it is disruptor. Technology has somehow become the evil genie world meant only to disrupt businesses, and everyone's focus is to disrupt other incumbent businesses.
Now, sometimes obviously this is very, very positive. Anybody who's used Uber, or Lyft, or Airbnb or Amazon, and I could go on, tremendously useful, innovative and just far better than what we had before. No question about it. In real estate and technology issue, particularly residential real estate brokerage, there's no question that access to more, better, more efficient, more timely information has been a boon to housing consumers, real estate professionals, economists, everyone.
People have been able to really look at the residential real estate market and be far, far better informed than ever in the past, and that includes real estate professionals. The number of tools and apps and websites have multiplied enormously and no one can say that hasn't been a benefit to almost every participant in the industry.
However, we also have companies that say they're using technology and access to capital to disrupt the business. The truth is, for 20 years technology firms backed by Wall Street, private capital or public capital have been trying to disrupt the industry. What do we mean by disruption in this case? Well, primarily they want to talk about disrupting the relationship between agents and customers, where sellers list with an agent and buyers use an agent to find their homes.
They posit that, why does anybody need an agent when you can do it all on technology? Of course, they say that about a lot of industries and it doesn't quite work out that way. We are not here to say that technology one day won't be so smart, so useful, so interactive that people can just speak to a device like Alexa or Siri, search all the homes, ask their questions, get photos, make a bid, negotiate a deal, engage a mortgage and title company, et cetera, et cetera, et cetera.
Who knows? Maybe one day that all happens. That day is probably still way in the future, but it's all been targeted to disrupt the relationship between the agent and the customer. Not disrupt the agent-broker relationship, that really hasn't been many people's desire. A few recent entries certainly are trying to use technology to disrupt the agent-broker relationship.
But you know what's really funny, is that even firms like Compass or eXp, which purport to have world class technologies and disrupting the brokerage industry, it's not actually their technology that's disrupting the relationship between agents and brokers, it's the economics of the relationship between agents and brokers. Simply put, eXp and Compass are offering in most cases, a better economic opportunity for agents for their level of production.
But, let's get back to technology and real estate. There may come a day as I said, where you ask Siri, or Alexa or somebody else's device and they can do all the work for you like a personal digital assistant. A virtual digital assistance, and that people will buy and sell homes that way. Could happen, but it's probably far into the future. Meanwhile, the billions and billions and billions that have been invested still haven't disrupted the primary relationship, and that's between an agent and the seller or the buyer.
Our recent consumer study, which we've mentioned before, 90% of all recent buyers and sellers used an agent to buy a home. By the way, Zillow's housing consumer report came out. It didn't indicate in their studies it was that high, but it was still in the mid, 80%. 20 years after technology said, we will disrupt the way things are done, consumers still use agents and primarily, they still find agents and select them on the basis of a relationship, or a referral, or skill levels.
The REAL Trends 500 will be launching the first week in January. Surveys will go out to all national networks, all large brokers and all brokerage companies that were on the survey last year. If you are a firm doing more than 500 close sides in calendar year 2018, we would welcome the chance to rank you on the REAL Trends 500 and up and comers. It's an elite group of less than 1,800 brokerage companies for calendar 17 that made these rankings. That's out of by the way, an estimated $85,000 brokerage companies, so it's a very select elite group.
We'd love to have every firm that qualifies to be included in the REAL Trends 500. If you're getting this message and you think you qualify or know you do and you don't have a survey get sent to you the first week of January, get in touch with REAL Trends; 303-741-1000. You can ask for Scott Wright or Trish Glodava. They can help get a survey to you and make sure we get you included. Again, those surveys will be shipped out the first week of January. We look forward to the chance of getting to know you better and in recognizing you among the elite brokerage companies in the United States of America.
Lastly today, there are a lot of columns, a lot of editorials, a lot of writers who say the American dream of home ownership is fading. We've been through these times before. Most people listening to this probably don't remember the downturn of '80, '81, '82, when housing sales fell by 50% in less than 18 months and fixed rate mortgages hit 17% to 18% . Can you imagine? Shoot, can you imagine we sold any homes at those mortgage rates? But, we did.
The hue and cry about how no one would be able to afford a home anymore, including first time home buyers and young families and people simply look at the numbers, the gross economic aggregate income numbers, housing cost numbers and they say, "Well, the American dream is fading." This story's been written five times in my 40 years in the industry. Somehow, someway, young families find a way to get into home ownership because they really, really want to.
All studies point to the fact that the desire to own one's own home remains undiminished. Yes, housing prices have run well ahead of incomes. Yes, there's $1.5 trillion of student loan debt that inhibits many young families. However, in realtor.com's own recent study, student loan debt wasn't the main problem, it was cash saved for a down payment. Where are young family starting to look to get that money? Well, according to realtor.com study and others, it's their parents, it's their friends, it's nonprofits are helping young families assemble the capital to save for the down payment on their home.
The downturn in housing sales that started about a year ago and the lessening of price pressures is only going to help. What we need is a downturn to cool off the housing market, to give builders a chance to catch up, to give those who haven't been able to get into the housing market a better chance to get into the housing market. This downturn isn't a crash, it's going to be a slide. It's already underway. It has been, for 10 months at least in most markets in the United States.
Inventory levels are up in most markets. Unit sales are down and pricing increases are softening. Mortgage rates are up, but given the economy right now, interesting to note that longterm rates, the 10 year rate has fallen back almost 40 basis points in the last 30 days with the decline in the stock market. There are signs that the Fed's actions to raise rates are cooling things off before they got out of hand.
I don't buy into the American dream fading. If you just look at the aggregate economic household income and the house price data, I think Americans find a way. They have in the past, and they will again in the future. Learn more about industry trends, marketing and technology strategies as well as listen to past REAL Trending episodes on our website, click here. This has been Steve Murray. Happy New Year to all of you. Looking forward to a great and interesting 2019. Bye for now.
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