REAL Trending Episode 54
Foreign Home Buyers, Litigation, Realogy Vs. Compass, July 20, 1969
REAL Trending Episode 54
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending episode 54. We’re breaking down the trends and events of the week and showing how they impact brokers and agents. I’m Steve Murray, President of REAL Trends. Today we’re discussing the disappearance of the foreign home buyer, litigation, Realogy versus Compass, and July 20, 1969. What does it all mean? A Wall Street Journal article citing sources at the National Association of Realtors® reported that foreign purchases of residential property in the United States have fallen precipitously 30 percent to 35 percent to 40 percent in the last 12 months on an annual basis.
Foreign Home Buyers
It’s an interesting fact that with a strengthening dollar, trade wars, tariff issues, a little bit of just plain old mayhem going on in the world, that all of a sudden, whether it’s Canadian, or Chinese, or Europeans, or South Americans, are starting to look elsewhere, or at least hold off on purchases of homes in places like San Francisco, New York and South Florida. The National Association of Realtors® reported the unit sales declines and percent of overall purchases have both declined substantially in the last 12 months.
We know that years ago, three, four years ago, for example, the Canadian loonie was almost on par with the American dollar, well, now it’s trading at almost a 30% discount. So for Canadians buying homes in the US, you’ve got to pay 30% more in American dollars to buy the same home you would’ve bought for that price just four or so years ago.
The Chinese government is putting significant clamps on Chinese families getting money out of China, they want that capital to stay home. And South America has a number of economies, particularly the two big ones, Brazil and Argentina, which are both going through some very, very challenging and difficult times. So you add all those factors up, and I’m sure there are many more, foreign buyers are just not buying as much. So one of the major props, particularly for homes in college campuses across the United States and major metros, are slowing down significantly.
Lastly, the article commented that many buyers said about home buying in New York at the upper end or San Francisco and South Florida, is there’s a glut of high end properties and many of them are just content to wait until the prices adjust to something that appears to be more reasonable to these offshore purchasers. None of these factors are likely to turn around in the short term so it’s likely to have an impact on, specifically those markets who have been feasting on the foreign purchasers.
Realogy vs. Compass
In a second item this past week, Realogy sued Compass. In their complaint they alleged a number of illicit behaviors, and please remember we said alleged, nothing’s been proved yet, among them predatory agent recruiting and practices, disparagement and other negative type practices, and even torturous interference in employment agreements and franchise agreements. Now, we have taken the time to read the complaint, and we have written briefly about it.
It’s our opinion, at this point at least, absent other facts and evidence, as to whether Realogy can prove or establish that the predatory practices in terms of recruiting agents by Compass are something that are technically outside the law, not to mention they’re disparagement claims, mainly because predatory agent recruiting and disparaging competitors has been a part of the real estate brokers landscape since I first got in the business 43 years ago. And it ebbs and flows depending on who’s the attacker and who’s being the hunted.
Whether those parts of the Realogy complaint against Compass will go anywhere is anybody’s guess, it’ll be interesting to follow. On torturous interference in contracts, whole different matter. We have been, in our history here at REAL Trends, expert witnesses in 11 to 14 torturous interference cases, most involving franchise agreements, but a few involving employment agreements with non-compete, non-solicitation and, or, non-disclosure agreements.
I mean, among Realogy’s complaints is that Compass recruited people away, who took non-public, highly confidential information practices and plans with them and shared that with Compass. Those are serious charges, and if torturous interference and violation of non-compete, non-solicitation and non-disclosure agreements can be proven, that’s a very serious matter, a very serious matter. We don’t know how that may or may not turn out. It’ll be interesting to follow it.
At REAL Trends, we handle a lot of non-public confidential information and contracts in our valuation, merger and acquisition business. We are a company for 33 years, believe highly in the sanctity of contracts, including franchise agreements and employment agreements. So that part, at least, we will follow very, very closely. And as a reminder to all of our clients, readers, and listeners out there, franchise agreements and employment agreements are enforceable, and to induce someone to break a contract of that kind is in fact something that is illegal and can cost enormous amounts of financial damage if you are found guilty of violating those contracts.
July 20, 1969
So why bring that up on a real estate industry blog? Because you know, things are tough right now. Unit sales have fallen 15 months in a row. We reported on, part of the problem is foreign buyers have backed off. We’ve got litigation all over the place with Realogy and Compass and an anti-trust trial starting soon, and all kinds of problems facing us. But you know, you can always, as you stop and think on July the 20th 1969, that no one in 1961, when president John Kennedy called that we put a man on the Moon before the end of the decade, no one thought it was possible. The technology and materials did not exist, but they got it done.
So maybe what we should be focusing on this July 20, and thereafter is, no matter how tough it is, back then, they didn’t let that stop them. And maybe we should focus on how do I build or rebuild a strong residential brokerage company to serve people who want to buy and sell? Because the evidence of that is over whelming. There are home owners and there are first time home buyers, and still many immigrants from offshore whose dream is to own their own home, and that the job of a brokerage company and its agents is to help make that happen. And it still remains an infrequent complex transaction where consumers report they use agents at the highest levels in the last 20 years, that part of our job is to help those people achieve that dream.
Learn more about industry trends, marketing and technology strategies and history, as well as listen to past REAL Trending episodes on our website, www.realtrends.com/blog/. This has been Steve Murray.