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REAL Trending Episode 78: Housing Recovery, New Mobility Patterns, and Competition

Jun 23, 2020 6:00:00 AM

From REAL Trends, the trusted source for real estate industry trends and news. This is REAL Trending episode 78. We're analyzing the most important trends affecting brokerage companies and agents. I'm Steve Murray, President of REAL Trends.

Steve Murray:

From REAL Trends, the trusted source for real estate industry trends and news. This is REAL Trending episode 78. We're analyzing the most important trends affecting brokerage companies and agents. I'm Steve Murray, President of REAL Trends.

Steve Murray:

Today we're going to talk about the housing recovery, new mobility patterns and competition for agents. What do these trends mean and how can brokerage firms best deal with them?

Steve Murray:

The housing recovery. Well guess what, it's Christmas in May and June. We had a terrific drop in written business from the end of March to the beginning of May, followed by an enormous increase in written business in May and June which is also leading to significant increases in closings in the last part of May and it looks like June and July are going to come in strong.

Steve Murray:

The way we view it is this. We took the normal mid-March to mid-May surge in spring home buying and shifted it 45 days into the future. From all reviews and all economists and housing experts, that apparently simply is what happened. We just took that enormous demand and shifted it forward 45 days.

Steve Murray:

We still are dealing in almost every market in the country with a limitation on inventory of existing homes for sale. Particularly since as NAR and others noted that the number of new listings coming on the market and the number versus the number as it were of sellers who pulled them off the market March, reduce supply even below what it would normally have been.

Steve Murray:

There are signals that the sellers are coming back into the market. We visited with nearly 20 brokerage company leaders, in just the last week there were indications of an increase in listings as sellers dropped their concerns for having people looking at their homes.

Steve Murray:

So we expect a very good solid June, July even. But here's the thing, with unemployment depending on how you measure it between 12, 15, 17% even this week there were one and a half million new unemployment claims filed around the country with 30 to 40 million former working people no longer working steadily.

Steve Murray:

The housing recover is going to come in short in all likelihood of last year's existing home sales which ended the year at about 5.3 million existing home sales. If you read the reports from NAR, realtor.com, Zillow and the MBA chief economists, an average therefore casts, the belief seems to be that will be 12 to 15% below last year's level of existing home sales.

Steve Murray:

Not that big of a tragedy compared to where we were just 60 days ago and thinking about what might happen. Breathe a sigh relief, down 10, 12, or 15% in year sales is not that bad and good firms and good agents will survive that just fine. Especially when the average prices are continuing to go up.

Steve Murray:

There are a number of both factual and anecdotal reports about new mobility patterns. Now there's a number of things that are affecting this. One, it appears as though there is some measurable movement out of urban cores to suburban and even exurban markets.

And there are going to be significant opportunities for brokerage companies who service both urban core, suburban and exurban markets, significant opportunity because this is not likely to stop.

Steve Murray:

Obviously the two big reasons, one might say are many employers understanding that maybe people can work better and more productively most of the time from their homes. Maybe even if they only have to come into the office a day a week or two days a month or four days a month, that's affecting where people are going to live and work.

If they can live and work from the same location in the suburban or exurban marketplaces, assuming they have powerful WiFi and local services.

Steve Murray:

This is already happening anecdotally around the country. You can read stories in the Wall Street Journal and Newsweek and other periodicals of people moving permanently outside of urban cores because their job doesn't require them to be at the office if at all fewer days.

Steve Murray:

Secondly, COVID of course, people are concerned about their health and how it's going to affect the health of themselves and their families. Particularly if they live in relatively crowded, in the cities with multi-story apartment or condominium or co-op buildings where they have to ride elevators to their housing units. There will be some people who choose not to live that way anymore, either on a permanent or temporary basis.

Steve Murray:

Lastly, there are people who just decide that we want an extra place away from the crowded urban cores that if they need to they can get to if COVID continues to hang around or has a surge.

Steve Murray:

So there are a lot of new mobility patterns for previous people that used to be very attracted to the urban cores. The growth in population in major urban cities, Boston, New York, Washington, Chicago, et cetera, have actually been either slowing down with their growth or shrinking for several years now.

Steve Murray:

Another mobility pattern we're seeing is people who are moving out of the cities and moving out into the exurbia or rural areas. In discussing some trends with major farm and ranch brokers, their business has exploded and is growing extremely steadily over the past particularly three to four months.

Steve Murray:

So we're going to see a lot of new patterns. How do you set your brokerage up to take advantage of that? That's a great question. Those who already serve urban core and suburban markets are well positioned and well positioned to market those services.

Those who are looking to expand further might think about offering services in the exurban or rural areas around the metropolitan areas they serve as a new opportunity.

Steve Murray:

Lastly, competition for agents. Yours truly has been in the business 44 years now and I don't recall any time being as competitive for productive agents as today. We commented to a number of brokers over the last 30 and 60 days that we're seeing consolidation among agents and teams and in fact some agents and teams are forming their own brokerage companies.

Steve Murray:

That will be reported over the next week in The Thousand from REAL Trends and Tom Ferry and America's best real estate professionals which will be released on the 24th of June. We will see that there are enormous numbers of agents who are doing more and more business each year.

Steve Murray:

So the competition for their practices is intensifying as never before. Now, a couple of thoughts on this and we have said this before and written it. If it were always and only about money in the relationship between a brokerage company and agents, then the low cost guys would have 80% market share in the United States and they don't and they never will.

But it does mean that brokers have to find the distinction of their company that's going to attract and keep the kind of agents and teams that broker wants to service. And one size fits all is gone or at least it's declining.

Steve Murray:

Brokers will have to decide, as we've said at written, do you want to be the Nordstrom's of the brokerage business or do you want to be the Walmart, nothing wrong with either model.

Just don't get caught in the middle. Pick a spot but most importantly define your culture and your distinction and stick to bringing agents and keeping agents who appreciate the culture and those distinctions.

Steve Murray:

And remember, obviously that their own wants and needs change over time. You will still lose people no matter how good you are at building your culture and building distinctive differences because their needs and views change over time. But there is a great place in this marketplace for really good brokers who provide real value that they can define.

Steve Murray:

Learn more about industry trends and successful tactics for brokerage firms, agents and teams, as well as listen to past REAL Trending on Apple podcasts, Spotify, Google play and others. Visit www.realtrends.com/channels/. This has been Steve Murray until next time.

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