REAL Trending Episode 36
Steve Murray, REAL Trending, Special Edition Number 36 on the road with Leading Real Estate Companies of the World and Keller Williams Family Reunion.
Recession vs. Depression
Housing sales in January fell again. No big surprise. What was a surprise is how much they fell by. Unit sales fell off from last January and fell off from December 2018. As we said last fall, that makes eight to nine months in a row of existing home sales declines. New home sales seem to be following a similar trend. While we do not think that housing sales will fall catastrophically, there’s no question that we should stop avoiding the word recession. In the general economy, two quarters of negative GDP growth equals a recession. We’ve had eight to ten months now of existing home sales declines. It’s time to call this what it is, which is a housing recession.
That doesn’t mean it’s a depression. Unit sales clearly are down and the trend appears to be headed that way in the months ahead. Good news is the job economy’s growing. Household incomes are growing. Unemployment rates at record lows and generally people are optimistic about their jobs and their environment. The problems that we have remain a lack of inventory, a lack of new home construction and a real problem with affordability in most markets in the United States. Throw into that mix the impact just now being recognized of the 2017 Tax Act and we have all kinds of markets that are seeing downturns in housing sales that in fact may be being affected by the tax act. We do believe when they close the books on 2019 we will see slight declines in unit sales. Obviously, it differs from market to market but generally speaking, most researchers, economists who follow housing, think we could see another 2 percent to 5 percent decline in unit sales.
Prices will still go up just not by as much. For brokerage companies this means, again, as we’ve said in the past, three, four, five months ago, being smart right now in the brokerage business means working on activities that lead to sales and watching your costs extremely carefully. Having attended the Keller Williams Family Reunion last weekend and just finished three days with the largest independent brokers in the country, the Leading Real Estate Companies of the World Conference and talking with numerous people at these conferences, it occurs to me that, or as someone said, “If I hear the word disruptor one more time I’m going to throw up.” I heard that comment more than once. I don’t think that’s really the point. I think that we don’t refer to them correctly when we call them disruptors. I think they are deceivers, actually. Not disruptors, deceivers.
Why do I say that? The fundamentals of the brokerage business remain basically unchanged. You have to recruit talent, you have to develop the talent, you have to be careful with your financial resources, spend money wisely and build relationships or as my friend Lennox Scott commented, “Build engagement with your people. Both your agents and your staff.” Brokers that are doing that repeatedly and doing it well are doing wonderfully well in their business, extremely well in their business. The fact is, there are far too many men and women in leadership positions in this industry that spend way too much time worrying about Zillow’s next move or OpenDoor and OfferPad and Knock and others like them. Or the technologist who sit there and snipe at each other over the fact that somebody’s features are a little bit better than someone else’s. It’s all a waste of time.
The Role Of IBuyers
I agree and have said previously I think iBuyers have a role in our industry and they may capture 5 to 10 percent of the market. It’s in certain metropolitan areas, great. Zillow has developed a very interesting seller lead program and they could be referring tens of thousands of sellers in their future and become an even more potent competitor in the brokerage business. Ladies and gentlemen, if the iBuyers grab 5 percent of the market, that’s 250,000 homes they’re buying. That’s 5 percent. If Zillow refers 5,000 seller leads a month and they all close, that’s 60,000 transactions. Ladies and gentlemen, that’s out of 10 million transactions available for agents to serve sellers and buyers. So why do I say deceiver? It’s because you’re being deceived if you think there is a technology solution to the challenge of brokerage. We all know having great transaction management systems and really effective CRMs for those agents who care to have a database and actually want to practice follow-up with their database, a CRM is required.
Transaction management is required to compete in today’s market in most cases. Apps, do we need apps? Perhaps. Websites? Good marketing tools. Do we know how to do social media? Have you exhausted the opportunities with your own database before you worry about social media? I could go on and on. I don’t consider all disruptors to be deceivers but collectively they are deceiving the brokerage industry into thinking that they are more important than the fundamentals of having great relationships with agents and are agents having great relationships with their clients and customers? Lastly today, I heard at the conference, a number of people commented on the surprising findings that even with all technology that’s around us and in our business and available to consumers that the usage rate of agents continues to be very high. As we commented from our Harris Insight Study last summer, 90% of recent buyers and sellers used an agent to buy or sell a home.
That’s up five points from four years ago when we did the same kind of study and up nine points from when we first did it 17 years ago. On more surprise, over 92% of millennials used an agent to buy or sell a home. Let’s drill down, what have we learned over all these years? It falls into three fundamental areas. First, collectively, housing consumers are highly intelligent. They have access to abundant information. They understand pricing and pricing trends. They understand inventory and what’s available. They don’t actually need agents for that. But there’s three things about buying or selling a home that drive consumers to use agents. And keep in mind consumers are collectively highly intelligent. The first thing is, buying or selling a home is a very infrequent transaction. It is not like Airbnb or Uber or buying something from Amazon. It is once every five, seven, eight, 10, 12 years in between when people buy and sell an home. So a housing purchase or sale is infrequent.
Secondly, it’s complex. Agents on behalf of customers have to navigate inspections and the actual outcome of the inspection report. You have to figure out financing. You have to figure out insurance. You have to figure out closing. You have to figure out household goods. We have to figure out numerous details and that’s not counting all the documentation that goes into a housing purchase or sale. So housing is a complex transaction. It’s infrequent and it’s complex. Reporting from the Keller William family reunion in New Orleans, Louisiana. The program was very much focused on the new Keller Command Platform. Amazing platform, amazing development incorporating hundreds of functions and features that agents and their customers will be able to use in searching for homes, finding homes, finding neighborhoods. Some of the best features are in a CRM function where Keller agents can manage their contacts, sort them by the type of contacts and the importance of the contacts they have.
KWFR & LeadingRE Recap
There was a lot of excitement around the announcement and Gary Keller, CEO of Keller Williams, spent a great deal of time over three days along with his President Josh Team laying out the many functions and the excitement of the capabilities. Well, when you step back, what Gary is really saying is that you have to have a platform to compete now and in the future in a residential brokerage business. It will create an environment where everything an agent wants to do can be done. Most importantly, later this year, in fact in the second quarter, they intend to launch their own consumer app, which will really be a customized web page, if you will, for each consumer. It may be located in a Keller Williams agent’s or team’s database. A lot of customer information and updated information on listing and sales and time on market and other community information that is built into the platform. It is a very exciting development to see. There’s no question about that.
Keller reported that 2018 also was another record year for Keller in terms of transactions, total volume, a near record payment again to their profit-sharing program and a number of other things were brought out, including the continuation of a great support for Keller Williams Cares and Red Day, their two big events that are community-oriented and giving back features. The environment was exciting. There were 17,000-plus Keller Williams agents, managers, operating partners and team leaders there. Everyone seems very upbeat about Gary’s re-energized leadership of the company and we heard in private conversations that he has truly re-engaged himself in the basics of the brokerage company in addition to his dedicated focus on Keller William technology, the platform, command and Kelly. It’ll be interesting to see in the months and years ahead what impact this investment will have on recruiting and retention and productivity at Keller Williams but certainly they are to be commended for this focus, this investment and the strong belief that this will make a huge difference for their agents and their market centers owners and the organization not just in the U.S. and Canada but globally in the years to come.
Time will tell. More on this later from REAL Trends. Learn more about industry trends, marketing, and technology strategies, as well as listen to past REAL Trending episodes on our website. This has been Steve Murray. Until next time.