After a year characterized by one of the fastest housing market shifts on record — due in large part to the Federal Reserve’s rapid interest rate increases — agents, brokers and executives are understandably weary about what is to come this year. At Inman Connect New York, this has led much of the discussion to be centered around what is in store for the real estate industry in 2023.
“Thinking about 2022 as an economist, what you really had was basically a hangover from the pandemic,” Chen Zhao, a senior manager and economist at Redfin, said during a panel discussion Tuesday morning. “We had unexpected high inflation that the Fed realized was not going to go away unless they really took this sledgehammer to the economy. And unfortunately, for the housing market, it is the most interest rate sensitive sector of the economy, so it gets hit first when this happens, and it was exacerbated by what the Fed did with the fiscal policy during the pandemic, which kept rates ultra-low.”
With the surprisingly rapid shift in last year’s housing market, industry experts were weary of making big predictions for 2023.
“I think that 2023 is one of the most difficult years to predict because there are so many variables that are uncertain right now,” Tamir Poleg, the CEO of The Real Brokerage, said. “I think what we will see in 2023 is probably the psychological effect of consumers adjusting to a new reality, which started in 2022. And every time the rates go up, the buyers take a pause, and then they adjust and then they go back to the market. I think that 2023 is probably going to be much better than we all think, and much better than what the media is telling us.”
Poleg believes the current housing market slowdown is a “good thing” after the frenetic level of home buying and selling activity in 2021 and the early months of 2022.
“This is the market correcting itself because the way the market behaved in 2021 and 2022 is just not sustainable,” Poleg said.
With mortgage purchase applications up, builder sentiment on the rise and inflation appearing to be softening, experts like Zhao are “cautiously optimistic” about the 2023 housing market.
“We are starting to see the very early signs of sales picking back up, but at the same time, we have to be a little bit cautious because there are a number of risks,” Zhao said. “Inflation is still a risk. Mortgage rate are another source of risk. And then there are recession fears. It won’t be anything like 2008, but it is still a risk.”
As firms attempt to navigate the uncertainty in this market, Zhao said to focus on what works.
“At Redfin, we shut down our iBuying business in November, and 2023 is much more about focusing on our bread and butter — the brokerage,” she said. “How can we make it more efficient? How can we make it work better for our agents so they can help customers win?”
Poleg shared a similar sentiment: “It doesn’t matter if you are an incumbent or an innovator. At the end of the day it is about value. Are you able to create value for your users? And if the answer is yes, then you will continue to succeed.”
Nate Levin, the managing director at Parker89, on the other hand, believes that the slower pace of the housing market makes it a great time to invest in innovation and creating new products.
“Look at all the people here who are thinking about how we innovate home buying and selling, and there is way more money going to that in this country than anywhere else in the world. And I think that spark is what is going to keep us active and continue our growth,” Levin said.
Despite Levin’s optimistic attitude toward innovation, it is no secret that venture capital money is drying up, making it harder for many private firms to innovate.
“When a VC firm invests in a startup company, there is a 10-year time horizon that you expect to see your return if you are investing in the early stages,” Levin said. “I think now we will be talking about longer time horizons because real estate is so cyclical, and you have these ups and downs, but it is really hard to grow when the market is contracting 40% year over year.”
With this in mind, many firms in the industry are looking to improve upon the technology they have this year.
At Keller Williams, Chris Cox, the firm’s chief technology and digital officer, said this means taking their CRM to the next level.
“How do we build greater intelligence into search? How do we support a really robust level of lead generation and management? How do we support the optimization of contacts?” Cox posited.
In addition, Cox said Keller Williams is focused on streamlining its “contract to close experience” for agents and their clients, and delivering its agents a “digital Market Center experience.”
“We are really focused on how we help run teams and brokerages in a more digital format and have less brick-and-mortar reliance — and that is important because in today’s world it is becoming more and more expensive,” Cox said.
Ben Litvinas, the SVP of data science and analytics at Realtor.com, said his firm is looking to solve similar problems for its clients.
“We have both agents and consumers on our site, and we are really focused on understanding them as deeply as possible,” Litvinas said. “What makes a successful transaction? What is a consumer looking for in an agent? It is really difficult to be an agent when the market turns, so we are looking for ways to improve agents and make everyone more successful.”
As part of their effort to help agents perform better, Litvinas said Realtor.com is providing agents with data on how their listings are performing on the site, helping them identify what they can include to improve traffic on their listing.
Over at Zillow Group, Curt Beardsley, the firm’s vice president of industry development, views improving the online digital experience of a listing as the key to an agent’s success in 2023.
“Homebuyers should be able to look at a house and fully experience that house and understand whether that house is right for them — just from using online technology,” Beardsley said. “We have floor plans now, and Matterports and fantastic photography now.”
Beardsley also advised agents to invest their time and money into technology firms with a proven track record.
“Invest your time and energy with companies that are going to be here next year,” Beardsley said. “There are a lot of little companies out there with great ideas and a slick presentation that are going to struggle to put all those pieces together in a slower market.”