Real estate brokerage owners are more positive than ever that the current market will continue to boom — at least for the next year. Some 80% of those surveyed are optimistic about the next three months. However, concerns over inflation, taxes and unsustainable home price increases may mean a market shift is coming.
Is there an end in sight to this booming real estate market? Not in the next three months, where 74% (up from 61% in Q1 2021) of brokers who responded to the RealTrends Q2 2021 Broker Sentiment Survey said that home sales will be up more than 5% in the next three months.
A whopping 96.5% said that home prices will be up anywhere from 1% to more than 5% in the same time period. That’s up from 58% of brokers surveyed in Q1 who predicted home prices to rise.
Concerns over inflation, rising interest rates and more
While there are a lot of positives to the market, and most experts don’t believe we are in a bubble, when asked, “What do you think will cause the next market shift?,” 40% of brokers surveyed cited rising interest rates and unsustainable price increases as possible reasons for a market slow down. “Current prices are not sustainable, interest rates have to rise at some point and inflation seems inevitable,” says Jeff Perry, CEO of Berkshire Hathaway HomeServices Results Realty in Florida. “I suspect Spring/Summer of 2022 will be the start of the shift.”
Another 32% of brokers surveyed cited government spending, new taxes, and inflation as reasons the market may change; however, most say a market shift won’t happen for at least another year. And, they didn’t mince words.
“Joe Biden is the biggest problem in America that will make the market shift,” according to a real estate executive from the Northeast. “His huge deficit spending, raising taxes, growing world conflicts, the border crisis and the continuing effects of the Coronavirus will be leading us to inflation and high unemployment. The downward pressure on margins will be even worse and real estate sales [may] be slowing and stagnating in 12 to 15 months.”
Other issues cited that may cause a negative market shift, include an increase in foreclosures and distressed sales and continued lack of inventory.
But about 15% said that factors, such as continued migration due to remote working and an increase in new construction as supply prices even out, will continue to push the market forward. “I think the hyper-competitive market will be the new normal,” says Andy Camp, president of Cutler Real Estate in Ohio. Sam Averbuch, COO of Zeitlin Sotheby’s International Realty in Tennessee agrees, “I think we are in the early stages of steady and consistent growth for many years in our market.”
Competitive threats
When it comes to competitive threats, 32.8% of brokers echoed the sentiments from above listing inflation and government regulations as the biggest threats to their businesses. Some others were:
- Discount, fee-for-service and other business models: 25%
- Venture capital-backed brokerages: 13%
- Independent contractor and commission lawsuits: 10%
- Third-party disrupters and technology companies: 7%
- Threats from inside the industry (professionalism, ethics): 6%
Challenges for Brokerage Leaders
Not much has changed as far as other challenges facing brokerage leaders over the next three months (in order of importance):
- Finding Inventory
- Pressure on net/gross margins
- Difficulty in recruiting
- Reducing our costs
- Increased regulation
For business owners, challenges will always exist. The key is to turn those challenges into opportunities—it’s the mindset of some of the most successful brokers.
The Q2 2021 Broker Sentiment Survey will open July 1, look for it in your inbox. Questions about the Survey, email Tracey Velt, managing editor, at tvelt@realtrends.com