REAL Trending Episode 41
Tech Competition, Market Favoring Buyers, Surviving as a Broker
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending episode 41. We’re breaking down the trends of the week and showing how they impact brokers and agents, I’m Steve Murray, president of REAL Trends.
Today we’re going to be discussing competition in the technology arena, how the market is now favoring buyers and how can brokers just survive in this environment and what does this all mean?
Competition in technology; isn’t it fascinating that you look back a few years and you have Zillow appearing to dominate the online real estate world and they still do in many regards. But if you look at two factors, you’ll notice number one that their year-over-year growth in ad revenues by agents is shrinking, which may account for them being in the iBuyer space to generate seller leads.
You also note, however, that in survey after survey you see a big shift of agent advertising spending to Facebook and Nextdoor and other alternative online platforms. This was all brought to mind by the fact that recently Zavvie, a company based in Boulder, Colorado, launched a new tool that allows consumers to examine different iBuyer offers.
Isn’t this terrific? This also reminds me of a few years ago when brokers were kind of caught about wanting to have an AVM on their websites for their own consumers to use and what to do, which one to use, and then a couple of brokers got smart about it and said, “Why don’t we put two or three different AVM tools on every listing for all of our buyers? Everybody looking.”
It’s like my house, my personal residence I have one tool that says $825,000 I have another tool that says $888 and I have another tool that says about $970 well, which one do I believe? Now if I’m a seller, I like to believe the $970 but several brokers caught onto the fact that they put all three up.
The first thing that occurs to consumers is, “Well, which one is right?” You get it, the obvious message on those websites was to find out the real number, talk to your realtor. Well, we expect Zavvie is going to take an early lead because they’re well-known and highly regarded.
We do know that at least one other company HomeLight said that they have launched a similar tool in the past few months, good. Let’s get two or three companies offering tools so consumers can compare and contrast different bids from iBuyer companies that will certainly be a consumer benefit beyond belief, but again, it takes you back to the fact that while somebody may have a dominant technology position today, the truth is there will always be competitors.
If you think back 30 years, we probably thought that Microsoft would own everything of course they don’t. First they got challenged on the Internet and on search and they lost that battle to Google. And then you figure, well, Google will absolutely dominate everything online.
Well, then we got Apple and then we got Facebook. Google can’t compete against Facebook for social and so on and so on and so on, isn’t it terrific? Entrepreneurs coming up with new solutions to consumer issues, constantly challenging, even giants in the technology arena.
Market Favoring Buyers
There’s been a shift, a continuing shift in the housing market away from seller dominance to not quite buyer dominance, but buyers getting a better deal out there. Inventories are growing and buyers are still in many regards, shying away from this market.
NRI reported that February, the annualized rate of sales was up over 11% from January 2019 but still down over 1% from February of 2018 so while things seem to be stabilizing, certainly they are, housing is still not roaring. Now, the good news is mortgage rates have now fallen from near 5% they’re now approaching 4.25% on the 30-year benchmark.
However, watch out because FHA announced that they were going to tighten up their underwriting standards because they’d gotten a little lax about them. Remember that kind of laxity got us in trouble 10-12 years ago actually more than that 13 years ago now. Got us in trouble, FHA good for them so as we don’t get into more trouble however, lower mortgage rates may be offset by the tightening of FHA standards.
It all leads to the real possibility of a much more balanced market according to one report, the number of homes where there was tough bidding decreased from 61% to 16% in the last year–that’s a big drop.
Where there was contention or competition for a listing to drop from 61% of all listings. There was competition to 16% is it clear indication of the market starting to tilt more in favor of buyers.
Now, I’m sure for most you, you know that varies market to market, but maybe that’s a factor you need to start looking at in terms of absorption rates, a critical measurement we’ve used for many, many years and be able to educate your agents about this softening market because I don’t think we’re done with this we are not done with the softening.
It’s probably going to be less softening because of the drop and the mortgage rate and anecdotal evidence suggests that March businesses doing quite well.
Surviving as a Broker
Lastly, some great articles recently about what brokers are doing to survive in Inman reports for one, he talks about what indie brokers are doing to survive.
Obviously being a virtual brokerage, one report on one great brokerage, an indie company. But you know there’s all kinds of companies doing well, whether they’re independent or they’re franchised. We saw from the REAL Trends 500 just released that all of a sudden eXp, Compass and HomeSmart, all three in the top 10 brokerage companies in the country.
You look back ten years ago, eight of the top ten would have been independent brokers. Today, only two of the top ten are independent brokers and when we look at, who’s the fastest growing brokerage companies putting eXp and Compass aside, we find that company that has done a great job over the last 15 years have focused on growth, Keller Williams.
Six of the ten fastest-growing brokerage companies in the U.S. who were on the REAL Trends 500 were Keller Williams. Speaking of that report, we saw that over half of the nearly 1,800 brokers on the REAL Trends 500 and up and comers actually saw their closed transactions retreat in 2018 over 2017.
On the other hand, the REAL Trends 500–that group of the 500 biggest brokers, they grew their transactions by 2.7% when the market was down between 3% and 4% last year. The big are getting better and that includes independent brokers because there are many independent brokers who grew smartly last year.
What are they doing? Top three things, getting much more engaged with their agents, spending far less time on all the other things an owner has to do more time engaged with their agents, forming masterminds groups, accountability groups, engaging in conversation both vertical and horizontal with their agents.
Have you done that? That’s the first thing every brokerage company should be doing right now. Far more engagement with your agents, building stronger relationships. The second thing we notice is a lot of brokers are finally getting serious about cost reduction.
If the money you’re investing does not pertain directly to the means and the methods of increasing production and productivity, then you probably shouldn’t be doing it. The third thing that key brokers are doing to survive and even prosper is of course they’re focusing on the big two recruiting talent and developing talent.