On REAL Trending Episode 77, were discussing the market recovery, trends, what we’ve learned and what’s ahead. What do these trends mean?
From REAL Trends, the trusted source for real estate industry trends and news. This is REAL Trending episode 77. We’re analyzing the most important trends affecting brokerage companies and their agents. I’m Steve Murray, president of REAL Trends. Today we’re discussing the market recovery. Secondly, what we’ve learned and lastly, what’s ahead. What do these trends mean? And how can brokerage firms and agents best deal with them?
Market recovery, one of the great surprises of our industry’s history over the last 40 years is just how quickly the market bounced starting in late March and early April in most markets.
As soon as agents were deemed essential and were allowed to show property, virtually every market in the country bounced upward at a rapid rate as showings climbed back to where again, in most markets by the mid part of May, to the end of May, depending on when the opening took place. Showings are back at the level they were at the same point in 2019.
The spring selling season was delayed, but not postponed indefinitely and buyer activity throughout the country is reported to be extremely strong for two factors, as it turns out.
First, normal family home buying activities to get resettled during the summer months in anticipation of school openings in the fall, just normal behavior by buyers and sellers in the springtime.
Secondly, we’re getting numerous reports from around the country and in many cases supported by Glenn Kelman just the other day, commented that Redfin, which has a national platform, that we’re seeing the beginnings of an important relocation or migration of families out of urban core areas into suburban or even exurban marketplaces.
The only complicating factor in this surge of buying and selling activity of course is the same problem that has plagued our industry for the last five to six years, depending on what market you’re in, which is the lack of inventory.
We’re starting to see price increases accelerate in a lot of markets, again, due to the surge in buying activity and the lack of inventory. It’s going to turn out to be a marketplace and a market recovery that happened far more quickly than we ever imagined just two months to 10 weeks ago.
That’s all good news. We’ll now be faced with the same issues we had four months ago, one year ago, two years ago, which is that scarcity of inventory.
Second, what did we learn from this? Well, we’ll put aside all the societal, health and political things we’ve learned over the last two or three months. Let’s talk about what we’ve learned about our businesses.
The fundamentals of our businesses that we’ve spoken about on our podcast before, the fundamentals of the importance of communication and relationships. If you’re a broker, the importance of those relationships with your agents and your staff and your management team and your community.
And for agents, relationships with your family and friends and current and past clients and customers. We’ve rediscovered just how important it is to be in close communication with these people at all times. We’ve had numerous Zoom calls and conference calls with groups of brokers and agents, and we’re hearing over and over again one of the things we have learned most importantly over the last two to three months, is the power of relationships above every other factor in being successful in the brokerage business, whether you’re an agent, a team or a brokerage company.
Building coalitions within your customer base, if you will, and connecting people within your customer base, whether again, those are agents or staff or past clients and customers. It seemed like because the market had been good for so long and really good agents and teams, and really good brokerages have had a good business that just gradually incrementally got stronger and stronger and stronger over the last three or four years, that we’d all forgot the importance of fundamental communications and the building of stronger relationships with whomever we call our friends, our families or our customers. We should never forget that. Never again, forget that.
Secondly, we learned just how sloppy many of us had gotten with our spending. As we encourage brokers, agents and teams over the last two to three months to take a look at their checkbook, their Quicken, their QuickBooks, their general ledger, however they keep track of revenues and expenses that there’s a lot of money that was being spent to no good purpose that didn’t have to be spent.
It was important for everyone to preserve their cash and their capital, even though this was a short lived issue or appears to be a short-lived issue, it was important for people to get their balance sheets and their spending in line.
One thing I read that I thought was interesting, whereas in the United States for the last 30 or 40 years, the typical household savings rate was four to 5% for the month of April. I thought it interesting, a little news note that the savings rate at the household level suddenly had grown to 33%.
I know what you’re thinking. Well, there were no restaurants to go to and there were no stores to go shopping and that’s all true, but isn’t it interesting that a lot of families seem to get along okay saving a third of their gross income.
It’s kind of interesting. It does point us in the right direction as real estate professionals, brokers, and agents and teams that let’s take a look at that spending. So we learn, there’s a lot of things we were spending money on that really weren’t very effective or necessary, so those are two important things we’ve learned.
What’s ahead is my last topic. I’ve said this to a number of people, but it bears repeating. We have nearly 40 million of our fellow American friends and neighbors and citizens who are out of work. 35 to 40 million is the number, depending on which data you believe and that you read.
That’s 20% of the workforce and it’s not just retail, waiters and waitresses and those kinds of workers. This is affected public sector workers, white collar, middle class jobs, all kinds of people’s jobs. We have bankruptcies among major retailers that will impact at all levels, employment of executives and managerial professionals at all levels. That’s not going to get cured in a hurry.
So while it is joyous that we’ve had this bounce off the bottom, don’t be surprised if the bounce doesn’t continue and we end up the year between 10 and 20% below where we were last year in housing sales. Maybe it’ll only be 8%. Maybe it’ll be 15%. economists from NAR, realtor.com, Zillow and the Mortgage Bankers Association all came out with some of their forecasts recently and they’re all over the place.
Some say it could be as little as 6%. Some say worst case could be 25%. But what lies ahead is that we will not recover all the last sales. And number two, this surge that’s going on is likely to calm down in the next month or two, perhaps three, and all chief economists of all housing organizations believe that the surge will flatten out and that over the course of this year, we may end up somewhere between 10 and 20% down in unit sales.
So don’t, don’t take your eyeballs off watching your expenditures. Don’t take your eyes off building stronger, better relationships with your agents and your staff and if you’re an agent or a team with your clients and customers.
Lastly, looking beyond this, there’s likely to be some very important structural changes in the American economy, as well as the real estate brokerage industry. Let me just touch on two here. It would seem apparent that we’re going to see a migration of people that hadn’t planned on moving three months ago.
As the growth in working from home and telecommuting grows, so will choices for people as to where they live if they don’t necessarily have to commute to either an urban core or even a suburban office park.
Their choices are much broader now if in fact the trend towards more work from home and work remotely takes hold. There are indications that at least a significant percentage of people will no longer be required to work permanently from an office park, if you will. That’s going to affect a lot of housing choices.
Number two, we think the brokerage industry, the major change will be twofold. One, how much office space is really necessary or desirable or useful for housing and real estate agents and teams? We see the growth of EXP. We see the growth of Side Inc, and others like them.
Agents and teams seem well disposed towards locating their own place to work without having a brokerage have to offer it. That doesn’t mean it’s true for all agents and teams, just that it is fairly interesting to note how much work has gotten done from home offices and remotely.
We think a major change in the industry will be a move more to technology and platforms that enable remote working and effectively executing on a plan of remote working, which also then changes the posture of brokerage companies as to just how many offices and how much space they really need.
Learn more about industry trends and successful tactics for brokerage firms, agents, and teams, as well as listen to past REAL Trending on Apple Podcast, Spotify, Google Play and others. Visit www.realtrends.com/channels/. This has been Steve Murray wishing you to stay safe and healthy.