trends in residential brokerage.ppt
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Trends in Residential Brokerage
A Presentation to the Georgia Association of Realtors
Trends
Trends in residential brokerage point towards a more competitive industry than has been the case since 2000;
Trends Consolidation
Outsourcing of realty functions
Focus on consumers
Democratization of listings on the Internet
Trends
More price competition among realty service providers
The integration of core services
Consolidation
As in previous downturns there is massive consolidation underway in terms of the numbers of sales professionals, realty firms and all forms of real estate industry professionals (title, mortgage, etc)
Consolidation
The number of real estate professionals has already declined by over 150,000: we expect it will decline another 100-150,000 in the next two years
Consolidation
The market share of leading regional and national brokerage firms, even with a decline in their sales, increased to a record level in 2007:
And was the single biggest yearly increase in the last 15 years
Consolidation
The level of sales in 2005: 8.3 million
The level of sales in 2008 5.5 million
The level of sales projected in in 2010 6.1 million
Consolidation
The level of sales will not soon again even reach 7 million
The fight for lower levels of business will drive competition to stronger levels
Some will chose not to play
Outsourcing of realty functions
With revenues down and the pressure to compete increasing realty firms and sales professionals are increasingly outsourcing many parts of their businesses
Outsourcing
Technology outsourcingLead management Transaction managementWeb hosting and designEmailLead generationAccounting and financial systems
Outsourcing
Marketing outsourcing
Printing and Direct mail services Custom design Online Graphics Sales professional branding programs TV and video production
Outsourcing
Other areas
Education and training Finance and accounting Recruiting Management development
Outsourcing
Few realty firms or sales professionals can afford the fixed cost of full time service/product suppliers in-house
In the new competitive environment, for most realty firms, the lowest cost provider will have a significant advantage
Focus on Consumers
The Internet and generational changes have brought about the early stages of the age of the consumer in residential real estate services
Consumers If it can be known, it will be known
If it can be rated, it will be rated
If it can be shared, it will be shared
Rich Barton, Chairman and CEO, Zillow
Consumers
The impact of the age of the Internet in our business can be most acutely identified by looking at how much consumers believe Realtor® assurances that “now is a great time to buy” versus how much they believe their online valuation tools and other networked advisors
Consumers
According to the Houston Association of Realtors and other leading sites, the percentage of consumers going online to check the valuations of property now exceeds that of those looking at listings Fall 2007
Consumers
REAL Trends/HarrisInteractive housing consumer studies done since 2002 show the following:
The younger the consumer the less they plan to use traditional full service real estate professionals and the more they trust the Internet
Consumers
Housing consumers are starting the process of searching for answers to a purchase or sale 12-18 months ahead of the actual decision time
While real estate professionals are still geared to tackle only those who are deciding right now
Consumers
What do housing consumers of all ages value?
Communication Trust Relationship
Consumers The future
Shift from showing and telling To listening and sharing
Shift from real estate expert To neighborhood and community
expert
Democratization of listings
The listing is a perishable asset
Leave it on the shelf long enough and its value declines
Democratization of listings
Leading firms of all brands, sizes and structure are finding that a broad based listing distribution strategy works well
Although several firms have discovered that the most effective way to market a listing is to advertise it under your own brand (RE/MAX, Real Estate One, etc)
Democratization of listings
Those realty firms and real estate professionals who defy open sharing will lose ground to those who share
Refraining from using addresses Refraining from having a valuation tool Requiring online registration
Democratization of listings
It is not that your listings have to be everywhere all the time
It is that they should be where most real estate consumers are searching with superb content
Democratization of listings
It is also an attitudinal issue
If you view sharing information as negative you will have a negative view of the new housing consumer
If you have a positive view and do not fear openness, then you have the chance to succeed
Competition It was competition for listings among
traditional sales professionals that brought down commission levels in the 1995-2005 period:
1991 National average 6.1% 2005 National average 5.0%
Source REAL Trends, Inc
Competition
It was competition among real estate brokerage firms that increased the average commission sharing between realty firm and sales professional
1995 68.0% 2005 73.2%
Competition
PS
That 5% swing from 1995 to 2005 for realty firms was equal to 75% of their profit from 1995
Competition
There are only two ways to go now
High value, high margin low market share
Lower value, low margin, large market share
Competition
Those who make no choice will have the choice made for them by segmentation in the market by their competitors
The same is true for real estate sales professionals only it is the consumer who will make the choice
Integration of Core Services
Housing consumers have increased their use of realty firms and sales professionals who offer a full package of services
NAR study on One Stop Shopping, May 2008
Integration of Core Services
Housing consumers continue to seek real estate firms and real estate sales professionals who provide “full service” more than any other segment of service providers (73%, 2006)
REAL Trends/HarrisInteractive
Integration of Core Services
Whether you own or partner or ally with core service providers, you will need to:
Continue to give consumers choice Find ways to add value to the use of your
affiliated Core Services to both consumers and real estate sales professionals
Conclusion
It is not just the skill sets that will be important but the mindset of the leaders of the industry
While the level of sales will not be what it was, the need for real estate professionals will continue
Conclusion
What will also change is the definition of what constitutes “full service”;
How consumers perceive you and your service will be the measure of whether you measure