Many calendar year brokerage executives are currently searching for their bearings as they head into the New Year. At some point in the process, they will ask themselves “Where in the heck are we?” Some will seek wisdom from of the industry literature stacked up on their desk. Others will call friends and industry acquaintances to compare notes and seek insight. Still others will decide that nothing ever changes and so they will plunge into the future bedecked in an old-fashioned plan.
What they should all know is that when the historians of the American real estate business get around to documenting the events of the first decade of the new century they will observe that it occurred in three of stages:
• First, with respect to business volume and agent growth, they will note that for the first half of the decade the industry enjoyed record high levels of business and an equally impressive influx of new agents.
• Second, they will note that for a number of social and economic reasons, on or about October 2005, the markets switched direction and stood in limbo for much of 2006.
• Third, they will record that in mid to late 2007, the market, finding there was little to learn from the mid decade downturn, returned to early decade volumes leaving thousands of industry participants with the ability to smugly announce that they “had been through the big one.”
The tale however will become somewhat more complex when the historians examine two more complicated facets. The first will be “How did the power curve change within the industry during the decade?” and the second will be “Who should have done what when it was discovered that power was shifting?” They will probably observe that for the first five years the traditional power curve held with brokers and agents officiating over a vibrant seller’s market that required little in the nature of innovation.
All of that ended however with the industry events of late 2005. In your search for your bearings today, if you pull your Realtor® Sextant and search the horizon you are likely to see these eight glaring stars:
Government – Record levels of business led to record levels of indiscretions. Throughout 2006 government, especially at the federal level, entered the industry with a clear power agenda aimed at what was perceived, rightly or wrongly, as a system that didn’t treat all in a fair manner. There is every indication that this assault will continue in 2007.
Media – Record levels of business evolved the real estate industry from a “knee jerk” reaction economic factor into one of the most powerful economic drivers in the American economy. With this new status came all of the attention one might have expected. In 2005 and 2006 real estate industry abuses became daily fodder for the print, broadcast and Internet media. This will continue in 2007.
Fraud – Record levels of business led to record levels of mortgage fraud and questionable mortgage products and procedures. By mid 2006 mortgage fraud investigations, prosecutions and convictions began to rival drug enforcement in terms of notoriety. The regulatory hammer will continue to deal with this issue in 2007.
Internet – By 2005 the Internet had successfully completed its first decade of being an essential part of the real estate experience. In 2006 the California Association of Realtors® observed that in only five years Internet use by consumers had gone from 7% to being universal. But most important of all the nature of that use had gone from “just wandering around” through seeking information, past comparative investigation, into providing consumers with the ability to exercise the highest level of individual power in history.
The Internet is not a trend. It is here to stay.
The New Consumer – By early 2007 consumer power, not market production had become the issue around which real estate industry status was measured. This new consumer is not satisfied with just being informed. Influence and impact now became the tests of consumer power.
Transparency – The new consumer now demands to know who does what in the transaction and who is responsible for what result. Consumers expect to know individual agent competencies and experience. The events of 2006 surrounding the title industry are another example of the new demand for transparency in real estate.
Franchise Ownership – Significant power shifts have fundamentally changed the profile of the industry’s franchise sector. During 2006 several of the most powerful franchisees in the industry changed ownership from industry “insiders”, with long established agendas built around service and product improvement, to investment groups with equally established interests in generating returns on their investments. Other franchises saw themselves becoming increasingly irrelevant as their traditional market positions became confused within the reality of the new market and their franchisees struggled to balance their day-to-day reality with the dogma from on high.
“Outside” Players – Trends and issues regarding listing information reached a whole new level of conflict in 2006. Commercial websites such as Google, Yahoo and Zillow established a whole new level of informational intensity within the real estate transaction. The question of who should control listing information went into free fall. The government contended that it ought to be a near public domain, NAR moved closer to a quasi-national MLS proposal, and Google invested billions of dollars to create the ultimate informational transaction framework.
These then are the stars by which the broker must set their course in 2007.
The current industry situation provides two clear insights. The first is that there is more opportunity for profit, creativity and innovation than at any other time in the history of the industry. A new boom lies ahead, but entry will be on the basis of meeting the current challenges rather than delivering yesterday’s product. Secondly, it must become immediately apparent that many of these new challenges cannot be met on a brokerage-by-brokerage basis.
There has been a significant shift in the power curve within the industry and Realtors® must learn to live within this new environment. 2007 must be a year of enlightened, engaged and energetic coordination and joint venturing at the vision, power and operational levels.
Brokerage firms, their executives, managers and agents must work together to create a whole new relationship that will lessen their current vulnerabilities and harvest the opportunities that lie ahead.
The brokerage community, using the Realtor® association as their common ground, must rise to the challenge and occasion presented by this new era.
We must understand that the market and transaction going forward will, one way or another, meet the consumer’s demands and expectations. That is the way of free enterprise.
Realtor® leaders must reject calls to preserve and protect the status quo in favor of working wisely within the new real estate industry to ensure that the Realtor® is the consumer’s best solution to success and balance within the real estate transaction.
When you clearly see where you are, and identify where you want to be, then identify your production engine in this new world, get tuned up, and reach out for the power curve.
