Trends in Residential Brokerage

1
Trends in Residential Brokerage

• A Presentation to the Georgia Association of
  Realtors

2
Trends

• Trends in residential brokerage point towards a
  more competitive industry than has been the case
  since 2000

3
Trends

• Consolidation
• Outsourcing of realty functions
• Focus on consumers
• Democratization of listings on the Internet

4
Trends

• More price competition among realty service
  providers
• The integration of core services

5
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)

6
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

7
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

8
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

9
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

10
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

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Outsourcing

• Technology outsourcing
• Lead management
• Transaction management
• Web hosting and design
• Email
• Lead generation
• Accounting and financial systems

12
Outsourcing

• Marketing outsourcing
• Printing and Direct mail services
• Custom design
• Online Graphics
• Sales professional branding programs
• TV and video production

13
Outsourcing

• Other areas
• Education and training
• Finance and accounting
• Recruiting
• Management development

14
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

15
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

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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

17
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

18
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

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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

20
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

21
Consumers

• What do housing consumers of all ages value?
• Communication
• Trust
• Relationship

22
Consumers

• The future
• Shift from showing and telling
• To listening and sharing
• Shift from real estate expert
• To neighborhood and community expert

23
Democratization of listings

• The listing is a perishable asset
• Leave it on the shelf long enough and its value
  declines

24
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)

25
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

26
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

27
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

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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

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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

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Competition

• PS
• That 5 swing from 1995 to 2005 for realty firms
  was equal to 75 of their profit from 1995

31
Competition

• There are only two ways to go now
• High value, high margin low market share
• Lower value, low margin, large market share

32
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

33
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

34
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

35
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

36
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

37
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