Written by JohnReinhardt
MARKET STATISTICS (Reported September 19th, 2012):
Existing home sales jumped 7.8% to an annual rate of 4.8 million. Highest level since May 2010
Home Prices up 9.5% since last August
2.47 Million Homes on the market 18% Fewer than last August
Days on Market was 92 Days and now is only 70 Days
Distressed properties made up just 22 percent of sales in August, down from 31 percent a year ago.
First, I would like to remind you that the dream and excitement of homeownership is still alive. Those naysayers that have been surrounding the industry in the media over the past few years are finding it more difficult to write about negative things in the real estate market. We believe that all economic indicators are solid and heading toward a sure; although slow, recovery and a comfortable return to normalcy.
Our expectations over the past decade have been bouncing all over the place. The inflated market prices and increased numbers of sales transactions also inflated what we came to believe was a decent business model and extremely lucrative industry. Anyone entering the business could become an instant success as buyers were gobbling up anything that hit the streets. It’s no wonder that there are 30% fewer agents today than just a few years ago. The market has adjusted and that’s good news for those of us that have managed to survive the tough times that are now behind us.
As I look at the most successful people and companies around the country, you will notice a very important ingredient in every one of them. The common awareness and ability to adapt to the environment makes these winners evolve and survive. We have often heard that change brings with it opportunity, and I believe that as the industry must change and evolve, those that adapt more quickly will be the winners of tomorrows real estate brokerage business.
Real estate brokerages and agents must recognize that the market dynamics going forward are different and we cannot look in our rear view mirror and remember how we used to be successful. Doing things the same old way will surely get us into trouble as new models and competition emerge that will change this industry forever. It is our mission to be a pioneer of change and to be proactive instead of reactive. Those who don’t react quickly enough will become extinct as the pace of evolution in the industry is more rapid than we have ever seen. Technology advances have moved the consumer’s expectations to a whole new level while the market was sleeping. As the market comes back, we need to be ready to earn more business from those consumers that are thirsty for a real estate company that provides exceptional quality services in the way in which they want and deserve them.
Real Estate is Back, and we need to take advantage of the opportunity today to sharpen our skills to be ready for an abundance of business in the very near future. It’s our turn to turn it up a notch and capture more market share and take advantage of the opportunity that is knocking at our door today.
Here’s why I believe that we have turned the corner and that we need to prepare now for a great market this fall and beyond.
The correction in the real estate market is officially over and recovery is evident.
Let’s first establish some facts so that you can help to understand why this is true.
Back in 2000, our country was selling 5.5 million homes per year. In 2005’s heyday, that number shot up to 7.2 million homes sold, and this number has never again been seen…yet.
We were chasing business that was not sustainable. Our prices went up 80-100% and even 200% in some markets, and that was just not sustainable.
As a country, we had poor judgment and leadership. People were using their homes like ATM machines. We have learned from these lessons and we’re not likely to repeat them again in the near future.
As the market is picking up, many are expecting around 4.5 million homes to be sold this year, which pretty much makes us trending closer toward the old normalcy. The challenge that many are facing around the country right now is the lack of inventory. If homes were available, the volume of sales would be even higher. This is interesting and exciting news.
I have been hearing stories of how the market is experiencing the Goldilocks syndrome around the country. Agents are complaining that the market was too cold for so long and now the market is too hot! Can you imagine agents complaining about the market being too hot? People are realizing that there are some amazing opportunities out there today and the demand is picking up. The cost to own versus renting is now much more favorable in our market and in almost every major market around the country, that it is causing increased activity and a reduction in inventory. A great strategy might be to work on getting a jump start on inventory and work on bringing in as many properties as possible in anticipation of this TOO HOT market coming our way soon.
We are going to experience a slightly bumpy road as the market adjusts to the increased demand and lack of supply. Prices will jump and retract more than normally and create some buying frenzy and tougher agent competition. The end result will be an upward trend in pricing, which will help heal the rest of the economy as well. As prices increase, people’s negative equity in properties will decrease and they will feel wealthier and they will once again have the ability to move up to the next level home. You can see how the activity can increase dramatically and rapidly and it shall.
Here’s how I see it:
It costs less to own than it does to rent, causing a shift towards owning. Pricing and low interest rates will continue to make this movement for first time homebuyers and entry level homes drive the marketplace first.
The people selling the homes to the first timers are now going to be able to sell their home and buy a bigger home for their growing family that they have been holding back on for the past few years. You can see how this cycle can spark interest up the ladder.
Then the growing families will be buying homes from those who want to either downsize or move to a luxury market; thereby creating even more activity. This can be very exciting, very quickly.
The key factor that I see as crucial is the consumer’s confidence in the marketplace. Once confidence is restored, activity picks up and then we’ll be faced with a shortage of inventory. I look forward to these new and exciting challenges ahead.
In a recent survey at the CEO exchange in NYC, 100% of the real estate CEO’s present reported that they believe that real estate prices will be higher in 5 years. Now, that’s confidence. The top CEO’s also believe that there will be increased sales volumes all around the country and that the real estate brokerage business will be morphed into a whole new industry, unlike the real estate business before the economic downturn.
Like a phoenix that rises from the ashes, the real estate industry shall rise too; but it is those who have adapted more quickly that will rise the highest and soar to new heights.
Here’s what real estate brokerages need to do to soar to new heights. The Fillmore Phoenix!
We need to find the sweet spot as a company. We all have way too much in bricks and mortar.
In the old days, we gave away the profit in the real estate business to make it up in other businesses like mortgage and title. Regulations and market conditions have gotten rid of those benefits and today, a real estate brokerage business needs to make money in the real estate brokerage business. The only way to do this is by reducing costs and maximizing the return.
Real estate brokerages are doing more with less. As a matter of fact, there are fewer agents in the industry and they are doing more business each. That’s the trend that needs to move further ahead. We need fewer agents doing more business. The industry is over-saturated right now and agents are offering services at discounted rates that end up cutting into the top producing agent’s bottom line. In 1998 there were 750,000 agents in the industry. Today, although the agent count is down about 30% from the heyday highs, we are still north of 900,000 agents in the country. Once the number of agents returns to the comfortable normalcy of 1998, business will be better for all those that remain. The way to stay in the game is by adapting to the needs of today’s consumer and working hard to provide excellent service and exceed expectations with better communication skills and tools.
The Future of Real Estate
We know that the world around us is changing more rapidly than ever before in our history. The wide adoption of the internet and the evolution of consumers buying habits and expectations have changed virtually every business industry and model. We should take a deep look at the real estate industry and learn what we can do to take advantage of the new world and the opportunities that it presents to us.
I like to use Best Buy as a great example of the challenges that we might learn from. Just a few years ago, we saw these great blue box stores come into our neighborhoods and we were truly excited about them. They offered great selection at a fair price that was right in our neighborhood. The stores are beautiful and have great displays of all the latest and greatest technology and electronics available on the market. I love to go to Best Buy.
I love to go to Best Buy to check out products, but I buy those products on Amazon.com or Ebay.com. Best Buy has become a showroom for the online retailers. It seems that consumers like to see what the products look like, but they would rather buy them at more favorable prices. This seems like an unfair thing to do, and perhaps it is, but the reality is that the consumer of today is doing it this way, because that’s the way they prefer to. Best Buy is known for not having many items in stock. If you place the order at Best Buy, it would take up to 5 business days, and you have to either pick it up at the store or pay for shipping. If you placed your order through Amazon or another vendor, you can get the item in as little as 24 hours, and many online retailers offer preferred customer services with free shipping.
So, I can get the item more quickly and for less money online while I can use Best Buy to kick the tires. What would you do if you were Best Buy? I can tell you this…they must evolve or they will become extinct. I would probably work on their pricing, inventory and shipping policies to gain more business. Just because it worked a few years ago does not mean it would work today. As a matter of fact, you could say that if you do things the same way that you did a few years ago, you are likely to become extinct!
Fillmore is positioned to take advantage of the great opportunities that will present themselves as the market picks up. We have the best team, the best technology and more inventory than any other company in Brooklyn. We must continue to push for an abundance of inventory as the market shall pick up more quickly than any of us might like to see. The shortage of properties available will hinder growth of other companies.
As we wrap up the final 100 Days of 2012, we strive to FINISH the year strong.
Our sales are up over 2011 and we are looking forward to doing whatever it takes to keep our agents on top of the game and ahead of the competition.
Watch as we launch some exciting new tools next week and throughout the rest of the year as Fillmore Aims to Finish STRONG.
NEW FILLMORE Website is being launched on Monday with multiple languages and automated videos in multiple languages.
Deeper social connecting on the site that will generate more leads and opportunities for our agents.
New valuation module for sellers to go on and find out their home values is targeted for the last quarter of this year too.
The new MOBILE APPS are being launched on the 1st of October, but you can get access to them right now in the Apple App Store or on Google Play for the Android.
Stay tuned to AgentDashboard for more details.
Thank you for being part of the Best Real Estate Team in the business!
I was reminded today of a simple truth and fact…
“We’re Fillmore, We’re Number ONE, We Sell More Homes Than Anyone…FILLMORE!
All the Best,
John P. Reinhardt