How's the Market?
I recently posted a shorter, kinder, version of this on LinkedIn. Here’s the expanded version.
One of the first "scripts" agents learn is the answer to "how's the market?". The stock answer is something like "well that depends on whether you are buyings selling or investing." Or something along those lines (scripts are not my thing, straight talk is).
In any case, for 2019, I think the better answer to "how's the market" might be, that depends on whether you are an agent, brokerage, iBuyer, portal, tech company, or other stakeholder in the industry.
Incidentally for buyers, sellers and investors the answer still is, “it depends” on whether the listing is over priced, the buyer is realistic, your financing and a host of other topics I’ll address in another post.
For this post, let’s focus on brokerages, agents, agents, iBuyers and portals.
As the overall number of transactions has been on a downward trend for the last few years, there is increasing pressure on most brokerages to stay solvent and there has been a lot of industry consolidation on a fairly large scale. A large brokerage I worked for from 2014-2018, Teles, was acquired by an even larger entity, Douglas Elliman.
Compass, a relatively new player on the scene, has been doing acquisitions and expanding, often buying fairly large brokerages. On the fringes entities like eXp Realty and others have been trying to stake out their piece of the market. And there is a growing population of broker owner micro entities. What I’ll call sub boutique.
This makes it all the more difficult for some of what I categorize as the first generation legacy firms (think Realogy franchise brands) to differentiate themselves and leaves the large independent franchise names (KW) rearranging their management ranks and offerings. If you aren’t familiar with the industry lingo that means C-21, Coldwell Banker, Corcoran, Sotheby’s, etc.
In order to attract agents, the game has become to offer better online tools, transaction management, and CRM. Speaking of which, recently Compass acquired Contactually in what feels more like a tech sector trade than anything else.
Unfortunately, though, none of these moves really addresses what agents are looking for and need (another topic for a future post).
What I can say is that I have never spoken with a major top producer who said the secret to their success was their CRM, although many large teams do utilize CRMs. For most agents, this is still a person to person relationship business not a call center model.
What you are still seeing though, is many agents still on the move looking for a better mousetrap, I mean brokerage. That's often in service of the misguided idea that of they only had a better CMA, website, or marketing piece they would get more business which almost 100% of the time is not the case. Or some are attracted to the "luxury" brand or international program. It’s funny how for most of the “luxury” brokerages their business is anything but. And international. Really?
Agents chasing better splits, signing bonuses, multi level recruiting opportunities, some form of equity seem to be the drivers for the better producers and addresses the fact that brokerages, which are already a slim margin business, have to give away even more of the pie to increase the headcount and top line.
Some of the newer players in the industry are iBuyers such as Offerpad. Basically iBuyers make quick offers based on algorithms to acquire houses to flip. In other words, selling your home based on a discount to something like a Zillow Zestimate. Hmnn.
Truthfully there have always been entities offering fast cash to acquire houses in all conditions. They just didn't put the window dressing on of having a website to do it. Now even Zillow has got into the game doing something similar and blurring the line between being a portal and something else. Not quite a brokerage, yet.
I think the iBuyer model is likely to wind up being a bad idea who’s time already came and went. With properties lingering on the market longer and prices declining in some segments, the added risk will further reduce the offer price to a point where most sellers will simply say no because they can get more on the open market. Even now, Zillow is saying that most of the people who inquire about their offer will list with a traditional agent. And lastly, there is no data supporting this as a likely public behavior. We know for example that people will sell their cars at a discount for the convenience. But your house?
So, in answer to the question of how's the market, in a word, fragmented.
My prediction is that instead of seeing the traditional one size fits all agent or firm, we will see much more segmentation. There will be traditional firms going forward for sure but we will see other lanes start to gain market share such as discounters, iBuyers, auction houses, etc.
For the traditional brokerages, those who survive will more clearly stake out specific market segments and specialties.