- Student loan debt is slowing the housing market and the economy, and economic growth is anemic -- 75 percent of recent college graduates are strangled by an average of $363 a month in loan payments.
- Some things about the sharing economy are counterintuitive -- using Uber every day is more expensive than owning a car, Keller noted.
- Online search is not making buyers smarter and may actually result in home shoppers taking longer to find the right home.
In a meeting room the size of two football fields, Keller Williams co-founder Gary Keller walked a crowd of 15,000 eager KW agents through an economics and housing market tutorial, starting with interest rates and ending with technology trends.
He promised not to “geek out over the numbers” in his vision speech, but he did explain dozens of arcane economic and housing market trends in 95 slides.
If you are going to be the ”housing economist of your market,” listen up, preached Keller.
He said the government does not exactly know how to raise rates, but low rates are helping affordability in most U.S. markets.
More sanguine about the U.S. economy, Keller says growth is “anemic” and debt is still tight, hurting gross domestic product (GDP). Also slowing the economy and the housing market is student loan debt — 75 percent of recent college graduates are strangled by an average of $363 a month in loan payments, which hurts the first-time buyer market, he explained.
“They are being set back,” said Keller.
At the other end of the market, “the world’s wealthy are getting wealthier.” The luxury housing market, as a consequence, “is amazingly strong.”
With its focus on teams, on youth, on equity sharing and on growth, the Texas firm is becoming a tough act to follow. It is not a new firm, but it is leading the way.
The company’s Achilles heel is a strategy of growing agent numbers, then suffering the consequences of poor quality agents entering its network. That is why the company is emphasizing training and education, like Keller’s talk this morning.
He encourages agents to use the slides to explain trends to customers, who have lots of questions that are hard to answer in a volatile economy and global uncertainty.
New regulations, new technologies, pivoting transactions
Keller also addressed threats of new regulations, such as do-not call and soliciting requirements and independent classification rules. “It is under scrutiny,” he said.
Smart phones were the beginning of disruptive technologies, he explained.
Nevertheless, 80 percent of consumers use a real estate agent, so technology has not hurt the role of the agent. But parts of the transaction are “pivoting”.
Showings are a big area to watch, according to Keller. Drones, live streaming, virtual reality and 3-D are changing the traditional habit of home shopping.
Keller said that $2.6 billion has gone into disruptive real estate technology. The biggest spend is around “taking your listing and making money from it,” warned Keller. When CEOs of the portals say they will never hurt you, be wary, he said.
Keller offered his perspective on the sharing economy. He said that using Uber is more expensive than owning a car, despite the hoopla around transportation innovation. He emphasized the value created from owning, not renting.
Should you rent or own a home? he asked the audience. Don’t listen to Wall Street, Keller advised. Owning is “forced savings” and a better option than other investments.
The home search component
He zoomed in on the issue of home search and its importance and danger to the industry, pointing to $8.6 billion in online advertising spending last year.
“You are getting fleeced” by the portals because there is no return on much of the search engine advertising, he said. Keller said the number of people using search has grown, but the portals have not increased the number of buyers.
Plus, “you may be funding someone who will put you out of business later,” he warned.
He did explain that some agents are successful with the portals, but generally it only works for the agents who bought ZIP codes early on.
For everyone else, “the math does not work.”
Keller also said online search is not making buyers smarter and may actually result in home shoppers taking longer to find the right home.
This line of reasoning led Keller to his support for the Upstream project, the industry initiative to give brokers and agents more control over where their listings go.
“Upstream is very smart,” he said. “This is good, and you need to go back to your market” and evangelize the wisdom of it.
“It puts everyone on notice that a mechanism is in place” that puts the agent back in the middle of home search, he said.
Keller said he was “agonistic” about the Broker Public Portal but he said it was a “not bad” thing.
He also said that although 89 percent of people use the Internet to find a home, only 33 percent choose a home that they found online. And consumers are still using an agent, more than ever, to find the right house.
Keller also admitted that “I sometimes go overboard to get your attention” when it comes to his statements about technology, warning his audience to be careful about what is happening with the Internet.
Referrals are still the most important way consumers find agents, despite the power of the Internet.
The audience was attentive throughout his 100-minute speech, mingled with applause and laughter.
His talk ended with a standing ovation.