Editor’s note: Looking ahead to 2010 we are optimistic that the real estate world will be better, but we also expect radical change. Paul Saffo, at the Institute for the Future, once said that in a two-year period less happens than we would have thought, and in a 10-year period more happens than we could ever imagine. This four-part series is a fun look at what the future may hold for the real estate industry. The predictions are not fact. (See Part 1: Where will we be in 2010?; Part 2: The mortgage debit card debuts and Part 3: REM: The Real Estate Marketplace.)
Looking to the future at first conjures pictures of flying cars that fold into briefcases, doors that open by recognizing fingerprints and microchips implanted in our brains that keep tabs of our bank accounts, important passwords and contact databases. Fast-forwarding to 2010 may not seem too far away, but big changes lie ahead for the real estate industry.
Inman News asked some industry visionaries what changes they predict for real estate over the next five years. We heard many of the same themes: less paper, more Internet, more service from agents, and more integrated and streamlined real estate transactions.
Here’s a sampling of what the real estate industry might look like in five years:
Christopher Cagan, director of research and analytics at First American Real Estate Solutions, predicts that all parties to realty transactions will sharpen their knowledge and market savvy, and come to the transaction more full of information than today.
“In 2010, everybody will have instant access to property and market information that only a few experts formerly knew,” Cagan said.
But the increased information flow won’t erase the real estate agent from the transaction altogether. While computers will do much of the “ordinary work,” Realtors will be as necessary as they were in 1990 or 1960 to show properties and guide buyers and sellers through a deal. As a result, efficiency will improve, costs will fall and the transaction will become speedier, more convenient and less stressful for everyone.
Tell us your prediction for real estate over the next 10 years and you could win one free admission to Real Estate Connect 2005 in New York City.
Ed Krafchow, president of Prudential California, Nevada and Texas Realty, forecasts that the transaction itself will undergo change as transaction management platforms come together and gain more acceptance in the industry. But he also sees change on the service side as mortgage, title and realty brokerage companies pull closer together and work toward “streamlining” the consumer experience.
Krafchow believes the real estate business will become more global in coming years. “One of the things that clearly will be demonstrated is that any place you want democracy, you’ll have to have home ownership,” he said.
Steve Kropper, SVP of Equinox Corp., sees mortgage paperwork leaving the United States altogether. He foresees this news headline: “U.S. won’t manufacture mortgages in five years; They will be ‘manufactured’ offshore.”
Despite the National Association of Realtors’ efforts to block banks from entering the brokerage business, realty agent Jennifer L. Jonak sees financial companies becoming more involved in real estate transactions.
Financial companies “are starting to incorporate in-house agents, so we may see banks and other financial institutions start to incorporate both real estate and financing ‘all-in-one’ services,” said Jonak, an agent with Millstein & Associates Real Estate in Berkeley-Kensington, Calif.
Jonak also predicts there will be less paper in realty transactions over the next five years as more parts of the process become digital.
“By 2010, most reports and disclosures will be downloadable online and some sort of electronic signature will negate the need to exchange paper or fax disclosures,” Jonak said.
Austin Jaffe, director of the Institute for Real Estate Studies at Penn State, believes MLSs will have a difficult time protecting the home sales and listing data they’ve kept private for so long.
“There will always be someone who wants to open it up,” Jaffe said. “It will be difficult to keep this club private.”
While Jaffe sees big changes ahead for the mortgage and brokerage industries brought on by technology advancements, he doesn’t think people will be buying property on the Internet the same way they’d buy shoes or CDs.
Jack Harris, research economist with the Real Estate Center at Texas A&M University, predicts that realty agents will become more focused on specialties, such as selling problem properties, and that most agents will act more as advisors and transaction facilitators.
Harris also expects more integration between realty brokerage and finance. “There have been tentative starts in this direction, so there is an inherent logic and demand for a smoother coordination between the buying and mortgage processes,” he said.
Abdullah Yavas, research director for the Institute of Real Estate Studies at Penn State, forecasts further unraveling of real estate brokerage services. More brokerages will be pressured to offer a menu of services that enable consumers to choose and pay for only what they want, such as a listing with the MLS.
Norm Bour, owner of Priority Plus Lending in Southern California, focused his predictions on the Los Angeles market. He predicts that home prices will continue to climb, with more homes selling for more than $1 million, than those selling for less that amount. Due to increased litigation, he sees the average sales contract ballooning to 20 pages, although Realtors will play a smaller role in the sales process.
Climbing real estate prices will drive a wedge between the “haves” and “have nots,” Bour said. “Home ownership, once claimed as ‘The American Dream,’ (will) become more and more distant as wages have not kept up with real estate values; yet the ‘haves’ continue to survive and thrive,” he said.
Mike Sklarz, chief valuation officer for Fidelity National Financial, expects an increase in the used of automated valuation models–or AVMs. He believes collateral risk tools will become even more sophisticated, playing a larger part in the market, and that consumers will demand this type of information and service.
In general, there will be a greater emphasis on information in a real estate transaction, Sklarz said. “People are going to expect it just as they do with their other investments.”
Glenn Roberts Jr., Samantha Peterson and Jessica Swesey contributed to this story.
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