Editor’s note: Inman News has conducted a future-focused real estate industry survey as a part of its Roadmap to Recovery editorial project. This article is part of a series analyzing the results of the Roadmap survey. Inman News has also conducted a separate survey on the Future of Real Estate Commissions. Click to read the first, third and fourth articles in this series.
The number of Realtors in America is almost certain to drop by 20 percent or more by 2010, a poll of Inman News readers suggests, with part-time agents among those most threatened by the market shakeout.
Virtual real estate companies, fee-for-service and premium full-service business models may be in the best position to thrive in the years to come, according to 702 readers who completed the 21-question online survey through Dec. 29.
Nine in 10 Inman News readers expect the number of Realtors to decline to 1 million or less by the end of 2010, down 19 percent from the 1.24 million the National Association of Realtors estimated were active as of October. Only one in 10 said they expect the ranks of Realtors to stay the same or increase.
Nearly half of those surveyed — 45.9 percent — expected the ranks of Realtors to decline to 1 million in the next two years. Another 37.2 percent predicted an even steeper decline, to 800,000, while a small minority (5.9 percent) envision only 600,000 Realtors by the end of 2010.
"We need a decrease of at least 50 percent, but we also need new requirements for entry," one reader commented.
Nearly 9 percent said they expect the number of Realtors to remain constant, at 1.2 million, while 1.1 percent of those surveyed actually expect the number to grow, to 1.4 million.
"I think that as people lose jobs they will look at real estate as a way to supplement their income," said one respondent who doesn’t envision a purge of the ranks.
Part-time agents were viewed as the most likely to leave the field, with 46.8 percent of those surveyed identifying them as the most threatened by the market shakeout. That compares with 33.5 percent who said full-time agents were most threatened, and 32.4 percent who identified brokers.
Asked what business models they expect to see more of in the future, Inman News readers were more likely to identify "virtual real estate companies" (27.6 percent) than "pay for service/a la carte models" or "premium full service models" (tied at 24.9 percent). Another 15.6 percent said they expected to see more "low-cost self-service business models" like FSBO.com.
Another 24.4 percent said "other." Their thoughts on the subject — in the form of hundreds of open-ended survey responses — shed some light on emerging trends, but provide no consensus on where the industry is headed.
There’s room in the marketplace for both "full service" and "no service" brokerage models to thrive, readers said — and no reason brokers can’t offer both.
"There will be a widening of the gap between full service and no service," stated one survey participant. "Death is in between. Customers either see the value and are willing to pay for knowledge and expertise or they are looking for the low-cost solution. It is important that we offer them both solutions with the knowledge to make the choice that meets their needs."
But the debate over "virtual" brokerages versus traditional brick-and-mortar businesses was intense. Some questioned whether big brokerage franchises can survive in an environment where consumers have easy access to information once controlled by Realtors.
"With the access to information, brokers and Realtors are losing (their position as gatekeepers) on real estate transactions," said one reader. "More self-help models will emerge."
While local multiple listing service boards are still trying to protect information, "It’s like fingernails screeching down the chalkboard as these efforts are fruitless," another respondent said. "Look for some smaller local markets to have a public Web site that will make MLS pretty much optional. This concept will spread, which will make 6 percent commissions look like a dinosaur."
On the other hand, supporters of the full-service, big brokerage model said "virtual" companies — especially low-cost or "no service" companies — don’t provide the level of service consumers demand in a tough market.
"In this market, the public is expecting service above the norm" said one advocate for full-service brokerages. Such service is "available primarily from full-service, name-brand brokerages supporting the ‘flight to quality’ mentality."
"It takes years of training and focus to deliver the experience today’s consumer is demanding," said one proponent of full-service brokerages. "Much of today’s crisis was caused by low-cost or virtual companies who have no concept of what it takes to be a Realtor. Full-service companies invest in agents’ education as well as their success as Realtors. Without that investment you have a bunch of unscrupulous, untrained people running around claiming to be professional Realtors (and) giving very poor advice to the consumer."
Consumers still want to hire people, not a call center, said another reader. "I see commissions going up as people are now forced to have a professional sell their home. Discount brokers in my area are bleeding and going out of business. They just don’t get the job done. Real estate is a personal business."
More training is needed to produce well-rounded brokers and agents who are adept at using technology, providing customer service, and pricing properties, another reader said.
Of course, that doesn’t mean those agents can’t provide such services on a fee-for-service basis rather than as a commission-based model.
"Most buyers and sellers still need help on understanding the real estate process, whether they know it or not," one reader suggested. "Across the nation real estate brokers need to be consultants for the transaction and not paid a percentage, but a fee for service."
Real estate agents will be hired as consultants, another reader predicted, and the role of "tour guide and administrator of paperwork will be paid for … by the consumer."
Other readers saw opportunities for virtual or small, low-cost brokerages to compete as full-service providers.
"Full-service virtual offices that offer (real estate agents) everything except space will succeed," said one reader with such views. "You need all the support, training, tools and technology. It’s just a phone call, e-mail, text message or instant message away."
Low-cost franchises with a strong brand and emphasis on technology can be more nimble and operate with lower overhead costs but still provide full service, said another reader.
So what’s the optimal size for the brokerage of the future?
One reader described their "small independent brokerage … a family business (that) works out of our home quite successfully." Many agents "are figuring out they do not need the ‘big company’ backing. With a solid marketing plan that demonstrates effective use of Internet syndication and confidence in your own expertise, it is not difficult to show clients you are their best choice."
Another reader envisions the brokerage of the future as one where agents are part of a larger sales team, and everyone is responsible for a different part of the transaction. "Much of the process will be computerized and all of the parties involved (agents, buyers, sellers, lenders) will be responsible for their portion of the transaction," the reader said.
Small and large firms may be able to find a niche that fits their cost structure. But with listings taking longer to market, mid-size firms attempting to continue as full-service providers may end up like the deer in the headlights, another reader said. Brokerages with less than 10 or more than 50 agents might hold on by cutting costs or spreading those costs out among many agents, but "we are going to see a loss of mid-size firms," this reader predicted.
While 2008 was a cataclysmic year for the housing and financial industries — not to mention the global economy — some Inman News readers don’t see those events as transformational.
"For all of the talk of change, it comes VERY slooooooooow to the real estate business," one skeptic said. "Like our healthcare system, minor adjustments will only result in nominal change."
Outlook for the future
The survey also asked Inman News readers about their outlook for their local and national housing markets (those preliminary survey results were reported Dec. 1 — see story).
Like homeowners, Realtors tended to be more optimistic about their own local market than the national housing market. While 42.4 percent expected home sales in their local market to remain stable in 2009, only 27.4 percent thought the same of the national housing market. And while 58.3 percent expected lower sales in the national housing market in 2009, only 37.8 percent said the same about their local market. Only a minority expected an increase in sales at the local (20.6 percent) or national level (14.6 percent) in 2009.
Nearly half of those surveyed — 48.4 percent — expected home prices to remain flat in their market, while 43.3 percent expected prices to decrease. Only 9.2 percent foresee prices in their market going up in 2009.
But nearly nine in 10 Inman News readers expect the national housing market to recover before 2012. While only 9.9 percent expect a recovery in 2009, 51.8 percent see a turnaround in 2010 and 24.3 percent in 2011. Another 11.2 percent don’t see a recovery until 2012, and 5.7 percent envision the turnaround as even further out.
While tight lending standards and rising foreclosures may grab the headlines, 42.7 percent of those surveyed said overall improvement in the economy will be the single greatest driver in a recovery. Another 18.2 percent cited "loosening up of mortgage credit," followed by 17.7 percent who said "slowing the number of foreclosures" would drive an economic expansion.
Only 15 percent said government stimulus programs might drive a recovery.
"Government throwing money at a problem rarely solves it," one reader commented. "Once the economy picks up, consumer confidence will return, leading to a loosening of mortgage credit."
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