Inman is interviewing industry thought leaders to find out what’s next in 2016. Here’s Peter Hernandez, President and Broker of Record at Teles Properties.
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Are you optimistic about 2016? The economy? Why?
By nature, I’m an optimist, so of course I expect that 2016 will be as good a year — or better — than 2015.
With employment poised to remain strong, along with increasing consumer confidence and a resilient stock market, even in the event our historically low interest rates climb a bit higher and gas prices fluctuate in the coming year, the glass still looks more than half full to me.
The housing market? Why?
It is somewhat remarkable that the housing recovery is still gaining momentum despite the unprecedented decline in homeownership — from 69 percent in 2005 to the current 63.5 percent — which is nearly equal to percentages decades ago in 1989.
Even in California, where low inventory and prohibitive housing prices in the major metropolitan areas persist, a few more years of increases can be expected before any correction commences.
We’re seeing more stability and normalization of market dynamics, from being an extreme seller’s market to a more balanced one, with low interest rates, a loosening of credit requirements in lending and the entry of millennials — the most powerful and influential generation since the baby boomers — to provide fresh momentum to the market.
Your success? Why?
For a boutique firm, we have a California-wide footprint in the luxury real estate market. Through our micro-market studies, we have found that local markets are on different cycles. By stretching out and concentrating on multiple geographic regions, we are less affected by the ups and downs of any one particular market, which ultimately allows us to create a more consistent revenue stream.
We also have a diversified executive team with combined experience in technology, international business law and real estate, which has enabled us to create a proprietary agent service platform to support our highly experienced and productive agents. We unleash them from time-consuming processes that would otherwise take attention away from developing their business — listing, selling and prospecting.
If agents are spending time on developing marketing materials and transaction management of their own, they are being drawn away from their strong suit: working with clients and developing business. We utilize the latest technology for launching listings for our agents, providing agent and property-specific websites and generating and capturing leads. We also provide social media consultation and support, mobile device integration and cross-marketing opportunities.
Because of this, we attract top talent — highly experienced and productive agents — rather than having to hire new licensees who typically have the lowest return on investment. In fact, Teles was the first firm on the West side to employ a paperless transaction management system with electronic signatures. In our early years, I remember a deal we won when our clients signed the document as they were boarding a jet on the way to Europe. That’s where the gains are made — or lost.
Lastly, we have enjoyed consistent growth from Carmel to Coronado, with 19 offices up and down the coast because we foster a culture of productivity, collaboration and innovation. We look at the real estate industry with fresh eyes, yet we’re grounded in the fact that nothing happens until a home is listed and sold.
What are you worried about?
There will always be competitive pressures, economic cycles and world events that can erupt. We started the firm in November of ’07, so we understand how quickly things can change. To survive and actually thrive during those financially crushing times that immediately followed our opening, we were forced to develop business disciplines and economic sensibilities and scalabilities while creating an entirely new agent service platform.
We recognized that in order to market and transact, we had to bring forth new technologies in a world gone digital. We had to smash the status quo and look beyond what had been done in the past and what was being done in the present.
With an intense and complete focus on our core beliefs and our unique business model, we silence the noise and drama that exists in the real estate brokerage world. Being nimble and quick to respond to changing dynamics requires a willingness to keep iterating and introducing new systems, technologies and marketing strategies that embrace the digital and social media world.
The old real estate paradigm encouraged firms to hire and keep everyone because it represented revenue. But that system only creates exceptions and dilutes the culture you are trying to build. By continually expanding on our platform that delivers results and delights our agents, we have experienced firsthand that a brokerage that best supports its agents with technology, marketing, coaching and administrative tasks ends up the winner.
How much do you fret about global events?
I don’t fret, but I do feel intense compassion. Take a look at history, and you’ll find barbaric acts of man that most of our imaginations could never conceive. And in most of us it instills an intense fear that prevents us from moving forward.
What we really need to do is find courage from within and face whatever dangers and challenges come to us. I’ve lived through three recessions, and as I have said many times before, they are all the same: they have a beginning, middle and end.
What goes up comes down. What is destroyed shall rise again, and so it goes. We built this country on the American dream, where landownership, freedom of speech and the pursuit of happiness was a birthright. We owe it to ourselves and future generations to uphold that promise, regardless of which industry or field of interest we pursue.
Will mortgage rates go up or down next year?
They will certainly go up, but I think the Federal Reserve will be very cautious in an effort to aid in our economic recovery. Inflation is still very low and not all sectors of the economy are firing on all cylinders. Asia and Europe are struggling, and other factors abroad as well as at home need a wary eye and keen attention.
Which market are you in?
We have 19 offices in luxury markets of California from Carmel to Coronado.
Will unit sales go or up or down in your market?
As more properties come to market and a new generation of first-time buyers enter, transactions should increase about 5 percent. Our transaction volume, however, is still low compared to previous highs.
Will home prices appreciate in your market next year?
We expect appreciation upward of 4 percent to 6 percent.
Will agents be more productive next year? Why? Or why not?
That’s hard to predict across the board, but agents will be more productive as transactions increase and prices edge up.
What will be the biggest source of real estate leads next year?
Several of our agents derive up to 85 percent of their business from social media sites such as Facebook and Instagram, fishing further upstream rather than casting their lines where traditional agents have found clients. Targeted Internet advertising to attract prospective buyers works better than taking out newspaper or magazine ads with the hope that the right buyer sees them.
The old spray-and-pray style of marketing is passé. Reaching out and talking to people face-to-face while being interactive is still the most powerful way to find clients.
Past clients are also a rich source of leads and constant contact is the key. Geo-farming is back, too, and with well-executed campaigns, an agent can build a strong market share in a local neighborhood.
Surprisingly, open houses have become more important than ever and have made a huge comeback in effective prospecting and sales. In the past, neighbors or potential clients would see a sign and drop in not really interested or knowledgeable about that particular property. Today, however, buyers and sellers are finding open houses online and are driving specifically to look at a home of interest or check out an agent.
As a result, buyers are purchasing properties on the spot because they have done their research and have zeroed in on a particular home. This is a new phenomenon and agents should not let their buyers go out on their own — and they should hold an open house every weekend — or they may write an offer with another agent.
Are you making plans to expand, contract or maintain your business this year?
We are definitely planning for expansion throughout the state of California. We intend to open in luxury markets where our clients own multiple properties, and we’ve been very fortunate to have agents and small firms reach out to us, inquiring whether or not we would be willing to open in their areas. We are currently looking at several opportunities.
What is your biggest challenge in the coming year?
Our greatest challenge is to surpass our own continuous growth, strong company culture and the personal and close connection between our agents, staff and executives. Staying ahead of the pack as an innovative leader is never easy, especially when you carve out a niche that inspires others to compete.