This report is available exclusively to subscribers of Inman Intel, a data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.
The past three years have been a roller coaster for real estate with the last six months or so really throwing the business for a loop.
Thanks to rising mortgage rates and record inflation, the housing market has gone from on fire to a smoldering cinder.
But of course, you know all that by now. It’s the story of late 2022 and early 2023.
While the experience of both consumers and agents in the downturn has received extensive coverage — in the virtual pages of Inman and elsewhere — what’s less clear is the leadership experience. What’s it like to rally the troops, for example, at a time when there’s not much for the troops to do? How do you motivate people when many of them are making a lot less money? How do you grow a business at a time when business is shrinking?
To get a sense of how industry leaders feel right now, Inman recently launched its first-ever Inman Intel leadership survey. The survey included 20 questions and was available between Feb. 27 and March 6. Questions zeroed in on topics, such as growth during a down market, technology investment and training programs. Ultimately, more than 700 people responded.
To be clear, this wasn’t a scientific poll and respondents came from Inman’s existing pool of readers. But the number of responses means that the results do offer insights into the mood of industry leaders right now.
Overall, the takeaway from the survey is that leaders are anticipating significant headwinds this year, with many indicating the market in 2023 will be worse than it was last year.
However, perhaps because most of the survey respondents indicated that they have high levels of experience in the industry, a sense of local optimism also permeated responses. In other words, the market may prove difficult overall, but many leaders believe they’ll be able to weather the storm and even grow in 2023.
Real estate leaders are generally upbeat about a down market
Much of the survey focused on how industry leaders feel right now about the state of the housing market. And overall, the responses show that the slowdown of the past year is taking a bit of a toll on the industry’s usual optimism. For example, when asked if the market in 2023 will be better, worse or the same as last year, a plurality of respondents — or just over 39 percent — indicated that it’ll be worse.
Another 29 percent said 2023 will be about the same as last year. About 28 percent said this year will be either much better or a little better than last year. On the other hand, only 3.9 percent said 2023 will ultimately be much worse than last year.
In a similar vein, when asked to rate their optimism about the market on a scale of one to five, with five being the most optimistic, a majority of respondents selected three, indicating only modest optimism. The average overall rating was 3.3.
These findings suggest that industry leaders are indeed bracing for somewhat tougher-than-normal times.
But while the survey respondents apparently see trouble in the market broadly, they’re surprisingly upbeat about their own prospects. Ask, for instance, how they thought their own markets will hold up, the vast majority of respondents — or 65 percent — indicated their local region will outperform the nation.
As it turns out, the respondents have cause for some local optimism; the survey also asked how the first months of 2023 have gone, and a plurality — or 35.2 percent — said conditions were busier than expected.
Another 33 percent said January and February met expectations, while 32 percent said the market was slower than they anticipated.
Those results aren’t necessarily an overwhelming vote of confidence, but they do show that two-thirds of respondents are either pleasantly surprised or at least not disappointed.
Consider also how surprising, in the worst way, 2022 was. If we had run this survey six months ago the results would surely have been different. Ergo, 2023 is at least not proving to be as much of a curveball as 2022 was.
Additionally, the survey found that a majority of respondents, or 53.3 percent, believe inventory will be flat in 2023. Another 29 percent believe inventory will rise, while 17.8 percent think inventory will decline this year.
Views on prices showed a similar spread with 55.4 percent of respondents saying they’ll be flat, 29 percent saying they’ll rise and 15.6 percent saying prices will fall.
Finally, 47 percent of respondents said bidding wars are becoming more rare in their markets, while 23.6 percent said bidding wars are becoming more common and 29.5 percent said they’re about the same now compared to the past.
Overall these findings offer something of a middling review of market conditions in 2023. Industry leaders appear to be upbeat about their own prospects even as they anticipate challenges with issues, such as inventory.
Technology is still really important to real estate leaders — and worth the cost
It would be tempting to presume that as the going has gotten tough over the last year, that disruption and tech have become less essential to the industry. After all, following years of growth, new models, such as iBuying and venture-backed brokerages are still losing fortunes while legacy companies are fairing comparatively well — or at least less bad in some cases.
On top of that, a recurring theme at industry events over the last year has been the idea of getting “back to basics” and cutting costs.
But the survey shows that industry leaders are still invested in and bullish on tech. Asked, for example, to rate the importance of tech on a scale of one to five with five being most important, the vast majority of respondents chose either four or five. The average of all the responses was 4.3.
Virtually the same thing happened when respondents were asked about the importance of technology to their own business. There, again, the average was 4.3. The results suggest that back-to-basics rhetoric notwithstanding, technology is here to stay. What was once the disruption is now the norm.
Perhaps even more telling, when asked about spending on tech in 2023, more than 44 percent of respondents said they expect to spend more this year. Nearly the same number of respondents, or 43.7 percent, said they expect their spending to stay the same in 2023 compared to previous years.
On the other hand, a mere 12.3 percent of respondents indicated they expect to cut spending on technology in 2023.
That’s a remarkable finding given the ongoing industry discussions about cutting costs. As it turns out, very few leaders see technology as an area for trimming.
In addition to asking about spending, the survey also queried respondents about the source of their technology. This is significant because one of the differentiating factors between major companies right now lies in their choice to either create a proprietary platform or partner with third-party providers.
Ultimately, only a small minority — or 11.5 percent — of respondents favored the proprietary option.
Nearly a third — or 30.6 percent — prefer to get their tech from other companies. But far and away the most popular response — at 56.2 percent — was that leaders prefer a combination of building and buying tech.
Finally, the survey also asked industry leaders about the proptech investment landscape in 2023.
In this case, a plurality of respondents — or 40.3 percent — indicated they’d like to see more investment going toward agent training. The second most popular response was lead generation, at 39.6 percent, followed by recruiting and retention at 36.1 percent.
However, despite a clear appetite for technology and a willingness to spend on an individual or company level, respondents were less optimistic about the venture landscape. Indeed, a mere 18.2 percent thought that venture investing in real estate technology will increase in 2023.
On the other hand, a plurality — or 43 percent — thought venture investing would dip this year compared to 2022. Another 39 percent think venture capitalists will invest about the same amount in proptech in 2023 as they did last year.
Some organizations may actually grow this year
Not only are industry leaders planning on doubling down on technology in 2023, many are evidently gearing up to grow more generally this year.
Of the survey’s respondents, nearly 50 percent have been in leadership positions for more than 10 years. Another 18 percent indicated that they’ve held leadership positions for between six and 10 years.
Moreover, a plurality, or 44 percent, also lead organizations that include 50 or more people. Another 21 percent of respondents lead organizations that include between 21 and 50 people.
All which is to say that most of the survey respondents are, by their own description, industry veterans with extensive time and experience leading organizations.
In that light, it was significant that when asked about the size of their organizations, nearly 50 percent of respondents indicated that they would indeed like to grow. Slightly more than a third — or 35.5 percent — indicated that they don’t want to grow.
When it comes to what respondents actually think will happen in 2023, a majority — or 54.1 percent — said they believe their organization will maintain consistent staffing levels.
However, a third of respondents — or 33 percent — said they plan to grow their workforce this year. A mere 13 percent said they anticipate having to let people go.
While there is clearly a gap between the number of leaders who want to grow and those who think that growth will happen this year, it’s notable that a third of respondents are still targeting growth at a time when the market overall has been shrinking.
Layoffs have also been widespread in real estate over the last year, ultimately resulting in many thousands of people having their jobs cut. The fact that so few respondents indicated that they’re anticipating layoffs this year could reflect views that the worst of the downturn is already over. Or it could simply indicate that the respondents are optimistic about their ability to outperform the overall trend.
The responses also indicate that leaders have a high degree of satisfaction with their employees. Asked to rank their satisfaction on a scale of one to five, with five being most satisfied, the overall average was 4.03.
Leaders who took the survey also indicated that the most popular way to energize their personnel is via training, with nearly 80 percent of respondents indicating that was their preferred way to rally their teams.
The survey also found that the second most popular way to rally teams was via events, with monetary compensation coming in last place with only 12.5 percent.
Respondents urged real estate leaders to double down in hard times
To get additional context beyond the survey, Inman reached out directly to a number of respondents to see what advice they have for other industry leaders. Among them was Robert Nelson, executive managing director for Brown Harris Stevens in the Hamptons. Nelson oversees about 160 agents in his region. And he said that one of the biggest challenges in Hamptons real estate right now is a lack of homes hitting the market.
“Even in a normal market we have limited supply because we’re surrounded by water on three sides,” he said. “In any market we only have so many homes. But we’re suffering the same problem everyone is, and that’s lack of inventory.”
Nelson told Inman he believes the number of agents working in the Hamptons will likely go down this year because there simply isn’t enough business for everyone. But he added that the agents who “are working every day” will manage to hang on.
“Now is the time to really double down,” he added.
Tom Kuntz, executive vice president of Engel & Völkers Real Estate USA, also told Inman lower producing agents are likely to wash out of the industry this year. But he added that in his company’s case, growth is on the agenda. Engel & Völkers is specifically looking to add both agents and offices this year and is eyeing metropolitan areas in states, such as California and Florida, Kuntz added.
Leaders who want to weather the storm should make specific budgets and contingency plans for different kinds of markets, Kuntz went on to say. And when it comes to leading agents, he recommended ignoring the noise and focusing on the work.
“I think what a lot of brokers have to do,” he said, “is get their sales agents to quit listening to all the media stuff and do it old school. Make phone calls. Knock on doors.”