Inman Director of Research Chris LeBarton is tracking industry sentiment at a major inflection point. He shared what he’s learned from results of the inaugural Intel survey — and what’s to come.

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.

Before launching Inman’s most ambitious attempt ever at tracking real estate sentiment across the industry, Inman Director of Research Chris LeBarton spent a lot of time drafting the questions to ask industry professionals.

Now, as the results of the inaugural Inman Intel Index roll out exclusively to Intel subscribers for the first time, he gets to dive into the answers.

LeBarton is now closely tracking industry sentiment on a month-to-month basis as part of the newly launched, recurring Inman Intel Index, or Triple-I, which aims to track the shifting perspectives of real estate professionals each month.

LeBarton broke down his thoughts on what real estate professionals and decision-makers should make of this new survey data — and how it can be useful as they prepare for the opportunities and challenges ahead.

The conversation below has been edited for length and clarity.

Intel: This is the first of a monthly survey of real estate professionals. What are the things that you’re going to be looking for from month to month, to try to find insights in changing attitudes toward the future, or changing attitudes toward the present? 

LeBarton: I think it’s a really interesting time to start a project like this. It is obviously one of the most challenging environments the residential real estate market has ever seen. And you don’t want to be too hyperbolic about that. This is not only the people that we are surveying — it’s their livelihood — but it is all about where people live. Where they choose to live, what types of homes they want to live in, and will they buy that home or will they rent that home?

What’s next is on everyone’s mind. Everyone is thinking, is this going to get better or worse? If it’s going to get worse, how much worse can it get before it starts to turn a corner? And I think as we start to track this monthly, we will see, in as close to real time as possible, the breadcrumbs of what’s next. 

The whole idea behind Inman Intel is to try to help industry leaders gauge what is next. How do you get ahead of this? How do you prepare for more challenges? Or when the opportunities start to build, how do you position yourself for that, both from a business leadership standpoint, and as a day-to-day operator?

I thought it was interesting that, in terms of the groups we’re reaching out to, not only are we trying to get a broad idea of what the challenges are for agents, but also for C-suite executives, proptech founders, and then even mortgage lenders, for instance. What do you think about how we’re approaching each of those groups, and how we should interpret the results?

There are so many parts to this ecosystem, and any ecosystem is interrelated. 

If you only look at it from the agent’s perspective, you are missing a huge piece of the puzzle. If you only look at it top-down, from the business leadership standpoint, you miss a great opportunity to assess, how are the foot soldiers, the beat cops, the ones that are doing this day-to-day on a transactional basis — what are they experiencing, and what are they thinking about the future? 

If we completely remove the lending aspect of a survey, we are offering our readers a big blind spot. Buyer purchasing power is the driving force behind real estate pricing. So if your buyer purchasing power has diminished significantly in the last 12 months, and you don’t look at it, you’re not getting a full picture.

And then we take it as far as going into the property tech world, which is experiencing push-pull from a couple different standpoints, including a more macro fiscal environment where their investment dollars are shrinking.

We want to try to gauge it all. And while it’s impossible to get a full picture of all of those silos, the point of this survey is to try, and then synthesize it and get a big-picture look at how this ecosystem is doing today, and how [does] each component part view the 12-month horizon?

I want to start with the questions for the agents. There were some interesting findings with regard to buyer and seller pipelines. This is our first view from this survey. What were your big takeaways from the agent perspectives here?

If you follow residential real estate, you generally know the state of affairs right now. Our goal in this survey was to go a little bit deeper and try to suss out nuance. And I thought it was really interesting the degree to which buyers are a more endangered species than sellers.

Of course, they’re interrelated, and for current homeowners, most of them will not become buyers until they’re sellers. But the buyer piece to this was really, really interesting. 

We had a finding that said over 90 percent of agents have the same or fewer potential buyers in their pipeline right now. It has been a really rough 12 months, and looking forward, we aren’t generally feeling that that’s going to have a sea change. 

Now, there is optimism that it will get better. Seventy percent of agents expect they’ll be working with the same or more buyers 12 months from now. But the general feeling is, ‘I’ve got to find a buyer right now.’ 

Not to get ahead of myself and this question, but if something has to give in this equation, and interest rates stay where they are, buyers can’t really give. Lenders aren’t going to give unless macro-financial dynamics change. So really it’s going to come down to the sellers that need to adjust that going price, because the buyer will set that market. And as we saw in several different ways, the buyers are really tough to come buy right now.

There’s a bunch of other questions in that area, and we’ll get into those even more in future months’ survey results. But I did want to turn to corporate leaders, investors, proptech founders: This group of decision-makers was also a pretty significant share of the respondents to the survey, and they had a lot of interesting things to say. What did you learn from this group that was most interesting to you?

It wasn’t surprising that the business environment was challenging, of course. An interest rate for a business owner is different in a lot of ways than a mortgage rate for buyers and sellers. So their margins are being squeezed right now. 

It is a hyper-competitive labor market nationally. But right now, in a tough time, it’s very difficult to keep your talent if they feel they have a better opportunity to improve their lot in a very difficult market by going elsewhere. So it was really interesting, and reassuring, to know that most of these corporate responses were focused on protecting — and investing in — their people, and doing everything they could to help weather this storm. 

It was not blind optimism. They understand the realities. But they also, if you can kind of read between the lines of this data, they believe in the people they have. For the most part, they believe in their business models, which is shown in that data. And they’re leaning into that right now. I thought that was reassuring. It should be reassuring for the people who work for these [leaders].

I thought some of the directional implications of the survey were interesting too. A pretty decent chunk of these business leaders said they had to reduce their headcount, at least by a bit. About 1 in 4 said that their headcount is lower than it was 12 months ago. And now, it seems that a portion of these same leaders who were having to lower their headcount are expecting it to remain the same or even increase over the next 12 months.

It seems we may have already entered a new era where perhaps they are looking forward to perhaps staffing up again as things stabilize.

There are always difficult decisions to be made as a business leader. When you invest in some, that does oftentimes come at the expense of others, and that’s a very difficult thing for them to have to choose. 

But we are in one part of a business cycle within real estate. And for those who believe they have the right model, they believe that they have the right talent remaining, or they believe that they are in a position to go out and recruit talent, then they are, to some degree, banking on a brighter future over the next 12 months. 

And again, they are business leaders for a reason. They either have a track record of success or they think they have something that serves this market better. If we are generally confident that the Fed is done raising interest rates and the squeeze … they know that that is a less dynamic piece of their business model. If this is a new normal, and we are going to be a higher-for-longer environment for cost of capital, what I need to pay people, what I need to pay for technology, etc., then they are preparing for the upswing. Who knows when that upswing is going to come, but like any cycle there are ups and downs.

Only 5.5 percent of business leader respondents said regulation was the No. 1 challenge over the past year, a distant fourth place in terms of top concerns. 

But when you ask this same group of people, about 12 months from now, ‘What is going to be the most challenging part of the business environment,’ instead of 5.5 percent, you see nearly three times that many respondents saying regulation is potentially going to be the most challenging part.

I’m wondering if this is something where people are looking at some of the lawsuits moving through the courts, looking at the implications that those could have for commissions, for buyer’s agents, and for tons of potential changes. 

It was perhaps the most interesting finding, and so indicative of the times we are in — literally the times we are in today.

When the survey was run, there still had not been the Anywhere [or RE/MAX settlements]. By the time the next survey runs, it’s possible that one or two more major settlements will come. And if any of the proposed business changes and major structural underpinnings of this environment change, I wouldn’t be surprised if that number moves significantly again.

If you look at some of the comments that came along with these answers — ‘lawsuit,’ ‘compensation,’ ‘fee structure’ — just the way that you can rely on data from the Federal Reserve, and economists say, ‘There’s really no way they can keep raising rates,’ right now everybody has data points and headlines in their face saying this industry is changing right now. 

It’s not necessarily surprising, but it’s one of those times where you say, ‘You know what? A sentiment survey has hit it on the head.’ It would be shocking if business leaders were not really, really concerned about regulation and how this business works at its very foundations.

Email Daniel Houston

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