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SHIFT HAPPENS. The results of the research … What we know …What we know … What we fear …What we fear … What we sense …What we sense …

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Presentation on theme: "SHIFT HAPPENS. The results of the research … What we know …What we know … What we fear …What we fear … What we sense …What we sense …"— Presentation transcript:

1 SHIFT HAPPENS

2 The results of the research … What we know …What we know … What we fear …What we fear … What we sense …What we sense …

3 What we know …

4 The continuing uncertainty regarding the national economy is negatively impacting the real estate market.

5 A pronounced and/or prolonged economic downturn will impact the industry to a point that it may not be able to remain viable.

6 The sub prime trigger is continuing to impact the national economy and the industry at several levels

7 The reformation of the mortgage process and industry is more expansive than generally recognized.

8 The vanishing real estate investor is and will be a factor

9 The evolved Internet consumer will play a major role with respect to all aspects of the real estate market moving forward

10 Generational and ethnic imperatives must be addressed

11 The consumer ’ s continuing questioning of the REALTOR ® value proposition will place additional downward pressure on fees and commissions.

12 The inadequacies of the traditional brokerage business model must be addressed if the industry is to maintain its position in the recovery market

13 What we fear …

14 Increased government oversight, regulation and intervention will negatively impact the industry ’ s ability to stabilize when the sustainable market returns.

15 The continuing media assault and the difficulty of rehabilitating the REALTOR ® image will play a powerful role in the equation

16 The Internet ’ s disintermediation of the role of the agent may go beyond the point of rehabilitation

17 The industry ’ s lack of resources will dry up innovations and creative research and developments

18 The fact that current market share holders are not moving to meet consumer expectations is creating a environment of opportunity for non-traditional entrants

19 That today ’ s searching, inquisitive and capable consumer, especially in the 21 – 43 year old demographic, may discover an acceptable alternative to traditional real estate services

20 What we sense …

21 That there is a changing vision of housing and home ownership in America especially among the generation X and Y demographic

22 That the average brokerage is in the process of shedding capability to a point where innovation and creativity will take a back seat to survival. In the same vein when the market recovers there will be a substantial lag in those firm ’ s ability to achieve relevance and competitiveness in the new market.

23 That when the market returns to sustainable levels it will be defined by the following: A pent up demand for housingA pent up demand for housing Low interest ratesLow interest rates Higher requirements for mortgage lendingHigher requirements for mortgage lending Lack of equity or cash resources combined with higher income requirements will force consumers to reevaluate their expectationsLack of equity or cash resources combined with higher income requirements will force consumers to reevaluate their expectations The market for higher priced homes will recover more slowlyThe market for higher priced homes will recover more slowly The recovery market will not be characterized by the production levels.The recovery market will not be characterized by the production levels. The strongest market dynamic will occur at the lower end of the price spectrumThe strongest market dynamic will occur at the lower end of the price spectrum

24 That, in general, generation X and Y, a group that will constitute a significant percentage of the buying market, will have less financial resources available with which to engage the housing market

25 Why? Significantly lower joint and household incomesSignificantly lower joint and household incomes Heavier credit card debtHeavier credit card debt Educational debtEducational debt Wedding debtWedding debt That this lower level of financial resources combined with higher mortgage requirements will propel this buying demographic into lower cost homes and delayed home ownershipThat this lower level of financial resources combined with higher mortgage requirements will propel this buying demographic into lower cost homes and delayed home ownership That in response to these factors the “frugal chic” lifestyle will be predominant within this age group for the foreseeable future.That in response to these factors the “frugal chic” lifestyle will be predominant within this age group for the foreseeable future.

26 That the Internet will have completed its evolution as the primary site for the fulfillment of the real estate experience from search to discovery, to purchase and closing, and to the post closing experience.

27 Strong, capable and well-funded competitors, drawn by both the obvious opportunity and weakened in place market shareholders, will appear very early in the recovery cycle.

28 That the downturn will also affect franchises resulting in weakened franchisee support By general downturn in revenues for both basic fees and optional services. Moreover franchisors will have record levels of account receivable from unpaid fees.By general downturn in revenues for both basic fees and optional services. Moreover franchisors will have record levels of account receivable from unpaid fees. With less revenues franchisors will cut services and will trim their own organizations further weakening the over-all systemWith less revenues franchisors will cut services and will trim their own organizations further weakening the over-all system Collection efforts and remedies will cause stress and discordCollection efforts and remedies will cause stress and discord This combination of circumstances will also weaken the relationship between the franchisors and their franchisees.This combination of circumstances will also weaken the relationship between the franchisors and their franchisees.

29 Franchise issues continued … Franchisee abandonment and new recruiting rates may be affected as some brokers discover lessened service levelsFranchisee abandonment and new recruiting rates may be affected as some brokers discover lessened service levels Those franchise entities that are owned by equity firms will find it increasingly difficult to service debt and meet franchisee expectations. Their surviving product may be the brand.Those franchise entities that are owned by equity firms will find it increasingly difficult to service debt and meet franchisee expectations. Their surviving product may be the brand.

30 The team next recognized that a major impediment lying between the current situation and success in the recovery market was the belief held by many brokers that the current down market was similar to previous down cycles and that the only necessary remedy was to hunker down and make it through to the next boom. The team strongly disagrees with this idea and developed the following response.

31 How is this down cycle different … There are multiple pressure points as opposed to the traditional cycle that centered on a down national economy or extremely high interest ratesThere are multiple pressure points as opposed to the traditional cycle that centered on a down national economy or extremely high interest rates Because during this down cycle the consumer has continued their evolution to becoming a more data and information powered buyer and seller. Moreover, at the end of this down cycle the consumer will use this increased sophistication to demand a higher level of service and a different level of involvement in the transaction.Because during this down cycle the consumer has continued their evolution to becoming a more data and information powered buyer and seller. Moreover, at the end of this down cycle the consumer will use this increased sophistication to demand a higher level of service and a different level of involvement in the transaction.

32 How is this down cycle different … Consumers from the demographic group that will constitute a large share of the recovery market will be looking for homes on the lower end of the price scale. Non-traditional vendors in the market (Google, Zillow, Trulia) will continue to enhance their services and products for further intrusion into the real estate buying cycle.

33 How is this consumer different? A significant percentage of real estate consumers within the recover market will either be or will be associated with the X and Y generation, a group that is noted for being self sufficient, self reliant, independent, and involved.A significant percentage of real estate consumers within the recover market will either be or will be associated with the X and Y generation, a group that is noted for being self sufficient, self reliant, independent, and involved. This same consumer will be techno-fused and Internet empoweredThis same consumer will be techno-fused and Internet empowered The recovery market will be characterized by a consumer who, for a wide variety of reasons, is more financially grounded and thus far more discriminating.The recovery market will be characterized by a consumer who, for a wide variety of reasons, is more financially grounded and thus far more discriminating.

34 How are traditional brokerage firms vulnerable? Most traditional brokerages have yet to decide whether to change their business modelMost traditional brokerages have yet to decide whether to change their business model The recovery market consumer will demand higher levels of service and safety while at the same time wanting to pay a lower commission or fee.The recovery market consumer will demand higher levels of service and safety while at the same time wanting to pay a lower commission or fee. Traditional brokerages are being weakened and may be unpreparedTraditional brokerages are being weakened and may be unprepared Well funded non-traditional competitors will be waiting in the wingsWell funded non-traditional competitors will be waiting in the wings The ability of new entrants in the business to compete will be enhanced by the fact that they have no baggage.The ability of new entrants in the business to compete will be enhanced by the fact that they have no baggage.

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36 13.Service Delivery Representatives The economics and service delivery standards necessary for success in the recovery market will likely necessitate a substantial adjustment in commission splits and overall compensation policies.The economics and service delivery standards necessary for success in the recovery market will likely necessitate a substantial adjustment in commission splits and overall compensation policies. The service and informational standards necessary for success in the recovery market will likely necessitate the creation of a standardized service and informational offeringThe service and informational standards necessary for success in the recovery market will likely necessitate the creation of a standardized service and informational offering

37 USER DEFINED CONTENT 80% OF Gen X and Y prefer user generated content over that of source information providers80% OF Gen X and Y prefer user generated content over that of source information providers Our industry is yet to embrace user contributionsOur industry is yet to embrace user contributions User sites and blogs are being created and used by consumersUser sites and blogs are being created and used by consumers Realtors generally refuse to admit to the existence of or contribute to user sitesRealtors generally refuse to admit to the existence of or contribute to user sites See SWAMPLOT.COM as exampleSee SWAMPLOT.COM as example

38 TRANSPARENCY Consumers are demanding and getting complete transparencyConsumers are demanding and getting complete transparency Consumers prefer to pass up those who will not subscribe to transparencyConsumers prefer to pass up those who will not subscribe to transparency Transparency in our industry means sharing all the data, all the process, and all the feesTransparency in our industry means sharing all the data, all the process, and all the fees

39 THE ROLE OF MLS There is a definite need for a robust data source that can serve the members as they strive to accommodate the desires of new buyers and sellers.There is a definite need for a robust data source that can serve the members as they strive to accommodate the desires of new buyers and sellers. The Listing is only the beginning of the required data.The Listing is only the beginning of the required data. The Listing may not be the beginning of the data needs of consumers and members alike.The Listing may not be the beginning of the data needs of consumers and members alike. What scale undertaking is required?What scale undertaking is required?

40 NEEDS Single technology platform for MLS and public facing web sitesSingle technology platform for MLS and public facing web sites MLS data standards such that all local needs can be accommodated.MLS data standards such that all local needs can be accommodated. Transaction management data exchange standardsTransaction management data exchange standards Data transparency (ex sharing of sold data)Data transparency (ex sharing of sold data) Maintenance of robust property data baseMaintenance of robust property data base

41 Consumer Centricity Of all the needs, consumer centricity is the greatest.Of all the needs, consumer centricity is the greatest. Understanding and satisfying consumer needs is the first step.Understanding and satisfying consumer needs is the first step. The role of the consumer is being transformed from passive buyer to active participant in co- creating value.The role of the consumer is being transformed from passive buyer to active participant in co- creating value. Setting and enforcing service delivery standards is an early stage must to begin the transitionSetting and enforcing service delivery standards is an early stage must to begin the transition

42 continued The organizational changes demanded to achieve such a shift are massive.The organizational changes demanded to achieve such a shift are massive. A change of this magnitude can only come from the top of the organization.A change of this magnitude can only come from the top of the organization. The first source of conflict in achieving this goal relates to weather the vision is embraced as a cultural goal or is seen as an independent projectThe first source of conflict in achieving this goal relates to weather the vision is embraced as a cultural goal or is seen as an independent project

43 And finally: Web centricity in Web 2.0 is consumer inter- action.Web centricity in Web 2.0 is consumer inter- action. Establishing and enforcing service delivery standards also implies encouraging consumer rating of you and your organization.Establishing and enforcing service delivery standards also implies encouraging consumer rating of you and your organization. Success will come to those who embrace the new world order.Success will come to those who embrace the new world order.


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