Editor’s note: This guest essay is a part of the Roadmap to Recovery editorial project, which focuses on the future of the real estate industry. Essays should be 400 words or less and should detail your views on how to reinvent the industry and revive the housing market. You can pick a specific industry category — such as brokers, agents, technology, title or lending — or discuss the entire industry. Our editorial team will review the essays — authors of essays published in full will get a free pass to the upcoming Real Estate Connect conference (for new registrants only), and the author of the top essay will receive $500. Send your essays to future@inman.com. There are other ways to participate in the Roadmap to Recovery project, too. Click here for more details.
By WILLIAM METZKER
The present down market isn’t going away. It’s going to get worse. Housing markets typically take years to recover, and this one is no exception. Home sales in 1993 were at about the same level as they were in 1988, and there wasn’t a consistent increase until 1995.
Even when the market stabilizes and recovery begins, the market won’t see a quick rise in prices or units sold, absent significant immigration. Aging baby boomers won’t be buying as many houses as before. The risk inherent to home-buying, eliminated by cheap mortgage money, has returned, along with a crisis in confidence. These factors will aid in a return to the acceptability of renting, which also permits job mobility and fast lifestyle change. Homeownership will be largely confined to upper-income people and to those in professions offering geographical stability and de facto tenure.
The real estate market is not in some kind of "correction," but rather it’s undergoing a sea change. Think lath and plaster. Until the 1950s, lath and plaster was used to finish interior walls of buildings, and the unions for lath and plaster workers were among the most powerful in the trades. Then, someone invented Sheetrock, and now that union doesn’t even turn up in a Google search. The change coming to real estate is that big and will see enormous changes — some very fast, some more gradual.
Brick-and-mortar brokerage houses won’t be able to cover overhead and will severely shrink or fold. Their value as a brand is questionable anyway, but the huge dissemination of information online has made the business agent-centered and not broker-centered, which is the final nail in the coffin.
Moreover, the public demands and receives more and more information online, and the real paradigm shift will be a change from agent-centered transactions to customer-centered ones. Commission-based compensation will slowly disappear. Agents themselves will perform a transparent service with clear value-adds. An enormous dip in the number of real estate agents will occur. Many inexperienced ones can’t make it in the current environment, and older, successful ones will retire.
But the opportunities are exciting. Agents (who will come to be termed something else) will specialize in niche areas — estates and trusts, homeowner associations, etc. — much as other professionals do. The market, their trade associations and state regulators will mandate better education, and professionals will receive higher compensation and enhanced social prestige.
William Metzker is a broker for RE/MAX Equity Group in Hillsboro, Ore.
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