Editor’s note: Inman News is seeking input for our Roadmap to Recovery editorial project, which focuses on the future of the real estate industry. This article features responses to a set of forward-thinking questions posed by Inman News. You can view this list of questions at: Inman.com/Reinventing — if we publish your responses you win a free pass to the upcoming Real Estate Connect conference (for new registrants only).
The following is an Inman News Q&A with Ken Jenny, managing partner for real estate consulting company Mediatise LLC.
Q: Imagine how the real estate industry will be different when we recover from the current downturn.
A: There will be more permanent changes than ever before for the real estate industry and as a result of a changing consumer in the very near future.
As for the real estate industry, the business will be transformed forever by the new credit requirements that are now being designed and defined. Expect fewer residential sales from a greatly decreased market of qualified potential buyers due to the higher credit qualifications that will emerge post this market. The need for real estate agents will be right-sized downward due to the restructuring of the creditworthiness of America and for once not by the general economy.
There will be plenty of business for those experienced agents who understand how to adapt and to do whatever is necessary to secure and market listings more effectively. In a world driven by search, listings will become the absolute source for buyer leads. Proven experience in the real estate business, combined with the application of new sales and marketing techniques, will reshape the future of this business in terms of what needs to be done at the point of sale.
In addition, real estate brokerage companies will be cinching up their expense "belts" and metaphorically "cutting off the end of their belts" to avoid the cycle of expanding the "expense belt" when the market improves. This market downturn is unique and is delivering the industry a near knockout punch that will not soon be forgotten.
As for the consumers, they’re online forever now and they have learned the game of search very well. The days of searching real estate by brand, company or agents is long gone. It is the property and the property alone that the consumer cares about and will search for going forward. A searched property will come complete with a listing agent, a listing brokerage company and some kind of brand. Essentially, the brand, the company and the agent will determine the listing, and search will deliver the listing broker or agent with all of the buyer traffic needed. The majority of all consumer buyer traffic will evolve from listings and the relevance of buyer’s brokerage will dwindle away over time within the brokerage business.
Q: How will the business model or business practices of the title, brokerage or lending industries change in the future?
A: RESPA (the federal Real Estate Settlement Procedures Act) will continue to rule the world of real estate and will likely tighten grip on the industry and unfortunately limit the value of a bundled settlement package of services for the consumer.
Careless attention to the details in the past will result in more attention to details that will inevitably limit or eliminate the value of bundled offerings for consumers.
Q: Will the industry be regulated differently in the future? If so, how?
A: No, Washington has bigger fish to fry other than limiting entrepreneurial business models.
Q: What must the industry do now to prepare for this new direction?
A: It had better change. The compensation arena is not where the battle of value will be fought or decided. It is the area of effective marketing strategies that will shape the new offering to the consumer.
Real estate-specific media resources are and will continue to replace generic media resources that now secure impressions from any consumer rather than from consumers who are confirmed to be in the process of searching for real estate.
Q: What technology trends will change the industry in the future?
A: The unfortunate separateness of the treatment of advertising and technology services by the brokerage industry has limited the growth of integrated interactive marketing capabilities in the industry.
A trend: the merger and consolidation of technology and advertising into interactive marketing.
Q: What skills will the real estate agent of the future require?
A: Being first and foremost a fluid, open-minded professional who FEEDS on change. Because business-critical things change daily and all things important to this business will need to be measured for results daily.
Q: How will real estate advertising dollars be spent in the future? How will real estate marketing be different?
A: "Inline" will be the way of the future: Inline with the expectations of the consumer and inline with the capabilities of the brokerage company’s ability to have the tools and mindset to best serve the consumer.
Q: What will drive the expansion or contraction of the housing market?
A: Consumer demand for real estate services. But if the brokerage business expects to survive, the only word in the vocabulary of the brokerage industry will be: contraction.
Q: Will local home prices decrease, increase or remain stable in 2009? 2010? Will national home prices fall, rise or remain flat in 2009? In 2010?
A: There will never be true stability in the market again. Stability will be challenged by much-eroded consumer confidence in the ownership of real estate as an appreciating asset and in the reluctance of home builders to risk capitalizing the build of product far in advance of the sales of current product inventories.
There will be a steady decrease in home values that will ultimately drive down prices. This trend will continue through 2010, and the inflated prices seen by an uncontrolled credit market will never return to the levels they once evolved into.
Ken Jenny, a real estate veteran who has worked in management roles for Prudential Real Estate Affiliates and Coldwell Banker Residential Affiliates, among other companies, is managing partner for Mediatise LLC, a real estate consulting firm with a focus on online advertising.
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