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Looking Confidently Ahead: Power Broker Predictions for 2013

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By Maria Patterson

BD6229-001Consumer confidence. Price appreciation. Multiple offers. Wait…is this real estate we’re talking about?!

Like long-forgotten music to our ears, these are just some of the buzz words peppering the vernacular of the nation’s top brokers as they advance toward further recovery. Even though some significant obstacles still stand in the way—from potentially hazardous changes to housing-related policy to a still-sizeable foreclosure inventory—power brokers believe that positive momentum in 2013 will carry us over the bumps in the road. Here, power brokers from across the country offer their take on the top issues influencing the real estate landscape this year. Take heed, as these factors stand to have a significant impact on business growth.

Consumer Confidence
Buoyed by a bevy of end-of-year statistics showing a slowly improving unemployment outlook, increased holiday spending, and an all-around more positive outlook on our financial future, the consensus among brokers is that consumer confidence is on the mend…and stands to be real estate’s greatest ally in 2013.

“One of the biggest changes this year is going to be the mindset of buyers and sellers,” says Mark Woodroof, partner at Houston, Texas-based Better Homes and Gardens Real Estate Gary Greene. “When we rolled into 2012, most people were pretty leery and tentative about where everything was going, however, people were pleasantly surprised. There was this sense that maybe the improved market was here to stay—maybe it wasn’t just a temporary lift as we had seen with the homebuyer’s tax credit. People are continuing to feel better, and when people feel better, they tend to buy big-ticket items, like housing and cars. That story will continue for 2013. We have (at press time) the fiscal cliff and a host of regulations that stand to affect our industry, but consumers are way ahead of that in believing that somehow, all of that is going to get worked out.”

Prudential Florida Realty/Florida Real Estate Services President & CEO Rei Mesa agrees, citing a recent study which reported that consumer confidence in the last quarter of 2012 rose to its highest level since early 2008. Self-described as “cautiously optimistic” for 2013, Mesa believes that consumer confidence will be critical to turning the tide this year.

“With the presidential election behind us, consumers are more likely to get ‘off the fence’ and increase spending, including moving forward with their homeownership decisions,” explains Mesa.

Surprisingly, we have the media to thank for helping to build the momentum of consumer confidence as positive headlines about the economy and housing continue to come forth from authorities such as The Wall Street Journal, Marketwatch and Case-Shiller, to name just a few.

Gary Scott, president of the Mid-Atlantic real estate giant Long & Foster Real Estate, agrees. “The most significant difference between 2012 and 2013? In a single word: confidence. Both among our clients and the Long & Foster sales team,” says Scott. “We are excited about the opportunities 2013 brings and have every indication that tomorrow looks better than today. Consumer confidence is high—at its highest level in almost five years.”

One of the critical drivers of this renewed consumer confidence is a gradual mental shift—both in the real estate market and our country as a whole—toward certainty.

“What will drive our business is what will drive most national business, and that’s creating certainty,” explains Better Homes and Gardens Mason-McDuffie Real Estate Chairman Ed Krafchow. “There was a lot of uncertainty during the downturn and now we’re moving more toward an area of certainty. Once we get to a place where people know the rules and understand the directions, then people will make their decisions based on that certainty.”

According to John Melo, CEO of Century 21 M & M Associates in Southern California, consumers are certain about one thing. “Consumers believe that real estate is a safe investment and the worst is behind us,” he says. “They are also feeling a need to get in the market before it’s too late.”

Inventory Down…Prices Up
A shift that began taking place in 2012, power brokers predict that 2013 will witness an even greater lack of inventory—both a boon and a challenge to business this year.

As J. Lennox Scott, CEO & chairman of the Northwestern powerhouse John L. Scott Real Estate, explains, the inventory shortage began in 2012 when the real estate landscape began shifting back toward a seller’s market. “This will definitely continue in 2013 where we expect the majority of the sales activity taking place in multiple-offer markets. Prices are going to continue to rise and we’re going to continue to see an inventory shortage.”

An important point of clarification, offers Helen Hanna Casey, president of Howard Hanna Real Estate Services in Pennsylvania, West Virginia, New York, Ohio and Michigan, is that the inventory shortage will be felt most strongly in “desirable price ranges.”

“One of our greatest challenges is low inventory,” she explains. “Inventory is off in desirable price ranges and/or desirable neighborhoods. In most of our markets, inventory in the $220,000 – $350,000 price range is way, way down. It sells as quickly as it comes on the market.”

As prices continue to improve, however, brokers hope to see an increase in listings.

“For the first time in five years, consumers in the Phoenix market have much to be positive about, especially on the selling side,” says Realty Executives Phoenix Owner and Realty Executives Intl. President Rich Rector. “The steady price increases and low inventory in the Greater Phoenix market coupled with low interest rates is going to get a lot of sellers off the bench, so to speak, and back into the real estate arena in 2013.”

Moving Up
If there’s one buying segment power brokers are betting on in 2013, it’s the move-up buyer. As rising prices begin to have a positive effect on battle-worn home equity, those who have been delaying moving up can suddenly get back in the game.

“This year, we will see sellers with equity who can now sell their homes in today’s market,” explains Lennox Scott. “Local homebuyers are confident that prices have bottomed out and that they can now move forward. They’ve been waiting five years or longer to act and life events have taken place. They’re now ready to move into the next phase of their lives.”

Casey began witnessing the return of the move-up buyer in 2012. “If the forecast holds for the next six months, I think we will continue to see the move-up buyer, especially the 35 – 45-year-olds,” she states. “The move-up buyer still seems to be in a position to drive the market.”

Increasing home equity is expected to spark a wide array of real estate sales, not just upward moves.

“We are seeing an increase in homeowner equity as home prices continue to rise,” reports Mesa. “This translates to a larger number of homeowners who are no longer underwater and can move up, or make a lateral move or downsize because they are now in a position to sell their home. With this lift in homeowner equity, we should experience a rise in traditional home sales.”

Not Your Father’s Office Space
On the operational front, one of the most predominant trends for 2013 will be a widespread migration toward the real estate office of the future.

“We learned a big lesson during the downturn,” says Krafchow. “Most large brokers had far too much lease space. We have gone through heavy-duty restructuring and will continue to look at how we utilize lease space. Agents are becoming more and more mobile—you can walk into one of my large offices and you’ll find very few people there because everyone is now mobile. 2013 will be a continuation of managing the business based on how you develop business—not about retaining vast amounts of lease space.”

Woodroof has reinvented his firm’s physical space based on how today’s consumer is buying real estate.

“We’re really recognizing that consumers today are looking at lifestyle before they ever look at a house,” he explains. “They are asking themselves, ’Where do I want to be?’ ‘What is the community like?’ ‘What activities are available?’ Tactically, we looked at our footprint and instead of having large, mega offices, we’ve created market centers in the most active communities. So in addition to the mother ship, we have market centers that sit in the middle of communities. It’s like an Apple store feeling. The idea is to have a presence in the community and let the office integrate with the community. It’s just where people are today…and you have to be where people are.”

For Gary Scott and Long & Foster, shifting from the traditional real estate office concept to a more relevant model does not necessarily mean fewer offices, but rather, “smarter” space.

“We are focused on what we call ‘smart retail,’” he explains. “This means creating retail locations that offer smaller office space with an emphasis on technology and mobile platforms that help our associates do what they do best: bring buyers and sellers together. It doesn’t necessarily mean having fewer office locations. In fact, we have begun adding offices in prime locations—just doing it more smartly. More investment in technology and in our people, and less reliance on just having large space.”

Technology, Yes…but Agents Rule
Never have brokers been more focused on supporting and nurturing agents than now. The reason? Those agents left standing have proven their value and their commitment to real estate consumers.

“As much as we look to technology to fuel our business, our greatest asset really is in the strength of our people,” says Gary Scott. “Take great technology and mix it with great people trained to use it, and that’s a winning combination.”

“Our operations model for 2013 has shifted to focus on staff and services that will positively affect our agents on a daily basis,” says Rector. “With a brokerage as large as ours, reaching every agent on a regular basis can be a challenge, but our new staffing structure enables us to ‘touch’ our agents on a consistent basis through a variety of venues and mediums. We’re still in the people business and the more we can help train and prepare our agents to meet the needs of their clients, the better off everyone is in the organization.”

This mindset will create renewed efforts around agent training, as brokers ready the troops for gleaning business in an improving market.

“We have been preparing our agents for an REO market to a short sale market to dealing with equity sellers,” says Melo. “We are training our agents on the basics of farming, listing presentations, video, smartphones, etc. It’s back to marketing your business for business…with technology.”

Casey is taking a similar tact, focusing on training agents to successfully incorporate technology into their business regime. “Training our agents and providing them the right tools is very important,” she explains. “We can’t have agents spending time trying to learn technology. They need to spend their time on the phone and in person. We need to be working together and have one team and one dream.”

To that end, leadership will take an increasingly active role in devising the right technology plan for agents.

“In today’s world, if you’re going to be a market leader, you’d better have the staff, the technology and the marketing tools,” says Woodroof. “The biggest challenge is sorting through all the options. Real estate agents can become totally immobilized by all the options, so you have to help them create a game plan. And none of it is worth it if you don’t have the right people to execute.”

Readying agents for the changing market is also critical for 2013.

“Our ability to provide the proper clarity and guidance this emerging market requires will be our main game-changer for this year,” says Rector. “Regardless of what is happening in the market, a couple of things always stand true. First, experienced professionals will succeed because they are effective at showing their value. And second, a positive reputation is gold in any marketplace.”

Relevancy at Every Level
Over the past several years of the real estate downturn, the industry has been forced to question its relevancy from every angle. With the market swinging into recovery mode, the need to be relevant will become even more paramount in 2013.

“Going into the year, we’re going to see different strategies and tactics, but at the end of the day, the biggest challenge is continuing to remain relevant,” says Woodroof. “Our associates have to be relevant to consumers; brokers have to be relevant to agents; and national brands have to be relevant to their franchisees. The world is ever-changing and you have to be fresh. You can’t be your father’s real estate company.”

“Today’s consumers are becoming more confident every day and that is good for our business,” says Gary Scott. “But they also want more transparency and, as a result, have an intense desire to be informed and be confident in their decision to make an investment in homeownership. They want the ability to not only have a great personal relationship with their agent, but also have their agent provide them relevant, ongoing insight.”

Casey makes providing relevant information and critical market statistics an ongoing practice at Howard Hanna. “As a broker today, you have to know your markets and you have to know what the appreciation has been in those markets,” she explains. “I’m a big proponent of providing historic data—going back and looking at that neighborhood or county and looking at what the price history has been over an eight-year period. Some markets are actually getting much more value than they were eight years ago. It’s important to provide this historical perspective.”

Mobile Becomes a Must
While the industry has been inundated with evidence of the rapid shift toward mobile technology, power brokers are placing even more emphasis on mobile in 2013.

“In terms of tools for working with buyers and sellers, it’s all about mobile,” says Lennox Scott. “There has been a huge paradigm shift in terms of the delivery of information. There are more minutes spent on mobile than on our desktops. We really invested heavily in our mobile apps—they are branded for each individual broker associate.”

What makes mobile so essential to business growth in 2013 is its capacity to be immediate. As Krafchow says, “The speed of getting agents to clients and the speed of getting information to agents and clients is crucial. Mobile technology will change all of this.”

For Mesa, mobile technology is a critical part of Prudential Florida’s arsenal of consumer engagement tools. “We are constantly looking to innovate and partner with great companies in order to increase our listing inventory and closed sales, as well as enhance the consumer experience throughout the markets we serve.”

NAR as Advocate
As the real estate market forges ahead on the path to recovery, brokers will look to the National Association of REALTORS® (NAR) to play a critical role in terms of advocacy in 2013…and well beyond.

“The role that NAR will play in the long-term viability of our industry is one of advocacy—advocacy in engaging members and consumers to protect and promote the American Dream of homeownership,” says Mesa.

Melo concurs. “NAR is very important when it comes to protecting our profession and having a voice at the table with our policy makers.”

Lennox Scott believes the real power of NAR lies in its ability to mobilize not just real estate professionals, but consumers as well.

“I’m very excited about what NAR is doing,” he says, pointing specifically to NAR’s consumer-focused Homeownership Matters campaign. “NAR is moving forward with this concept in order to go directly to the homeowner for public advocacy—to get not only one million REALTOR® members involved in these issues, but the homeowners as well. They want the homeowner’s voice to be heard, too, because the issues confronting real estate are just as important to them.”

According to Krafchow, NAR’s efforts can be instrumental in further galvanizing the industry to work together for the benefit of all.

“I think during the downturn, it became obvious that we needed to be better ‘friends’ in this business. Where there had been a lot of contention between brokers and state associations, there was a pulling together for the common interest,” says Krafchow. “Hopefully, we will continue down that path in a good market and continue to work toward a cooperative stance in the industry. The brokerage business, the agents…everyone needs to understand everyone’s best interest to maintain a relevant and vibrant real estate industry.”

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