Encouraged by a post-recession housing market that continues to tick upward, Power Brokers are generally positive, but carefully watching the future, with 58 percent describing their confidence level as “cautiously optimistic.”
While certain tailwinds stand to accelerate growth (low interest rates, pent-up demand), several headwinds may get in the way (the presidential election, low inventory). That’s why respondents to RISMedia’s 28th Annual Power Broker Survey are focused on fortifying their agent force with new blood, better training, and the right resources to increase business, no matter what the market hands them in the months ahead.
The results of RISMedia’s Power Broker Survey* reflect the overall pattern of the housing market last year. While 45 percent described their markets as “growing,” “stable” was a close second. Power Brokers reported a collective $1,123,494,913,023 in sales volume and 3,453,108 transactions. This represents a more than $150 billion increase in sales volume over 2014, and nearly 250,000 more transactions—a clear indicator of low inventory driving prices higher.
While many positive indicators bode well for an even better 2016, certain factors may have the unintended consequences of thwarting the market’s potential.
Helen Hanna Casey, president of regional leader Howard Hanna Real Estate, is well aware of the impending conflict in this year’s market. “2016 is off to an incredible start, and it looks to continue for the coming months,” she reports. “High rents and low interest rates will continue to drive the first-time buyers’ market. With slight increases in inventory, move-up buyers are gaining momentum. But it’s an election year, and there is a volatile stock market, which affects the luxury buyer and seller.”
Of course, the scenario varies based on location, with many brokers in hot markets experiencing significant increases in 2015. “We are anticipating another strong year in 2016,” says Tom Tognoli, founder, president and CEO of Intero Real Estate. “We expect the pace of appreciation to slow down a bit, but with a lack of inventory, low unemployment, and low interest rates, I do believe that property values will continue to appreciate, especially in the San Francisco Bay Area and Silicon Valley.”
“This is a historic time for the real estate industry, and the wild ride will continue into 2016,” says Lennox Scott, president and CEO of the Pacific Northwest’s John L. Scott Real Estate. “Inventory in markets closest to job centers is desperately low, and what was a ‘quick action’ market is now an ‘instant response’ one for homebuyers. Because this is such a frenzied market, we are arming our brokers with the best tools possible.”
The Pros and Cons of Low Inventory
Rei Mesa, president and CEO of Berkshire Hathaway HomeServices Florida Realty is battling inventory challenges in the Sunshine State. “We’re experiencing some headwinds related to inventory here. It’s still pretty tight—we have four months of inventory in the single-family sector, and a healthy market is six months,” he explains. “For first-time and entry-level buyers, the lack of inventory and price appreciation we’ve experienced over the last several years are challenging. Even though interest rates are low, prices have inched back up, so there is a lack of choices.”
But despite those factors, the desire to buy is strong. “There is a great deal of pent-up demand,” adds Mesa. “Rental vacancies are near zero. Rents have risen higher than actual sales prices as a percentage. These factors should translate into a higher number of transactions in the future.”
Inventory challenges are not just relegated to coastal markets, either. According to Dan Elsea, president of Brokerage Services for Michigan’s Real Estate One, among the biggest concerns for buyers is finding a home to buy, “particularly in the mid- to lower-price ranges. I think as the market settles down through this year, inventories should rise and give some relief to buyers. We have been seeing that in the upper-end markets for the past 12 months. Finding listing inventory will still be the primary focus this year, even as the market settles down, so agents will need to be creative in reaching out to their sphere.”
“Like most markets, we do not have a huge inventory of affordable housing and new construction,” agrees Dorcas Helfant-Browning, managing partner and principal broker of Coldwell Banker Professional, REALTORS® in Virginia Beach, Va. “We represent several core cities and several counties, and our hotter cities are hot with multiple offers. Others have less job opportunities. Employment is low, and many people are under-employed. Local economists tell us employment is down 10 percent, but we’ve also grown 10.5 percent. For us, that’s a win because we’ve sustained jobs.”
The Millennial Promise
Despite their staggering student-loan debt and alleged disinterest in owning a home, millennials hold much promise for real estate, say respondents.
“Millennials are poised to dominate the housing market in the coming years, and we’re positioning Long & Foster and our agents to appeal to their needs and wants in a variety of ways,” says Jeff Detwiler, president and COO of the Mid-Atlantic powerhouse, Long & Foster Real Estate. “We’ve increased our focus on technology, recognizing both the power it provides our agents and company in terms of growth and its appeal to millennials. We became a part-owner of Moxi Works, a real estate tech company, in 2015, and that investment positions our company and our agents on the leading edge of real estate tech—a place you’ll find many millennials.”
According to Coach REALTORS® Branch Manager Whitney Finn LaCosta, appealing to millennial homebuyers in the firm’s Long Island, N.Y.-based market requires bringing more millennials into the company fold—and that goes beyond technology. “They want to be part of a like-minded group, and that group must have high ethical standards,” says LaCosta. “The high ethical standards part is easy because that has always been part of the Coach REALTORS® culture. To help create the group environment they’re looking for, we have developed a Young Professionals network within our company.”
Joe Rand, managing partner of Westchester, N.Y.-based Better Homes and Gardens Rand Realty, adds a word of caution when it comes to millennials, suggesting that the differences between them and other generations are “often over-hyped.”
“Obviously, you need to be more tech-savvy with younger agents and clients, but that’s always been the case,” says Rand. “With regard to clients, millennials respond to fundamentals the same way everyone else does. Agents need to know their inventory, be able to explain the buying process, communicate openly and frequently, manage a transaction…all that good stuff. And with regard to agents, I do think that brokers need to be a little more sensitive to the fact that millennials want a more ‘customizable’ career path that responds to their needs, rather than the cookie-cutter approach that many brokers have traditionally taken. But in the end, millennial agents want what every agent wants: good training and coaching, solid resources and tools, uplifting branding, and a fair split.”
Outsmarting the Market
To succeed in the year ahead and beyond will require a strategy that takes both the market’s challenges and opportunities into account.
“We anticipate that 2016 will outperform 2015,” says John Paul Horning, executive vice president of Wisconsin’s Shorewest REALTORS®. “We have already seen increased demand due to low rates and an improving job market. We are also experiencing a tighter inventory of homes for sale, which is supporting an increase in home prices.”
Hanna Casey says that success path forward will require a focus on target marketing. “We need to better understand market segments and how to capture them and keep them through multi-media, multi-generational marketing.”
Savvy brokers will seize the opportunity to turn economic uncertainty into an advantage. “We see a big opportunity with the chaos in the stock market to attract people to real estate investments as a safe, local investment,” says Caroline Ruhl, president and co-owner of Iowa’s Ruhl & Ruhl REALTORS®. “We have a speaker scheduled to come in and train our agents on how to sell investment real estate and then in the evening they can invite their clients back in to hear the speaker explain the advantages of investing in real estate.”
Preparing agents for both the challenges and opportunities in the current marketplace is a priority for Jim Fite, president and CEO of CENTURY 21 Judge Fite Company, serving the Dallas/Fort Worth Metroplex. “With listings being par with the last two years, our multiple offers are significant in number—upward of 30 offers on hot properties within 72 hours of listing,” says Fite. “The biggest opportunities are recruiting new and experienced real estate professionals. As our marketing is very strong, new recruiting, onboarding, and training opportunities are paying off.”
Looking past the uncertainties of 2016, Power Brokers see clear sailing on the horizon. “The real estate industry follows the cycles and reacts according to the law of supply and demand,” says Alexander Karavasilis, president and CEO of Maryland’s RE/MAX Advantage Realty. “Absent any extraordinary events, inventory levels are stabilizing, interest rates remain at historical lows, and the desire for the American Dream is burning as bright as ever. If the regulatory body releases the overall chokehold on the industry and related industries, we will see increased activity and healthier markets.”
To view the full Top 500 Power Broker Report, click here.
Paige Tepping, Nick Caruso, Zoe Eisenberg and Suzanne De Vita contributed to this report.
*RISMedia’s 28th Annual Power Broker Report & Survey is based on the top 1,000 respondents to a survey distributed via email and available online at rismedia.com. The survey ranks residential real estate brokerage firms according to closed transaction numbers and closed sales volume for the year 2015. The Top 500 list in this section is ranked by sales volume. To see firms ranked by transaction, please reference the full Power Broker Report, coming soon to rismedia.com. All sales and transaction data are submitted directly by brands and individual brokerage firms, and verified by the firm’s financial executives, outside accounting firms and/or corporate franchise headquarters.
