The State of Real Estate: The Good, the Bad and the Ugly

HomeServices Chairman Kicks Off RISMedia CEO Exchange With Candid Look at Industry

Set within the hallowed halls of the Harvard Club of New York City, RISMedia’s 2017 Real Estate CEO Exchange opened last week with a candid look at the state of the real estate union from HomeServices of America Chairman and CEO Ron Peltier.

CEO_2017_Ron_Peltier_Opening — HomeServices Chairman and CEO Ron Peltier gives opening remarks on the The State of the Real Estate Union at RISMedia’s 2017 CEO Exchange.

Peltier’s address on Sept. 12 came after RISMedia President & CEO John Featherston welcomed the crowd of more than 230 real estate brokerage leaders and C-level executives, pausing to honor the victims of the 9/11 terrorist attacks as well as those suffering from Hurricanes Harvey and Irma.

Featherston then turned his attention to the state of the real estate industry. “We live in an era where the consumer has become more sophisticated than ever before,” he said. “Our value proposition as real estate professionals is under constant attack.”

To address this concern for the CEO Exchange audience, Featherston turned to old friend and industry icon—“someone who walks the walk”—Ron Peltier.

“One thing I can’t do is tell this group how to get another listing or sale,” said Peltier to the crowd. “But we’re all in the same business and at the end of the day, the ultimate achievement is superior customer experience in the homeownership space.”

When it comes to the state of the housing economy, Peltier said it’s a “tale of the good, the bad and the ugly.”

Giving his perspective on the national market, Peltier referred to the first 8.5 months of 2017 as a “Goldilocks” market. “It’s not too hot, it’s not too cold…it’s just right,” he explained. “Although it’s very hot in unit-driven markets or entry-level markets where there is no inventory.” In fact, keeping with his movie-title theme, Peltier referred to the entry-level homebuyer market as “gone in 30 seconds. Conversely, we’re seeing a very slow marketplace in the luxury market as it relates to units,” he added.

CEO_2017_JEF_Ron — HomeServices Chairman and CEO Ron Peltier and RISMedia President and CEO John Featherston during the CEO Exchange opening session.

Peltier believes we will end the year at 5.5 million home sales and experience a slight increase next year to 5.6 million. “It’s a Goldilocks market—it’s okay, it’s normal. It’s not perfect and it’s not great, but it’s one we can navigate in. We can plan and predict and build a budget. Pricing is continuing to move up, but affordability is still good, although it’s starting to get challenged on the lower end.”

Problems dot the economic landscape, however, including a very little wage growth and “not a lot of fire” in the marketplace. GDP is growing but is probably not going to be robust, said Peltier, but the good news is there is no recession on the horizon and inflation is low. “I think we’ve got a good run ahead of us.”

That said, there are several concerns that keep Peltier “up at night,” one of them being the tremendous lag in new construction, especially given the continued inventory shortage. “New construction is still woefully underserving the entire country.”

Cyber security is also high on Peltier’s list of concerns, citing the recent Equifax breach to support his point. “Virtually half of America just had their credit compromised,” he said. “We can be of help to our clients by being good stewards and encouraging them to freeze their credit. This is going to be a major challenge for people who want to secure credit for auto, housing or home improvement loans.”

Peltier is also concerned about what he refers to as a lack of velocity in the marketplace. “People are effectively buying back their houses, by choosing to remodel instead of move. We used to say that people would trade up every seven years, but now that stat would have to be adjusted to nine or maybe 11 years. The population continues to grow all the time, but we’re low in inventory—we’re going the wrong way and it’s putting a great deal of pressure on commission. Inventory is going to be a problem for the next several years and I’m not sure how we’re going to deal with that.”

Peltier mused whether the current shifts we’re seeing in the housing market are fall-out from the Great Recession, similar to the way our parents were shaped by the Great Depression. “We don’t fully understand yet how the recession has shaped housing,” he said. “There is delayed housing formation—millennials have delayed home purchases, delayed having children, and all of this is impacting the first-time homebuyer trend. Are millennials reshaping the way people think about houses?”

On the flip side, baby boomers are influencing the market in different ways. “They’re staying in their homes,” explained Peltier. “People are retiring where they live and work.”

Ultimately, the onus falls on brokers and agents. “When we look at all those changes, the question we have to ask ourselves as brokers and professionals in the business is, ‘are we continuing to adapt and coach and change and train our people?’ I believe that what we do as individuals is a very high calling. We help navigate a very complicated business.”

Peltier stressed, however, that not all real estate professionals are created equal. “We have way too many agents,” he said. “The bottom half do nothing and then we have super-talented people. Is the bar too low? Do we need to raise the standards? If we need to keep our value proposition, it’s time we start to visit those questions. We’re judged by our most common denominator.”

Peltier closed his opening address with a few words on the subject of data, a battle he reminded the audience has been going on since the late ’70s. “We’re not the first to the party, but we need to be focused on capturing and retaining data because we have a wealth of information on customers and clients.”

Stay tuned to RISMedia for continuing coverage of this year’s CEO Exchange sessions: