What a difference a year makes.
This time last year, Power Brokers were sitting pretty, a healthy economy in hand and a bullish outlook on 2020. But a growing concern was also casting a shadow of uncertainty—the nascent COVID-19 virus.
No one could anticipate with any degree of certainty what the fallout would be one year later. But after a couple of barren months sparked by a pandemic-induced recession and near worldwide lockdown, a housing boom took hold—and the results of RISMedia’s 2021 Power Broker Survey tell the story.
Despite the devastating impact of COVID-19 on so many facets of life and business, real estate thrived in 2020, with this year’s Top 1,000 Power Brokers reporting nearly $1.7 trillion in sales volume compared to last year’s $1.4 trillion. 2020’s average transaction amount also soared beyond 2019, rising from $374,314 to more than $400,000. What’s more, Power Broker sentiment for 2021 marks a first in our 33-year history of the survey: 50% of Power Brokers describe their market as “booming” compared to just 18% who described it as such the year before.
“The COVID-19 pandemic drove consumers’ homes to the top of their priority lists in 2020,” says Todd Sumney, chief industry officer for HomeSmart. “That priority, combined with the lowest interest rates for some time and our pre-existing housing shortage in the U.S., has impacted many markets by driving an increase in demand for homes and, ultimately, an increase in transactions.”
A Pervasive Fly in the Ointment
Today, with hot market conditions prevalent in almost every area of the country, Power Brokers are riding the wave. But they’re also bracing themselves for the other shoe to drop: lack of inventory sparking increasing affordability issues. While “Lack of Inventory” has been ranked the No. 1 challenge in the Power Broker Survey for four years running, the extent and scope of the issue is now greater than ever, according to a whopping 84% of Power Brokers.
“Coming off a record-breaking year, our market continues to flourish with strong buyer demand,” explains Michael Saunders, CEO of Sarasota, Florida-based Michael Saunders & Company. “We are experiencing multiple offers and frantic buyers. However, inventory is at an all-time low. With properties selling quickly, sellers are hesitant to list as they must reenter the market as buyers with limited choices. Off-market properties are the hottest commodity.”
“The market is very difficult with extremely low inventory,” says Gary Carlson, broker/owner of Realty ONE Group Premier in Lone Tree, Colorado. “The significant increase in home values and low inventory are making it difficult for a buyer to find another home and/or assess if there is a significant difference in making a change from what they are currently living in to a new home.”
Some believe market conditions will propel an inevitable increase in inventory.
“The public—due to the pandemic, the election, social unrest and other issues—has been delayed in participating in the listing and purchasing of properties,” says Lisa Munoz, broker of Keller Williams Realty Heritage in San Antonio, Texas. “Builders have little to no inventory and are increasing new starts. However, they are challenged due to lot shortages, unknown supply availability and continuous price increases of those resources. This is likely to improve with the public’s and industry’s confidence level, including but not limited to the virus vaccine rollout, the election completion and simply the desire to be back together again in person.”
“COVID has created market indicators that we’ve never seen before, leading to record prices and activity that will be studied for years to come,” adds Grattan Donahoe, broker of ERA Donahoe Realty in Temecula, California. “In the meantime, I expect sales to continue to flourish and inventory to loosen as home sellers can no longer ignore the record values their homes could fetch on the market.”
Consumers Are Driving the Bus
The 2020/2021 real estate boom is sparked by a variety of unique circumstances triggered by the pandemic, most notably, the consumer-driven shift in where and how they live.
“The meaning of ‘home’ has been redefined because of the pandemic,” explains Ryan Carter, president of 8z Real Estate serving Denver and Colorado’s Front Range communities. “People now want more from their home. They want space that can allow them to have more amenities—that may be the ability to work from home, more outdoor space, more privacy or larger square footage. Also, the ability to not be bound by a commute as more people are working virtually has allowed buyers to look outside of typically metro/urban markets.”
Operating in a pandemic environment meant the immediate need to service consumers with, and through, technology more than ever before. For many Power Brokers, COVID times pushed their agents over the tech hump fast, and potentially for good. And for some, the rapid tech shift of 2020 stands to permanently change the traditional real estate business model.
“Agents will lean into technology-driven, virtual brokerages,” believes Jason Gesing, CEO of eXp Realty. “The brick and mortar value proposition of a traditional brokerage will fade fast, as more agents and their clients will embrace remote work in 2021.”
While the pandemic has accelerated the adoption and use of technology, for many brokerages, it has also emphasized the value of working with a real estate professional.
“The industry will continue to experience technology intrusion and sales associates will struggle to find the secret sauce,” says Thais Vona, controller for RE/MAX Select Realty in Pittsburgh, Pennsylvania. “The relationship between the REALTOR®’s value and the consumer’s expectations will become increasingly scrutinized. The sales associates who can bridge that gap consistently and deliver both pre- and post-relationship driven transactions will, without a doubt, overcome the illusion that technology-driven models will either replace them or result in the devaluation of the services they perform.”
In It to Win It
The year ahead, once again, will unfold with a degree of uncertainty. While the positive impact of vaccinations and potential herd immunity hold promise of a potential return to normalcy come summer, rising interest rates, persistent unemployment and increasing taxes are all on Power Brokers’ radars as they move forward.
“With historically low interest rates, greater negotiability and a vaccine in play, we believe that we will experience robust market activity across all of our markets, especially in New York City,” says Salvatore Troia, CFO of Douglas Elliman.
“In our market, we are currently experiencing economic uncertainty brought on by record-breaking unemployment rates,” says Andrea Larson, broker/owner of Berkshire Hathaway HomeServices Michigan Real Estate. “We are keeping a close watch on potential interest rate changes as a result of the new administration, which could compound the challenges we are experiencing.”
No matter how things shake out, the real estate professionals who have invested in innovation and increasing their professionalism are the ones who will win out.
“Despite the numerous challenges of 2020, housing continues to be a basic need and prevails in spite of challenges,” says Terri Stickle, executive vice president of Virginia’s Rose & Womble Realty. “The new normal is to be flexible in meeting those real estate needs.”
“We are in a radical, changing environment,” adds Mike Pappas, president and CEO of Florida’s The Keyes Company/Illustrated Properties. “It is incumbent on us to adapt, pivot and lead in these times.”
Maria Patterson is RISMedia’s executive editor. Email her your real estate news ideas to email@example.com.