September 29, 2021
Is it possible to predict what the future holds for real estate, at a time when the market has experienced massive changes in an extremely small amount of time? With the right analysis — and the right analysts — today’s trends can tell you a great deal about tomorrow’s opportunities.
Matthew Ferrara is one such analyst. He may be best known for his work as a speaker, founder, and philosopher of business, along with being an accomplished professional photographer, but Ferrara is also a real estate expert who has kept a close eye on recent developments in the market.
Rich Green, Executive Vice President of Worldwide Sales at Realogy, has likewise been tracking the trajectory of global real estate. Both he and Ferrara sat down to answer questions about where they believe the industry is going, and how brokers can make the most of it.
Prices may remain elevated in tomorrow’s real estate market, but that isn’t expected to deter buyers. “Credit is very accessible,” notes Ferrara. “And interest rates are, in most cases, at historical lows.”
Green also points out that the federal government has stated interest rates are likely to hold into 2023, and while there are some signs of inflation, it’s not overwhelming for buyers right now.
“When I think about the general inflation that affects housing, such as cyclical fluctuations in the price of gasoline, electricity, food, and other goods and services, it’s not overwhelming for people’s budgets right now,” agrees Ferrara. “People see that prices, and even mortgages, are going up, but they can still afford them.”
Brokerages that want to lead the way will know how to speak to pricing and inflation in a way buyers and sellers can understand — and implement.
Just as the market shows no signs of slowing down, neither do the people who are free to move due to a changing workforce. “There are now even more employers that have said you can work from home and live anywhere,” says Green. “It’s changed how organizations go about selecting talent.”
It’s also changed how people go about selecting homes. In the past, large moves marked momentous occasions, like marriage or retirement. Now people can make these life-altering choices in their 20s, 30s, and 40s. “Between 14 and 23 million Americans said they’d be willing to move now that they can work from anywhere,” says Ferrara.
Even small increases have huge implications. “Before the pandemic, approximately 6% of our population worked from home on a regular basis,” he adds. “Imagine if that’s now doubled. An already healthy relocation market multiplies overnight.”
Signs point to potential for strong performance for second- and third-tier markets; but if brokerages want to remain viable, valuable, and competitive, they need to make sure they have a network that connects their business and clients across geographies in order to meet this growing demand.
Vast sums of money are coming into the marketplace as real estate ventures raise capital, industry leaders continue to expand, and many brokers enjoy their best quarters on record. “The cash in their coffers right now is probably at an all time high for the last 15 years,” says Green.
“Average prices are the highest in history, and that means average commissions are going up too,” adds Ferrara. “So people are making money in this business, and that’s good, because they’re looking for places to invest it.”
According to Ferrara, brokers can save by not having to buy their own technology solutions. Custom solutions are notoriously costly and cumbersome, so instead of burning their capital trying to invent their own proprietary systems, brokerages may consider partnering with a company that provides immediate access to a leading-edge technology ecosystem.
Although the real estate market is growing, Ferrera has heard from mid-market brokers that market share is not growing equally. According to his contacts, large firms are gaining more, and so are the niche players and discounters who are hyper-focused on particular specialities, geographies, or clientele.
Per Ferrara, this creates a “barbell” of market share. “The middle level companies are under pretty extreme pressure to produce a value proposition on a margin that gets tighter everyday,” says Green. Ferrara agrees. “Brokers who don’t have the right systems, tools, and market presence to compete may run out of stamina.”
Green also observes that larger organizations have the opportunity to outcompete proptech disruptors, with iBuying offerings looking to deliver more value to consumers than the do-it-yourself apps available on the market. Affiliating with an established brand is an effective way for brokers to continue building their businesses, reputations, and relationships while benefiting from the innovations and investments of industry leaders.
The decade is still new, and the next 10 years are likely to be transformative and dynamic. Many of the most defining trends may have already been set in motion — and for today’s brokerages, adapting to the present will prepare your business for the future.