Recession, depression, or compression in the Real Estate market? It doesn’t really matter!

Many of the economic pundits are predicting that our economy will weaken over the next couple of years. Many more have said we will see a recession that could impact the Real Estate sector. I actually heard one of the popular analysts compare what he thinks is coming to a depression like 1929! Does any of this really impact you as a real estate professional? Let’s examine this a little further.

The Housing Market

First, mortgage rates are at a historic low. Under 4% for a 30-year loan and the Fed says they will cut further which could cause a slight additional drop. Second, housing demand is at a low compared to housing availability. We simply aren’t starting enough new homes to have enough available to the new entrants into the housing market. That means that supply is low and demand is high with more people able to qualify with lower loan payments! Sounds like a solution, not a problem!

How to prosper

That means even if only the same number of houses sell next year, the agents that set a business plan in motion to let people know that they can purchase first time, move-up to something better, or capture their equity and down-size easier than at almost any time in recent history will continue to succeed. If the market drops off a little, those who aren’t consistently pushing their relationships and marketing are the ones who will decline in the number of sales. Don’t let the market have any effect on you. Set your target, figure out the best approaches to hit your target and break down each approach to the little things that need to be done consistently to succeed in each approach. Once you have done that, track what you do for each of the little things and the approach becomes successful and the target gets hit, regardless of what the economy does!

Carpe Diem!!

After 34 years of operating in and around real estate, I believe the future of real estate is bright in spite of the coming changes to real estate! The housing market is such an economic driver that many will try to disrupt and change, but no one will defeat it.

Right now, the primary change in the market is toward consumer choice. It will start with compensation. The broker co-operation model as we know it will disappear in the next 3-5 years. No longer will Sellers dictate what Buyers agents will be paid. Buyers agents will have to negotiate with their Buyers for what they get compensated and what services they provide.

Consumer focused:

Other coming changes to real estate are that consumers will want all services coordinated in a cohesive single environment including contracting, title, escrow, mortgage, and inspection. These services will need to be digital, accessible, and coordinated. This requires fewer people and thus less cost as the industry moves forward.

The Industry will evolve to a single nationwide (worldwide?) database that will replace local MLS’s. That provides greater access to knowledgeable brokers/agents and will erode the “local knowledge” advantage currently enjoyed.

As all of this comes into play, it will hasten the entry into the industry directly of at least one of the mega players; Amazon, Google, or Facebook. Not as on-demand or iBuyers but as full-fledged integrated real estate services companies.

Last, but far from least, the Independent Contractor model that we are familiar with is going to be replaced with an employee/employer model. That’s right, the one with withholding, job descriptions and requirements, and social security!

Are you ready:

All of this bodes well for those agents who have exceptional knowledge, refined negotiating skills, and understand the true nature of customer service. They will have access to the nationwide MLS and be able to coordinate the process from scheduling showings, writing contracts, and obtaining mortgages to closing the transaction digitally! They will need to be exceptional at creating, building, and maintaining relationships with consumers.

New mortgage advances, more employment, and greater opportunity are going to make home ownership more accessible to more people. More customers and a reduction in the number of agents competing for their business, what could make the market any better? The future of real estate really is bright if you are ready, willing, and able!!

The Claims

I love getting new real estate recruiting ads. I continue to see claims of providing 1 to 1 support and a whole laundry list of support services while paying out something near 100%. When I look to find out how many ” employees” these companies have to provide the services they claim to their real estate agents, I find the number to generally be 1 or 2 support personnel. Really?

The reality

That number of support personnel works if there is less than 10 agents. Otherwise, they must be super talented employees, have many years of experience in real estate and thus must get paid well. If that’s the case and you receive 100% of your commissions, how is this payroll covered? As a matter of fact, how is the rent, internet, copier, and utilities paid? Now ask how many real estate transactions the broker does in a year? That governs how much time he or she has available for thee. Without a reasonable split from the real estate agents, related service providers from which they profit, or a large number of agents the math simply doesn’t work. If you have a large number of real estate agents and a fixed fee, how many “people” are there for you to ask real estate questions of and get specific real estate advice from? You can’t expect specific advice from a video and you can’t get specific advice from an out-of-state “broker” as they have no knowledge of local laws and forms.

Fuzzy math?


You get what you pay for, regardless of how much business you do. Nothing more, nothing less, even though they will tell you they can give you more for less. One model even claims no franchise or tech fees of any kind. So, am I to believe the real estate Franchise company gave the right to use their name and resources to a real estate broker that gives all his real estate agents 100 % of their commissions for no compensation? Either capitalism or math has dramatically changed. In my 34 plus years as a real estate agent, broker, lender, and developer, I have met few real estate brokers that will take on liability for no return and even fewer real estate franchisors that provide name recognition and services without charging a fee. There is always a “but” in these arrangements. Don’t let the “butt” be you! Ask questions. Get fully informed. If we as agents made these representations in selling a property, we would violating the rules in most all states, yet they just keep recruiting with the same old promises.