Industry

The end of the real estate story?

Author
Brian Boero
No.
352
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Marc and I spent the past two days in Chicago. A marvelous city! Big, grey and stolid but laced with flavor like a well-marbled steak.
It’s like Manhattan without the bravado and San Francisco with substance.
I hated to leave.
Anyway: Our trip was filled with great discussions with smart people. One stuck with me as I enjoyed a few internet-free hours on the flight home.
This particular debate centered on the following question:
“Have we reached the end of the real estate story now that FSBOs and discounting have lost their menace?”
Pull back a minute. Above the clouds of the market contraction and beyond the blinking lights of Web 2.0.
Here’s what we see this spring of 2009:
Realtors sell about 85% of homes. They are paid a commission that averages somewhere between five and six percent. Most people report satisfaction with their Realtor, but hold the profession of real estate in low regard
Now imagine it’s the spring of 1993, two years before Netscape went public. What do we see?
Realtors sell about 85% of homes. They are paid a commission that averages somewhere between five and six percent. Most people report satisfaction with their Realtor, but hold the profession of real estate in low regard
Methods have changed. Markets have changed. The balance of power between brokers and agents has shifted. Consumers have access to enough data to choke a horse.
But the basic structure of this business remains remarkably intact.
There are two possible conclusions to be taken from this:
A. Real estate is exceptional. The complexities and emotions that characterize the real estate transaction will forever shield it from structural change. Bill Gates, Barry Diller and about a billion dollars in VC have been thrown against the barricade with no transformative impact. The story is over.
B. We’re due for a cataclysm. The forces of change, of technological innovation, of inchoate consumer frustration, are stacked high against the dam of Real Estate As We Know It. It will not – it cannot – hold. The story is far from over.
My dinner pals were in the “A” camp. I argued for “B.”
I think it’s foolish to assume that we are not going to see major structural change in real estate brokerage. I say that without judging the value of what we have, without a set view of what a good Realtor ought to be paid, or if a Realtor must be used at all.
Right now we are bobbing within a small eddy on a river of generational change that will soon carry those who made their mark in the 1980’s – and who still dominate the industry – out to the sea of retirement.
Moreover, I do not think we have begun to feel the broad impact of social media in our business. We have merely glimpsed the uneven efforts of early adopters. I talk to some who think real estate blogging’s best days have already passed. Really? Communicating value and knowledge with intelligence in a democratic medium that rewards excellence is not a fad. It is, practiced well enough a widely enough, a force that will corrode the old value chain.
This went on for an hour or so. It’s an old debate, perhaps tired. But it remains important. For even if you are in the “A” camp – that real estate will remain fundamentally unchanged – you better plan for “B” just in case you’re wrong.
Where do you stand?
The takeaways
As you can see, this is not one of those “top ten quick and easy things you can do right now” posts. But I guess these are the takeaways:
1. If you’re a broker or an agent, do not think things will settle back to normal once the market comes back. Think long-term, assume your value will continue to be challenged on a dozen fronts, and make moves now to adapt.
2. If you’re a technologist, entrepreneur, visionary broker or agent or investor, keep the faith.
Now it’s out of the clouds and back to work!