The Future Is Now


 Matthew Ferrara  |    March 01, 2017
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The great management guru Peter Drucker once wrote, “The truly important events are not the trends. They are the changes in the trends. These determine ultimately the success or failure of an organization and its efforts.” 

No observation could be better applied to the real estate industry than this, where the key trends shaping the future of real estate professionals across America are changing in dramatic ways.

Three areas that should capture the attention of real estate professionals planning for the future are:

  • Significant changes in real estate practitioner age, experience and production over the last few years.
  • Surprising developments over the last decade in core consumer behavior such as homeownership, rental vs. homeownership, and tenure.
  • Rapid growth among consumers and practitioners in the usage of new technologies such as mobile and social networking tools.

The great retirement and influx

From an industry standpoint, the big changes are within the industry demographics of new and experienced practitioners. For years, data provided by the National Association of REALTORS® (NAR) showed the typical real estate agent holding steady as a baby boomer, between 55 to 58 years of age, female with 12 years of experience, who completed about 10 deals per year. This profile remained relatively steady, even during the real estate boom, when the percentage of real estate professionals under the age of 30 did increase but never exceeded 10 percent of the practitioner population. 

Recently, however, the data look strikingly different. According to 2016 NAR data, the typical real estate professional averages only 53 years of age, and the median age of new agents is only 43. More surprisingly, the number of agents over the age of 65 fell dramatically from 25 percent of the practitioners to only 16 percent. As hundreds of thousands of older practitioners exited the business, they also took with them years of experience, driving the average tenure in business down to 10 years from 12. In their place, a large cohort of new salespeople with less than two years of experience entered the business, soaring from 17 percent to 28 percent year over year. 

Women today continue to dominate the industry gender demographic, making up 62 percent of all members; although women only constitute 56 percent of broker/owner licenses. As for productivity, the typical member last year produced 11 transactions, relatively unchanged year over year, although the value of those deals averaged $1.8 million in sales volume, slightly up from the year before. 

What do these big changes in demographics mean for the industry? A few areas of impact have begun taking shape: 

  • The rapid retirement of baby boomers, which was anticipated a decade ago but probably was delayed by the recession, has now started in earnest. Many firms will need to quickly establish and implement succession plans on a much larger scale than in recent years, as the volume of agents leaving the business will continue for years to come. Note that within the overall U.S. population, 10,000 baby boomers will turn 65 every year for another two decades, driving retirement across the entire labor force.
  • At the same time, younger and less experienced practitioners will take their place, putting at risk a loss of significant human experience and knowledge in an industry that still greatly depends on “apprentice-style” transfer of knowledge. Firms and individuals will need to move quickly to enhance their resources to capture and transfer knowledge from exiting practitioners by introducing more mentorship programs, while simultaneously bolstering formal training systems for new and mid-career professionals. 
  • The financial impact of such large scale transitions in talent is potentially crippling. Companies should examine their company earnings by age demographic to understand what amounts of production are at risk of exiting the company over the next few years. 
  • The talent transition will also pinch the leadership layer of the industry. Owners and managers will also be exiting the business, putting pressure on firms to replace and train new managers, support staff and even owners. Since training managers and transitioning owners can take years to be effective, firms must examine their talent risks more seriously than ever and focus talent attraction and succession programs sooner rather than later.
  • As an industry, the rapid changes in member population will also affect the association leadership and volunteer levels. Members who have served on local, state and national committees for years will need to plan ahead, and association staff will need to be prepared to transfer knowledge and best practices to the next generation of association members.

 

Technology trends affecting real estate

The smart home is just the latest symptom in the overall consumer fever for more real estate technology. The modern real estate buyer and seller are excited by new ways to sell and buy homes using technology. Tomorrow’s successful brokerage firms will need to know which changes in expectations will affect their ability to remain competitive. 

One area of rapid evolution is the use of mobile devices to shop for homes and real estate agents. More than 50 percent of home searches last year were done on a mobile device, according to NAR. In fact, overall 72 percent of buyers said they used a mobile device to research neighborhoods, properties and real estate agents. Within that same data, an astonishing 37 percent of buyers searched video sites like YouTube for real estate listings and information, with buyers over the age of 51 comprising the biggest percent of video-watchers. 

These consumer trends bode well for the future, although many firms may have some ground to cover to connect with the mobile consumer. According to NAR, less than a third of REALTORS® were actively using sites like YouTube for marketing purposes, and many websites were still not mobile-ready. Investment remains low on essential web marketing: a typical agent spent less than $50 last year on that agent’s website presence, and 30 percent received less than 5 inquiries from online. At the same time, as investment levels increased, so did the results.

Nearly 4 percent of agents generated more than half of their total business from online sources. 

Other areas of changes in technology trends that could help REALTORS® grow in the near future include:

  • Americans check their smartphone 8 billion times a day, according to Deloitte, which means connections through applications like social media, texting and email will continue to strengthen the opportunities to reach consumers wherever they are during the day with high-quality content like video as well as relationship management like birthday greetings on Facebook.
  • Surprisingly, millennials make more phone calls on their smartphone than any other generation, so the popular belief that you have to text millennial consumers to reach them may be inaccurate, and the power of proper telemarketing skills may once again be a competitive advantage.
  • Real estate listings using high-quality video get three to four times more inquiries than those without videos. The competition for capturing and sustaining attention, plus encouraging the consumer to take an action, like inquiring for an appointment, will increasingly be driven by commercial-quality video marketing, not just static content.
  • Virtual reality is expected to reach a billion-dollar position in marketing by the end of 2017. This means expanded opportunity for brokerage firms willing to act first to develop immersive and realistic content for neighborhoods, properties and even individuals’ marketing using a new channel of media while competitors lag behind.

Whether it’s changes in industry demographics, consumer behavior or new technologies, the real estate industry is certainly entering uncharted territory. The need to evaluate the assumptions of the past, to compare large trends at the local level, and the willingness of industry leaders to experiment with novel sales, marketing and technology patterns could lead to the development of new best practices for the next generation of real estate. If the changes in trends are the important events to watch, it seems equally important to remember that the best way to predict the future is to be part of the ones who are using those changes to invent it.

Philosopher, writer, photographer and keynote speaker Matthew Ferrara has traveled the world for the past 25 years to inspire audiences to apply creativity to their careers and lives. Matthew’s career began in the real estate industry, focused on salespeople, managers and executives in sales, marketing and technology. Matthew has delivered more than 1,000 seminars, retreats and training workshops, working with groups in 49 U.S. states, 15 countries and multiple languages. 

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