GRAR Industry Update

A Tale of Two Extremes

Jeremy ConawayRECON Intelligence Services

September 9, 2010

The forces being generated within today’s market environment rival those of the most turbulent ocean

currents and require entirely new navigation and handling skills for even the most experienced

REALTOR®

QuickTime™ and a decompressor

are needed to see this picture.

Today GRAR members at both the broker and agent levels are caught between the extremes of challenge and opportunity. Both forces are equally powerful. Survival and success within

these forces will require the combined resources of the GRAR REALTOR®

Community.

GRAR Members

The Market

Economy

The ConsumerTech/Info

The Challenge Side of the equation

At the same time GRAR and its members exist in the most creative, innovative, and opportunity rich market environment that

has existed since 1947

The present industry sphere has nothing to do with how powerful one is or how

much money one has in the market. It is being guided by an unparalleled level of challenge and opportunity for those who can see beyond the numbers to a total

lack of rules and restraint.

The next two years will be a “moment in time” for your Association. It is all about you, your spirit, abilities, engagement

leadership and aspirations.

This is your time!

These are very historic times

They are historic by virtue of the fact that the industry events of the past eight years,

starting in 2002 to be exact, the last time we touched “normal”

The path of the past eight years

• 2002 - Market goes over 5M for the first time• 2003 - 2004 450,000 new agents brought in• 2005 - Market goes over 7m residential units• 2006 - Sub prime mortgage crisis begins• 2007 - Market goes into a down spiral• 2008 - Recession hits - Social Media arrives• 2009 - Recession ends, “recovery” begins• 2010 - The new market arrives - REO continues• 2011 - The shadow inventory looms

Virtually every segment and element of our industry is in a change mode.

One cannot underestimate the impact of the past eight years on this industry.

From the perspective of expenditures, resources and philosophy we are dealing

with a whole new situation at all operational levels

Understanding Today’s Market Environment

The Market …

• Location, location, location• Holding annual rate of 5.3 residential• Post federal incentives• Foreclosures• REO/Distressed properties• Shadow Inventory

More good …

Not so good …

With respect to market forces nothing is as powerful and influential as the sinister

shadow inventory. The only questions are when, what form and how,

QuickTime™ and a decompressor

are needed to see this picture.

QuickTime™ and a decompressor

are needed to see this picture.

What message does this convey?

Is this the beginning?

Waiting for the axe …

The shadow questions …

• How long will the liquidation take?• How dramatically will the liquidation impact values?• Will the liquidation process use REALTORS®?• What impact will the process itself have on the

transaction process?• How much of the property will be put into • If 11 million American families purchase through a

new process how will current system be impacted?

The brokerage community, another evolving equation …

There is no longer any question that the traditional brokerage business model will not perform in a positive manner moving forward

…

The purpose of the brokerage …

• Profitability is “the issue”• There is nothing more important than attracting

capital into our industry• Who is going to be the broker of 2012?

– Agents not interested– No brokers in training– Existing brokers are aging quickly

• Many believe it will be individuals from corporate America– Turnkey systems– Benchmarking, systems and metrics

Getting a whole new handle on management through accountability,

metrics and benchmarking

A number of brokers are preparing for the shadow inventory event by creating

transaction teams and arming them with automation software.

Automation is the critical next step (next as in tomorrow) …

https://www.nationalquicksale.com/About.aspx

http://www.pulserealtysoftware.com/videodemo

The Brokerage Community

• Survivors are hanging in there• Trying to increase panels and decrease overhead• “100 plus failures by Christmas”• Cash is precious• Universal recognition of the fact that traditional

business model is no long functional• Working hard to control overhead• Few if any acquisitions, nothing to acquire• Low - nonexistent EBITA multiples

Brokerage Community, con’t

• Few if any investors in the marketplace• New relationships with agents• New relationships with managers• Universal accountability• Print marketing continuing to wane• Online activities increasing• Increased broker control over online leads

Challenge

Opportunity

Today’s GRAR Member

Agent Accountability …

• Everyone has a “boss” these days• Independent contract is a “tax” concept not a

management system• Consumers are demanding a way to determine the

“right” agent• Agents are refusing to have their association control

the system• Internet based third parties are moving into position

quickly• A huge opportunity - lost to third parties?

Generally speaking today’s real estate agent is in a life and death struggle with

respect to meeting the needs and expectations of today’s consumer. Only

one side will prevail …

Agent rating slowly moves to the forefront …

85% of Yelp reviews are positive

An essential element of the Automation process is identifying who has failed to

meet their commitments …

TripAdvisor Experience

Source: TripAdvisor

TripAdvisor Experience

+ Paris:

+ 8 of top-10 hotels have fewer than 100 rooms

+ London:

+ 6 of top 10 hotels have fewer than 75 rooms

+ Rome:

+ #1 hotel has 11 rooms

Source: TripAdvisor

REALTOR.com will be next

81% Will Benefit

Source: Based on graphic by Sean Moffitt, Agent Wildfire

A shift from agent centricity to consumer centricity

• The old system hasn’t worked since 2005• Doesn’t produce profitability• Doesn’t create consumer satisfaction• Didn’t make for happy agents• Didn’t make for satisfied consumers

The power of generations …

• This force is impacting every industry• Boomers - 74 million - 45 - 65• X’ers - 47 million - 33 - 44• Y’s or Millenniums - 82 million - 17 - 32

The Consumer as an individual…

What does today’s consumer want from their business and professional or Association experiences?

Simplicity

Innovation

Speed

Relationships

Entertainment

Collaboration

Transparency

Integrity

Scrutiny

Customization

Freedom

Community Service

Consumers as customers …

• Are not happy with real estate agents at this point in time

• The issue isn’t whether to use, it is what to pay

• Knowledge of the marketplace• Ability and willingness to negotiate• What is the agent value proposition?

Recent Consumer Satisfaction Surveys and Research

54%

We aren’t going toescape the ethics quandary

The Consumer as a market force …

Consumer interactions …

• Consumers do not trust advertising• Consumers do not trust broker websites• Consumers do trust what their contemporaries say

about a brokerage or an agent• Consumers are all about relationships• Consumers will begin to trust brokers and agents

who converse with them through appropriate blogs, tweets and other social media

Trust

Source: Forrester Research / Intelliseek

"C-level life"--complete consumer control--has arrived. Consumers now have unprecedented access to excess-entertainment, infotainment, utilitainment and everything in between. It has put chief marketing officers and their

marketing minions in the hot seat.

We must learn to practice effective generativity by learning about our Generation X and Y members and

dropping our “kiddies table” approach.

Communication respelled …

• We will learn to listen

• We will learn new languages

• We will learn the language of generativity

• We will learn the language of the consumer

• We are going to become hyper-video

• We will incorporate social media in everything we do

Are we stuck in The Age of Crap?

Google Maps

Gulf Oil Spill Recovery Map - Anyone can report what they observe in their backyards, upload stories, photos and video to this common shared map

Fold It

Meanwhile,• Independent book stores have declined

3,250 to 1,400 in 10 yrs

• Annual book avg sales grew 1.6 % for last 6 years

• E-books are now 10% of market; sales increased 175% in 2009; to go to 50% in 5 years

• 600,000 titles in the Kindle bookstore; ebooks now outselling hardcovers and will outsell paperbacks within 18 months

American booksellers association 2009); newyorker, april 23, 2010) ; usatoday, july 23,’10

Insatiable Thirst for Media on the Internet

“Media is the connective tissue in our society.”

200 billion hours of TV alone

How to Deal with Info Overload?

55% of Americans say it is easier to keep up with news and information than 5 years ago.

70% of Americans feel it is overwhelming.

PewInternet.org; illus: Humboldt College Library

The Re-Emergence of the Curator

Curation & Real Estate

Position your business as the community curator, curating local and national real estate news, information, events, performances expressly for your client base

To avoid the Age of Crap, deliver relevancy in real time – differentiate yourself with keen editorial judgment, bold initiatives and creativity

Other Fresh Ideas

• Arrange online chat between the home seller and the buyer.

• Do WebEx of a house and local community, complete with a presentation by the home inspector and a mortgage broker, to an audience of invite-only potential buyers.

• Create an ‘ecosystem’ of locally informed content blogs about your neighborhood. Sponsor the blogs, separating you from the

• Let clients opt in to receive text alerts about specific properties. Build "geo-fences" around certain homes that automatically notify by text message

 

SOCIAL ME- dia

‘The balance of power is shifting. A new era in buyer/seller relationships is being defined. And unlike other revolutions, this isn’t so much about the power of "we the people" but rather "me the people.”

--- Jeff Pulver, The Connected Me

1:1 with 7 Billion People

“What I would like to have is a one-on-one relationship with seven billion people in the world and be able to customize offerings for those seven billion people. Digital allows that relationship.”

- Bob MacDonald, CEO of Procter & Gamble

Facebook in its own words

• More than 500 million active users• Avg user has 130 friends• Avg user is connected to 80 community pages,

groups or events• Avg user creates 90 pieces of content each

month• More than 30 billion pieces of content are

shared each month.

Social Age Groups

So who’s driving Social?

• The average social network user is 37 • Linkedin’s average user is 44.• The average Twitter user is 39• The average Facebook user is 38• The average MySpace user is 31  • Twitter and Facebook have almost the same

male-female ratio; Twitter with 59% female users and Facebook with 57% women.

Is Gen X Having a Midlife Crisis?

Matt Dorfman for the NYTimes

Gen X

• Comprise many of today’s “trade up” buyers

• Having fewer kids than boomers• Generally have two jobs• Do not seek or have a desire to

own a large home• Many have lost their initial

investments in their homes• Remain skeptical of Boomers

“Owning a home used to mean building value and adding to your net worth, but these days more people are finding that owning a home is nothing more than a large monthly payment.” - GenX Finance.com

This is the generation that will likely find the home of their dreams on a 4G wi-max third-generation iPad and will contact their real estate agent via Twitter or text message.

“emerging adults”• 1/3 move to a new

residence every year• 40% move in with their

parents at least once. • 7 jobs in their 20s • 2/3 live with a romantic

partner without being married

• Avg marriage age: 26 for women, 28 for men

“The younger generation is starting to question the American Dream as it was created in the 1950s. Npr.org

Gen Y• 76 million strong

• Like to work in teams • Need feedback

• Want to make a difference

• Expect the corner office at the end of their 90-day probationary period. 

Critical Reading

Critical Reading II

Attributes of digital natives

• Remain anonymous until they decide• Won’t register or leave personal data to

receive information• Have little use of expertise, believe they can

do it themselves• Will research online before making contact• Trust what their cohorts say, not you• Eternally mobile

5th Cycle in Last 50 Years

The Phone Call is ….

• # of mobile phone calls has dropped since 2007.

• Length of calls = 3 mins in 2005; now it’s almost half that.

• 20% of all voice mails are never listened to.

• “We’re moving toward a fascinating cultural transition: The death of the telephone call.”

• Clive Thompson, wired, 8.10

The Web is Dead. Love Live the Internet

The Web is Dead*

• In 2007, when the iPhone arrived, the web became less critical to daily life

• There are 304,561 iPhone/iPad/Android apps available; 2.69 billion app downloads in 2009

• A mobile screen is always with me.• Fast apps beat flexible browsers

*wired, august 2010

In Conclusion

Link New Opportunities to Old Motives via the Right Incentives

• Digital data is infinitely copyable at marginal cost

• People like to share data & content (information & knowledge)

• Link those two items to engage your client base

NYTimes 0c10.02.09 illusTim Gough

60% of 50 to 64 use smartphones to send text messages; 2 out 3 use cellphones to take photos.

Social networking use among internet users 50-64 grew by 88%--from 25% to 47% -- from April 09 to May 10

During the same period, social network use among those ages 65 and older grew 100%--from 13% to 26%

Don’t Forget the BoomersThey’re connected, they have time

We must reengineer our approach to issues of integrity and ethical practices

We will have abandon our institutional approach ethical behavior and adopt a

very personal one

Social Media …

• Is based upon person to person communications

• Allows consumers to talk to other consumers about their experiences

• Allows individuals to have one to one relationships

• Is not an essential part of the real estate culture and transaction

Blogging is not spamming …

Lifestyle …

• Civics let their parents pick their lifestyle• Boomers let their peers pick their lifestyle• X’ers designed their lifestyle to get away from

boomers• The Millenniums are in the process of re-

inventing lifestyles• Today almost every American is in the

process of creating a new lifestyle (either up or down)

Life style marketing will be the single most profitable opportunity for brokerages

moving forward

Consumer lifestyles are changing dynamically under social environmental influences. Lifestyle marketing aligns brands with consumer interests, needs, desires, and values. As businesses have grown to realize that their success is increasingly dependent upon an adequate knowledge of consumer behavior, the importance of lifestyle market segmentation has increased steadily. Companies must be able to interpret customer/product lifecycles and apply their marketing machine to successfully innovate around lifestyles and repackage existing offerings to fit the needs of new customers.

Rental lifestyles …

• The past five years have changed many minds about home ownership

• It is no longer about making money it is about lifestyle

• Generation X and Y are changing lifestyle• Generation X and Y are changing jobs

frequently and are deferring ownership to be able to transfer more smoothly.

A starting point …

Moving forward the smart brokerage will be in the concierge property management

business

The Emerging Neighborhood Dynamic …

• Civics went back to the old neighborhoods• Boomers were about moving up not settling

down• Besides they had no furniture for the longest

time• X and Y are all about relationships• Neighborhoods are all about relationships• Neighborhoods are coming back big time

The Internet …

• Web 3.0

• From publication to conversation

• The full force of information and participation

• Creating relationships

• Providing experiences

Mobile Computing …

• The ubiquitous hardware• Smart phones• Paperless readers• Within 3 years over 50% of American internet

contacts will be by mobile device• Understanding the mobile app

Here today …

The game changer …

The iPad isn’t for what you are going now, it is for what you should be doing ..

Rich Barton, CEO, Zillow

Without a mobile application

With a mobile application

Just around the corner …

Real Estate Information …

• Information is the new currency• Upcoming dependency• The fight to be the vendor• RPR vs. Core Logic vs REALTOR.com• Hyper local content will be king

Data has become to REALTORS® what aviation fuel has become to the airlines. Your association must become part of the solution. Information will the currency of the real estate

industry moving forward

Layered real estate data

Availability data

Contact data

MLS Data

Public data

Target property specific

Neighborhood data

Lifestyle data

Knowledge will become the single most critical element in the REALTOR® value

proposition.

Here is the old …

Here is the new …

Essentially we must start our communications programs all over from

scratch