The U.S. housing market appears to be surging again: Sales are up, inventory is down, and prices are rising.
So what are small business owners in the real estate industry doing differently this time around? Plenty.
Five years after the nation’s worst real estate market in generations, it’s a new world for people in the business of selling and buying America’s homes. Much has changed: There’s the demise of print newspaper advertising and a new universe of home sales websites to figure out, an array of apps and search engine tricks to get properties in front of the right buyers, and a myriad of short sales, foreclosures, and new regulations for all parties to navigate.
Even so, the turnaround has come quickly, catching some veterans off-guard. What was a trickle of activity just months ago has become a full-throttle firehose in recent months in some markets.
“It’s like someone threw a switch on January 1,” says Chantay Bridges, a Los Angeles real-estate specialist. “It happened so fast that it was like you went to sleep and you woke up and you couldn’t find a property for your buyers.”
The dynamics have changed for everyone. For agents and brokers, it is a far leaner industry. At the National Association of Realtors, membership in 2007 stood at 1,338,001. The number as of February 2013: 963,478. (The last time the ranks were that low: 2002.) The Internet has helped slim physical overhead. Many agents who once commanded desk space in a brick-and-mortar location now routinely work from home or out of virtual offices.
Buyers and sellers have adapted, too. Relegated to the sidelines during the market’s darkest days, many have become more sophisticated in terms of their own taste—partly thanks to HGTV’s many reality-TV series and the addictive home-design site Houzz— and understanding what others are seeking when shopping for a home.
“Buyers are more savvy than ever. They have the Internet at their fingertips and can compare properties side by side,” says Jay Hart, a principal at New York’s Sold With Style. “They know the value of properties so much better than they used to. If you listed the wrong price, you’re not fooling anyone anymore.”
Here are a few lessons real estate veterans say they’ve learned in the past few years:
“The last few years have been a challenge,” says Pat Vredevoogd Combs, a Grand Rapids, Mich.-based Realtor who’s been in the business for nearly 40 years. She says anyone who’s in real estate for long enough understands the constant need to “reinvent yourself” and the past few years illustrate that.
The last housing boom came before the proliferation of smartphones, apps, text-message alerts, and the rise of Internet listing titans Zillow, Trulia, and Realtor.com. Combs says what was once a job that was largely done on nights and weekends has now become part of the Internet’s always-on economy and a full-time endeavor for her. She blogs and her site has Web video, since getting her listings to turn up in organic search results, along with her name, picture, and contact details, is a priority.
With an estimated 65 percent of homebuyers now starting their hunt online, Combs says she shifted away from print advertising, particularly after her local newspaper stopped publishing daily. The properties she represents turn up on some 360 websites to capture potential buyers’ eyeballs. “By the time we get to talk to buyers, they’ve already gone through all of the listings. They know where they want to be,” she says. “Our job has changed. We are more like consultants. Finding the house takes the smallest part of time of what I do.”
Yet it still sometimes comes as a shock to sellers that having their digs show up on the major search engines isn’t free of charge. Combs says to get her independent agency’s image and contact details on the big sites is an expense that’s even higher than the old days of print.
“People say ‘Well, you don’t have that print advertising expense anymore, so your services must be cheaper,’ ” says Combs. “Not so. We have to put our money into the Internet end—and that cost has changed dramatically. ”
Dig in to big data
Before the crash, Hart says he would have described his firm as a “staging company”—helping sellers make their properties look their best by bringing in furniture, art, and other interior-design tricks to make them seem more attractive. But during the downturn, he and his partner invested in a market-statistics data miner to better focus on consumer behavior. These days, Hart says he considers Sold With Style more of a consultant to sellers on what makes a property move—and why and when.
“What we discovered is that there is a greater need for information and advice than there is for accent pillows and sofas,” he says. He and his staff have armed themselves with information to answer the most important questions: At what point in the sales process is a property likely to sell? When is a seller likely to get the best price? And which renovations are most likely to bring the best return on their investment?
“Now we can explain what makes buyers choose one property over another, or what factors influence a buyer to make an offer close to asking,” Hart says. “Our goal is to take the fear and uncertainty out of the process of selling a home. Our job is to understand what makes someone tick from the moment they walk into that listing.”
Know your game cold
In the red-hot Los Angeles market, Bridges says limited inventory has swung the region deep into sellers’ favor, with some new listings attracting dozens of offers within hours, escalating all-cash bidding wars, sight-unseen contracts, and scrambles for clients to get early access to open houses. With the industry in a frenzy, she points to the network of colleagues she’s groomed over the last few years. She cites one listing in January in which she knew the house would sell quickly—but gave a few selected brokers an hour-long head’s up before she posted it more widely. It sold before the day was over.
With a market moving so quickly, it’s the little details of your reputation that matter. With all parties forced to be so nimble, inexperienced or unprepared agents are getting stampeded, Bridges says.
“It doesn’t hurt to happen to know or have worked with the listing agent before,” she says. “Some offers are selected on their whim. They like you, your clients, and they encourage their client to take your offer.”
Focus on what customers care about most
Sam DeBord, managing broker at Seattle’s Coldwell Banker Danforth, says he’s been able to cut the firm’s advertising budget by 80 percent in recent years, largely by moving away from local print media and being part of a national franchise network in a busy major market. In that shift, he says they knew they would lose the leads that venue provided them; so his firm invested time and money in building its website, Seattlehome.com. He tried to make the site as pleasing, useful, and interactive as possible for users—and save them the time of perusing the national listing sites, which only led them back to their local site. These days, DeBord says his firm is spending a fraction of that old budget to keep the site updated and maintained—and generating more leads. “The ongoing costs of maintaining the site are nothing like dealing with outside marketing,” he adds.
“Any time there’s a bubble, it encourages business practices based on short-term profits at the expense of long-term strategy,” DeBord says. “Everybody wanted to buy and you didn’t really have to focus your marketing or branding to make sure people wanted to work with you long-term. But when the crash came, a lot of them didn’t have a plan in place to make money when the market was down.” His local market lost 20 to 30 percent of its agent members in the lean years.
Now, the majority of his agents work in virtual offices and only come in to the main office when there’s a need. Gone are individual desks, monitors, and receptionists. “From our mind-set, to survive the ups and downs of the market, we cut out the things that our clients didn’t care about,” DeBord says. “Our clients didn’t care how big our office was—they just cared that we were professionals who could help them through the process."