The Real Estate Market Is Changing in 2013. If you are a real estate agent, you should be changing with it!

1. The Market is Changing...
Special Report:
Special Report: How the Market is Changing, How Those Changes
Will Impact Our Business, and What Can We Do to Adapt and Thrive
Joseph W. Rand
Better Homes and Gardens Real Estate – Rand Realty
March 2013

2. Introduction:
The Market is Changing...
The market is changing. We’re seeing it throughout the country, and particularly in our region. Inventory is tightening. Prices are
stabilizing. Buyers are losing homes to bidding wars. Essentially, we have come to the end of a market cycle that began in about
1997, and starting a new cycle that will drive sales and prices up for most of the next decade.
This is all good news, of course, for those of us in the real estate industry. Having lived through the last market change, which was
the transition from the bull market of 2001-2006 to the correction that started in 2007 and then accelerated after the financial
crisis of 2008, we certainly welcome a market in which sales and prices are going up instead of down.
But change can still be intimidating. And even though this market change is generally good news, it does bring with it new
challenges that we will have to face and overcome if we want our businesses to thrive.
That’s why Better Homes and Gardens Rand Realty has put out this Special Report on how the market is changing, and what you
can do to change with it. The Report derives from a series of seminars that we held at Better Homes and Gardens Rand Realty from
November 2012 through February 2013, and comes in two parts:
The Market is Changing…
This Part of the Report comes out the seminar series that we held in November 2012, where we discussed the coming changes to
the real estate market, how they would impact our business, and what we could do to adapt and thrive in the new environment.
This part of the Report derives from those discussions, and includes not only an expanded version of my notes for those
presentations, but many of the ideas that came out of the open forum we had with over 500 Rand agents.
…Are You Changing With It?
On the “flip side” of this book, you can find the other half of this Report, which comes out of the forum series we held in January
and February 2013 entitled “Extreme Makeover: Real Estate Agent Edition.” There, we discuss how you can implement change in
your own business, making over your productivity, technology, and systems to put yourself in a position to take advantage of the
opportunities presented by this market change. You can find this part of the Report just by flipping the book over.
We believe that forewarned is forearmed, and the more we do now to start preparing for the market changes that will start
impacting our business in the next few years, the better-positioned we will be to take advantage of all the opportunities the new
market will be giving us. The “Market is Changing” and “Extreme Makeover” seminars were just the first step, and this Report just
is the second of what will be a long process of revitalization, reinvention, and reenergizing.
Our best wishes to all of you for your continued success in the new market.

3. The Market Is Changing Overview
The November 2012 “Market is Changing” seminars were not the in whole series of company initiatives that helped us cope with
first time that we held agent forums to deal with market change. the new market realities:
Back in November 2005, on the cusp of the last major shift in
the market – from the seller’s market that thrived during the Partly as a result of our proactive preparation for the market
early part of the decade, to the buyer’s market that we have all changes that we started to experience in 2006, Better Homes
endured for the past seven years – we held a similar series of and Gardens Rand Realty was able to manage the disruptive
identically-entitled events to discuss what we believed would be effects of those changes over the next seven years. Even
the coming changes in the market. with the decline in revenues that came from the fall in units
combined with depreciating sales prices, which drove many of
In those forums, we came up with a host of ideas that we could our competitors out of the business, we were able to continue to
implement to help us adapt to an environment with declining grow the company with an innovative and aggressive spirit.
units, falling sales prices, and ultimately lower revenues for the
company and the agents. Indeed, those ideas ultimately resulted
How the Market Was Changing, 2005 What We Did to Adapt….
We eliminated empty marketing in newsprint
Prices and Units Going Down
and cut unnecessary expenses.
We took steps to create ongoing client experiences through the
weekly Market Action and Property Traffic emails. And to protect
Listings Would Take Longer to Sell
ourselves, we created the Seller Packets, which locked in a 6%
commission for a full nine month listing.
Because it would be more competitive selling listings, we took
steps to give our own sellers an advantage on RandRealty.com
– more featured status on the front page, on search results, and
Listings Would Be Harder to Sell
on property detail pages, and more enhancements with higher
quality photos, videos, and mapping. We also expanded paid
listing syndication to better market listings.
Knowing that it would be harder to cultivate and keep buyers, we
improved lead generation from RandRealty.com, adding callouts
to drive more buyers through our system. We also created
Harder to Generate and Convert Buyers the R4L program to help agents build their referral databases
to generate high quality leads, and initiated exclusive buyer
agreements to lock buyers into our agents during their long
searching process.

4. Consider, for example, some of the changes in the company over the last seven years:
• Growth within our territories. As of 2005, BHG Rand had about 17 offices in Westchester and the
Hudson Valley, with about 500 agents. We now have 25 offices in that region, with over 700 agents.
• Territorial expansion. Just in the past two years, BHG Rand has now expanded into two new markets
in northern New Jersey – Passaic and Bergen counties – in an attempt to fully service clients who are
looking at broad geographical areas.
• Technological Innovation. BHG Rand has continued to be a leader in technological innovation in
our region. Just like we were the first regional company to put our inventory online in the late 1990s,
we were the first company add high-resolution photos, mapping, blogging, and research tools to
our website. And in Randcenter, we created a series of programs to help agents run their business,
including the letter-writer function in Contact Manager, and a host of creative presentations on
Presentation Center.
• CORE. Over the past five years, BHG Rand has pioneered an innovative approach to agent
development in the “Client-Oriented Real Estate” program, which has led to a series of initiatives
to better help agents service their clients: the disclosure packets, the Realtor for Life program, the
Orientation Guides, the Consultation Guides, and more. We are the only company in the country, much
less the region, that is setting out to change the client service experience in the real estate industry.
• The Breakthrough. Even while revenues were declining, BHG Rand implemented a dramatic change
in our compensation policies, adding an 80% split level that can be reached at about $25,000 in agent
earnings and providing agents with myriad choices for starting splits and personal assistant time.
Thus, those 2005 sessions were instrumental in sparking now that the market seems to be going through a market change
actionable programs, tools, and resources that helped us get again. And just like last time, we hope that the ideas generated in
weather the storm of a declining market. Accordingly, we those forums will help guide us in continuing to innovate over the
believed it would be similarly helpful to hold a series of forums years to come.
The purpose of this year’s “Market is Changing” seminars
was to answer three basic questions:
1. How is the market changing?
2. How will those changes affect our business?
3. What can we do to adapt to those changes?
We will take each of those questions in turn. Ultimately, our goal for the forum was to generate ideas for new processes, programs,
and tools that we could develop or implement to help us thrive in the new market.

5. Question #1:
How is the Market Changing?
The market is changing. We are seeing it throughout the industry, – i.e., maybe you’ve started to see inventory decline, or you had
with transactions and sales prices rising throughout the country your first multiple bid situation in years – it’s still important to
after many difficult years. More importantly, we are seeing it in back up your first-hand impressions with actual market data and
our local markets, with sales up from last year in every region and a full understanding of how the market cycle works.
prices stabilizing and actually up from the bottom they hit in late
2009. We believe that our local housing market is slowly working
its way through the end of a market cycle that began in the last The Market Cycle
1990s, and that we are poised in the next few years to start a new The fundamental economic rule of supply and demand says
market cycle that will bring a true seller’s market that will drive that for a fixed supply of goods (i.e., a housing inventory), any
both prices and transaction up through the end of the decade. increase in demand is going to drive prices up, and decreases in
In this section, we’re going to review the economic fundamentals demand will push prices down. That simple rule is what drives the
of the housing market cycle, and show how that cycle has housing market cycle, which moves through a predictable series
played out in our regional markets. Although many of you have of fluctuations depending on the interplay of inventory and buyer
anecdotal evidence that the market has started to turn around demand.
The below chart identifies the basic properties of the market cycle stages:
Seller’s Market Correction Buyer’s Market Recovery
Buyer Demand High Declining Low Increasing
Inventory Low Increasing High Declining
Increasing, Declining,
Sales Declining Increasing
then stabilizing then stabilizing
Average Sales Price Increasing Stabilized Declining Stabilized
GROWTH
AHEAD

6. Here’s how the market cycle plays out.
Seller’s Market. As a seller’s market begins, we see rising demand results in fewer and fewer buyers looking in the market.
buyer demand and low inventory, which has a tendency to push Indeed, the very fact that prices are falling makes buyers
transactions and prices up. This goes on for a period of time, with reluctant to pull the trigger, because they’re afraid to buy a
prices continuing to rise so long as buyer demand stays strong. depreciating asset. So prices continue to go down, which drives
At some point, though, prices get so high that buyer demand transactions down even more. Over time, though, we reach a
ebbs – buyers become skeptical of the high prices and lose some point where prices have come down so far that they become
of their urgency. This leads to a transitional period that we’ll call attractive to buyers who now start to take a second look at the
the “Correction”. market. They start to scoop up bargains, which stabilizes both
the transactions and ultimately starts to prop up home prices
again. That leads to the Recovery.
Correction. In this transition out of the seller’s market, we have
a disconnect between sellers and buyers: sellers still think that Recovery. In the Recovery, we start to see sales slowly start
it’s a seller’s market, and demand price appreciation, but many going up again. Buyer demand is rising, spurred by the perception
buyers are too skeptical to meet those price demands. So what that housing has finally become more affordable and a “good
happens is that transactions fall as fewer buyers rush to meet investment” again. Inventory starts to drop off as buyer snatch up
seller demands, but prices hold out for just a little longer. Why? their bargains. Ultimately, all this buyer demand starts to put some
Because the homes that sell involve those holdout sellers and pressure on home prices, which start to rise. So where does this
the diminishing number of buyers still willing to meet their price leave us? In a situation with low levels of inventory, rising buyer
– thus, the homes that close are still selling at the “seller market” demand, and upward pressure on pricing. This, of course, leads us
price. Over time, though, as transactions fall, inventory grows, back to the beginning, and the start of a Seller’s Market.
and it becomes increasingly difficult for sellers to insist on price So that’s how the housing market cycle develops: a Seller’s
appreciation. At that point, prices start to fall, and we enter a Market with rising prices and transactions leading to a
buyer’s market. transitional Correction phase with flattening prices and declining
transactions, which brings on the Buyer’s Market where prices
Buyer’s Market. In a buyer’s market, the buyers have the upper and transactions both fall, until prices fall so much that buyer
hand. Inventory is high, sellers are in retreat, and prices are demand comes back and brings on the market Recovery. And
falling. Transactions also fall, because the reduction in buyer then, of course, the whole cycle starts up again.
This brings us to the big question: where are we now?
In our current market conditions, what we see is the following:
Buyer demand is going up.
Inventory is going down.
Sales are starting to go up.
Prices have deterioriated a bit, but are stabilizing.
In other words, the part of the market cycle
that we’re in looks a lot like “Recovery.”

7. $700,000 20,000
$650,000 17,750
$600,000 15,500
Illustrations of the Market Cycle
$550,000 13,250
The Three Market Distortions
You can see this market cycle play in our regional housing
markets. For example, look at this graph entitled “Westchester
$500,000 11,000 of 2005-2010
In looking at the graphs we’ve supplied, you might have an
Inflation-Adjusted Average Sales Price,” which sets out the
$450,000 8,750
objection – you might notice that the clean, fluid wave cycle
inflation-adjusted average sales price for Westchester County
$400,000 6,500
seems to get a little little choppy in the 2007-2010 period, where
going all the way back to 1981. We use Westchester because
it goes down, then up, then down again, then flat. That makes
it’s the only county for which we have a full 30 years of data,
$350,000 4,250
the second wave look a little different from the first. You might
which allows us to see an illustration of two full market cycles.
$300,000 2,000
look at that and think that the two market cycles aren’t in fact
2010Q1
2011Q1
2012Q1
2002Q1
Q2
Q3
Q4
2003Q1
Q2
Q3
Q4
2004Q1
Q2
Q3
Q4
2005Q1
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
2008Q1
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
Q4
Q2
Q3
2006Q1
2009Q1
2007Q1
the same.
Average Sales Price Transactions
That’s a fair point. The two cycles followed the same trajectory,
Westchester Inflation-Adjusted Average Sales Price but they aren’t exactly the same. As anyone who has been in the
(Source: MLS data) market over the last seven years can tell you, the buyer’s market
that we went through was harsher and more volatile than what
$1,200,000 we had seen in the past.
$1,000,000
But the difference is not something that was inherent to the
market cycle, and doesn’t disprove the idea that the last fifteen
$800,000
years have conformed to basic economic fundamentals of
$600,000 supply and demand. Rather, those aberrations from 2007-2012
were caused by three major artificial distortions of the normal
$400,000
market cycle that impacted the market during the last ten years.
We’re written about these market distortions at some length on
$200,000
the “Market Intelligence” blog and the Rand Quarterly Market
Report. The basic idea is that the normal evolution of the last
0
‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99
market cycle was distorted by three outside influences that
2000
‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘11 ‘12
1981
1990
2010
created many of the severe shocks that we experienced over the
last ten years.
What you see on the graph is a perfect articulation of the
market cycle playing out twice: from 1981 through 1996 and
from 1997 through 2012. In both cases, you have a similarly
shaped curve that goes up during the seller’s market, tops out Here are the three distortions:
at the correction, goes down during the buyer’s market, and
then flattens out during the recovery. Credit Bubble. The first distortion was the “credit bubble”
that was created from 2005-2007 by the expansion of
• First Market Cycle (1982-1996): We see the cycle available credit to unqualified borrowers, which artificially
start from 1982-83, when prices rise for what was expanded buyer demand and kept pushing prices up for
the first time in years. That kicks off a Seller’s Market two years when they should have been flattening. That’s
that continues until about 1987, when prices top why you see prices going up in that 2005-07 period when
out and the market starts a transitional two-year they provably should have been plateuing the way they did
Correction that turns into a Buyer’s Market that lasts in the 1987-89 comparable period of the last cycle.
from about 1989 through 1994, until it flattens out
into Recovery from 1994-96. Financial Crisis. The second distortion was the financial
crisis of 2008, which was obviously precipitated by that
• Second Market Cycle (1997-2012): This cycle starts in credit bubble. As you know, the market came crashing
1997, as prices start to go up as the Seller’s Market down around us in late 2008, and over the next eighteen
starts up. That Seller’s Market continues through months we had prices come down over 25% across the
to about 2005, when prices plateau and we start region. So instead of a nice soft decline in pricing like we
the process of the Correction. That lasts until 2007, had in 1989-1994 over the last cycle, we had a dramatic fall
when the Buyer’s Market takes hold and prices that took place over less than two years.
plunge for two years, spike up for one, and then
gradually recede through to 2012. Tax Credit. The third distortion was the Home Buyer
Tax Credit, which spurred another artificial increase in
Note that both market cycles last about 15 years. The first cycle buyer demand inlate 2009 and early 2010. That’s why
starts around 1982, and lasts until about 1997. The second starts you see that odd spike in home prices in 2010 – because
around 1998, and lasts until at least the present day 2012. And government intervention pushed prices up for a brief
in both cases, prices rose for four or five years, flattened out for period when buyers were rushing to take advantage of the
two or three, then fell for three or four, and then flatted out again. tax credit. Again, that’s why the curve looks different from
Both cycles play out the same way. the comparable period of the last cycle, when prices went
slowly but surely down from 1989-1994.

8. and Prices 2002-Present
Westchester Rolling Year Transactions
$1,000,000 7,000
and Prices 2002-Present
Westchester Rolling Year Transactions
$950,000 6,500
In other words, the market cycle looks a little different this time than $1,000,000
$900,000 Westchester Rolling Year Transactions
and Prices 2002-Present 7,000
6,000
in the 1981-1996 period because the market was artificially distorted $950,000
$1,000,000
$850,000 and Prices 2002-Present 6,500
7,000
5,500
– first by the credit bubble that extended the price appreciation for $900,000
$950,000
$800,000
$1,000,000
6,000
6,500
5,000
7,000
another two years, which led to the financial crisis, which led to the $850,000 5,500
$900,000
$750,000
$950,000 6,000
4,500
6,500
$800,000 5,000
government intervention in the form of the tax credit. If not for the $850,000
$700,000
$900,000 5,500
4,000
6,000
$750,000 4,500
credit bubble, which led to the rest of the distortions, we feel that the $800,000
$650,000
$850,000 5,000
3,500
5,500
$700,000 4,000
market would have started to crest in 2005, started to come down $750,000
$600,000
$800,000 4,500
3,000
5,000
$650,000 3,500
in 2006, and come down more gradually from 2006 through 2011 or $700,000
$550,000
$750,000
$600,000
4,000
2,500
4,500
3,000
$650,000 3,500
so (a five year period comparable to the 1989-1994 period of the last $500,000
$700,000
$550,000 2002 2003 2004 2005 2006 2007 2008 2009 2010
2,000
4,000
2011 2012 2,500
$600,000 3,000
cycle). That’s why this market felt different – because it WAS different. $650,000
$500,000
3,500
2,000
$550,000 2002 2003 2004 2005 2006
$600,000 2007 2008 2009 2010 2,500
2011 2012 3,000
Transactions Transactions
For another view of this dynamic, take a look at the graphs on the right $500,000
$550,000 2002 2003 2004 2005 2006 2007 2008 2009 2010
2,000
2011 2012 2,500
Transactions Transactions
for each of the primary markets we service: Westchester, Rockland, $500,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2,000
Orange, and Passaic Counties (we do not yet have historical data for Transactions Transactions
Bergen). What the graphs shows are the sales and average prices for Rockland Transactions Year Transactions
Rolling Transactions
Westchester and the Hudson Valley over the last decade or so. They and Prices 2002-Present
are interesting to look at for two reasons. First, because they show
Rockland Rolling Year Transactions
$600,000 2,500
the interplay in each region of sales and prices during the height of the $570,000
Rockland Prices 2002-Present
and Rolling Year Transactions
2,250
Seller’s Market, through the transitional Correction, on to the Buyer’s $600,000
$540,000 Rockland Prices 2002-Present
and Rolling Year Transactions 2,500
2,000
Market, and then to what we believe is the Recovery. Second, these $570,000
$600,000
$510,000 and Prices 2002-Present 2,250
2,500
1,750
$540,000 2,000
graphs also clearly show the impact of the three market distortions. $570,000
$480,000
$600,000 2,250
1,500
2,500
$510,000 1,750
$540,000
$450,000
$570,000 2,000
1,250
2,250
In each case, what you see is a clear demonstration of the latter part of $480,000
$510,000
$420,000
$540,000
1,500
1,750
1,000
2,000
the most recent market cycle, and how that cycle was distorted from $450,000
$480,000
$390,000
$510,000
1,250
1,500
750
1,750
2005-2010. In particular, review the following parts of those graphs: $420,000 1,000
$450,000
$360,000
$480,000 1,250
500
1,500
$390,000 750
$420,000
$330,000
$450,000 1,000
250
1,250
• Credit Bubble. You can see how prices continued to $360,000
$390,000
$300,000
500
0 750
$420,000 2002 2003 1,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 250
appreciate in 2005-07 even though transactions were $330,000
$360,000
$390,000 500
750
falling, because of the credit bubble that propped prices $300,000
$330,000 2002 2003
$360,000 2004 2005 2006 2007 2008 2009 2010
0
250
2011 2012 500
Transactions Transactions
up even when they should have started to fall. $300,000
$330,000 2002 2003 2004 2005 2006 2007 2008 2009 2010
0
2011 2012 250
$300,000 Transactions Transactions 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
• Financial Crisis. You can see how prices in each of those Transactions Transactions
markets basically fell off a cliff in 2009, giving back years Orange Rolling Year Transactions
Transactions Transactions
of appreciation in just a one- or two-year period. andRolling Year Transactions
Prices 2002-Present
Orange
450,000 4500
• Tax Credit. How transactions spiked in 2010 because of the tax and Prices 2002-Present
Orange Rolling Year Transactions
405,000 4050
credit. Indeed, in Westchester, the transactional surge actually 450,000
360,000 Orange Rolling Year Transactions
and Prices 2002-Present 4500
3600
was enough to temporarily drive up the average sales price. 405,000
450,000
315,000 and Prices 2002-Present 4050
4500
3150
360,000 3600
405,000
270,000
450,000 4050
2700
4500
315,000 3150
360,000 3600
This graph shows the impact of the three distortions beautifully. The 225,000
405,000
270,000
2250
4050
2700
315,000
180,000 3150
1800
point is simple: the market evolves in a very predictable cycle, and 360,000
225,000
3600
2250
270,000
135,000
315,000 2700
1350
3150
even extreme situations like the ones we experienced during the latter 180,000 1800
225,000
90,000
270,000 2250
900
2700
half of the last decade do not change the cycle – they only distort it. 135,000
180,000
1350
1800
45,000
225,000 450
2250
90,000 900
135,000 1350
The graphs are also helpful, of course, because they point the way 0
180,000 2002 2003 2004 2005 2006
45,000 2007 2008 2009 2010
0
1800
2011 2012 450
90,000 900
forward. If you look at each of them, what you’ll see is that prices 135,000
0
1350
0
45,000 2002 2003 2004 2005 2006
90,000 2007 2008 2009 2010 450
2011 2012 900
have deteriorated a bit but that transactions are starting to come Transactions Transactions
0 0
back. That’s a good indication that buyer demand is increasing, 45,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 450
0 Transactions Transactions 0
which supports the view that we are starting to look at a market 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Transactions Transactions
that is moving into Recovery and eventually into a Seller’s Market.
Transactions Transactions
Passaic County Rolling Year Transactions
Conclusion and Prices 2002-Present
Passaic County Rolling Year Transactions
4500
$450,000
and Prices 2002-Present
Passaic County Rolling Year Transactions
The purpose of this part of the Forum was to make one thing $420,000 4065
clear: the market is clearly moving in the right direction.
$450,000
$390,000
Passaic County Rolling Year Transactions
and Prices 2002-Present 4500
3630
Sales are going up, and we can expect that sales will continue
$420,000
$450,000
$360,000 and Prices 2002-Present 4065
4500
3195
$390,000 3630
$420,000 4065
2760
to rise year after year for the next several years as buyer $330,000
$450,000
$360,000
4500
3195
$390,000
$300,000 3630
2325
4065
demand continues to increase. And we can also expect that $420,000
$330,000 2760
$360,000
$270,000
$390,000 3195
1890
3630
at some point in the next few years, this increased buyer $300,000 2325
$330,000
$240,000
$360,000 2760
1455
3195
demand is invariably going to lead to price appreciation. $270,000
$300,000
1890
2325
$210,000
$330,000 1020
2760
$240,000 1455
$270,000
$180,000
$300,000 1890
585
2325
All this brings us to the next question: how will market change $210,000
$240,000
$150,000
1020
1455
150
1890
$270,000
affect our business? $180,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 585
$210,000
$240,000 1020
1455
$150,000 150
$180,000 2002 2003
$210,000 2004 2005 2006 2007 2008 2009 2010 585
2011 2012 1020
Transactions Transactions
$150,000 150
$180,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 585
$150,000 Transactions Transactions 150
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Transactions Transactions

9. Question #2:
How Will Market Change Affect Our Business?
The biggest difference between the agent forums we held in average sales prices, increasing units, and rising revenue – brings
2005 and 2012 was the attitude and spirit that agents brought with it a brand new set of challenges and difficulties. After all,
to this year’s discussions. Agents were much more hopeful and agents in 2003 didn’t skip around the office singing happy tunes
optimistic about the market that is coming now than the market because the business was so easy back then. Rather, they just
that they were dreading back in 2005. Why? Because in seller’s had a different set of complaints based on the types of problems
market, we’re likely to see increasing units and appreciating that we are likely to see come back into the market.
sales prices, which means that we will have more revenue being
generated throughout the industry. To illustrate this, we set up a simple table to identify aspects of
the market that will be changing, how they would be changing,
But that doesn’t mean that everything’s going to be easy. and how those changes would affect the business. Here’s that
Indeed, one of the main themes that developed during this year’s chart.
forum was a reminder that a stronger market – one with rising

10. Factors that will Increase in the New Market
How is
Category The Market How will it impact the business?
Changing
Sales will rise, which is good for revenue purposes, but it also means that agents will have to
Unit Count Increasing
handle a larger number of transactions at a time. This will put some stress on them.
Prices will be going up, which again is good for revenue. It also means, of course, that we are
Sales Price Increasing going to see even more problems with appraisals that are going to come in low when they’re
based on six month old comps that sold in a market that has since appreciated.
Multiple With increased buyer demand comes an increase in the number of multiple offer situations,
Increasing
Offers which are always very stressful and distressing to buyers, particularly those who lose out.
With more money in the market comes more competition. Listings are going to be in high
Listing
Increasing demand, which means that more agents will be chasing fewer listings and increasing the
Competition
difficulty of getting them.
With increased agent demand for listings, companies and agents will be tempted to drop
Commission their commission – particularly if they think they can get homes sold very quickly and with a
Increasing
Pressure minimal marketing investment. We saw this type of commission pressure in the 2001-2005
market, and it’s going to come back.
We’re going to see the return of alternative business models, like low-service realty
companies that will offer reduced service or a menu of offerings for reduced commission (i.e.,
Alternative
Increasing put a home on the MLS for $500). We need to be ready to respond by showing how we can
Models
provide a much more effective marketing and service experience, and ultimately bring sellers
a better price for their home.
Buyers will become very anxious and urgent in the new market. They won’t be able to take
their time looking at homes, because well-priced properties are going to move quickly. This
Buyer Urgency Increasing means that buyers are going to require lots of quick attention and handholding. It will be very
difficult to keep them happy, particularly those that want to go see every house the minute it
hits the market, and blame you when they lose out on bidding wars.
As it becomes easier to sell a home, more homeowners will be tempted to sell it on their own,
FSBOs Increasing putting more pressure on commissions but also providing new prospecting opportunities for
aggressive agents.
As the industry starts to generate higher levels of revenue, we’re going to see a lot of new
agents entering the business. This not only means more competition, but more stress on
Agent Count Increasing
seasoned agents who will have to handle both sides of the transaction when dealing with
neophyte agents who don’t know what they’re doing.
Appraisal If you think we have appraisal problems now, imagine what it’s like in a rising market, where
Increasing
Problems the six-month old comps are 4-5% below where the current market is.

11. Factors that will be Declining in the New Market
How is
Category The Market How will it impact the business?
Changing
As more listings sell, inventory will dwindle. This will put added pressure on price, as
Listing well as fuel the urgency that most buyers will feel. Well-priced properties will move very
Decreasing
Inventory quickly once they hit the market.
We have gotten used to working with sellers for a long period of time. That’s going to
change as homes sell more quickly, which means that it will be easier to deliver an
Listing Time on exceptional client experience to sellers – you can cram seven or eight months worth
Decreasing
Market of service offerings into a six week period. It’s helpful that we’ve developed a series of
service initiatives designed to cover the long haul, because they will be that much more
effective in the short term.
We are going to start seeing brokers skimp on buyer side commissions. In some cases,
they will be internet brokers who get a minimum fee to put listings in the MLS but
Buyer Side make no offer or a limited offer to buyer agents. In other cases, even traditional service
Decreasing
Commission brokers will be cutting their commission, and putting the burden on the buyer agents.
Agents will need to protect themselves by signing exclusive buyer agreements to ensure
they can get paid.
In a buyer’s market, agents work with clients for a long time: sellers whose homes take
Client Service a while to sell, and buyers who take a long time looking. That’s going to change. You will
Decreasing
Time find yourself working with more clients, but for a shorter period of time. The challenge
will be getting those clients, and keeping them happy when they want to move quickly.
In the new market, it will not take a long to put together deals. Sellers and buyers will be
Deal Making
Decreasing moving quickly. The challenge will be managing an increasing number of transactions at
Time
one time.
Sellers will not have the same urgency that they’ve had during a buyer’s market. They’ll
be able to, for example, start looking for a new home even when they haven’t sold their
Seller Urgency Decreasing
old home, something we discouraged in the buyer’s market. You won’t need to maintain
long-term relationships with sellers, because their homes will sell more quickly.
Sellers will not have to discount their homes as severely. We will start seeing more near-
Seller Discounts Decreasing
price, full-price, and even above-asking offers.
We will start seeing fewer expired listings hit the market, and the ones that do will likely
have severe problems that kept them from selling. If you prospect expireds, it will be
Expireds Decreasing
slim pickings, and you might want to turn your attention to FSBOs, which will be increas-
ing.

12. How is the Industry Changing?
These market changes might all seem very familiar to many of This also means a raising of the bar for the competitive challenge
you who have been in the business for more than ten years, that you’re going to face. You’d better take advantage of that
because you’ve all seen a market like this before. What we’ve technology, or you’re going to start losing listings to the people
described above is simply the predictable impact of a seller’s who do. You know that we’ve been preaching for years the
market, just like the one we experienced prior to 2006: an importance of doing outstanding listing marketing as a service
increase in competition, downward pressure on commissions, a to your seller clients, which remains true. But in the coming
rise in transactional load, and higher levels of buyer stress and market, providing an amazing market experience is no longer
urgency. In some ways, we just need to re-learn the lessons that going to be as necessary to SELL the listing, but it’s going to
we learned in that last seller’s market, and adjust our business to be crucial to GET the listing. If you can’t show a seller how well
accommodate these changes. you can market a listing online by taking advantage of all these
new technologies, you’re going to lose that listing to alternative
But the market is not the only thing that’s changing – we’re also brokers who do nothing but put a listing online with a bunch
going to start seeing changes in the industry, especially those of photos and a rudimentary video. After all, why should a
sparked by technological innovation over the past ten years. seller pay you 6% when an online broker pretty much does the
After all, the last time we saw a seller’s market like the one same thing for $500? The key to the listing presentations of
that’s coming, we were living in a different world, one without the next few years will be your ability to show sellers how well
smartphones and Facebook and Yelp and video and all sorts of you market listings online, literally by pulling out a laptop or
technical innovations that are going to make the new market very tablet and showing them your current or recently sold listings
different from the old one. and comparing them to how the competition markets their
properties. That’s what’s going to get you -- or cost you – listings
in the new competitive environment.
The point is that it would be foolish to think that all you need
to do to be successful is to go back to doing business the way
you did in 2004. The industry has changed, the technology
has changed, and even the consumer has changed. And those 2. Communication Technology
changes require you to make some changes of your own. Going back ten years, it was unusual for agents and clients
to communicate by mobile phone: clients still called you on
Let’s think about those industry changes, and how they might your office phone and waited for you to get a chance to return
impact our business in the next several years: their call when you got back to your office. One study in March
2002 showed that only 62% of Americans owned a cell phone.
Moreover, do you remember how different cell phone usage was
1. Industry Marketing Technology back then? You probably had a limited data plan where you would
Think about how marketing technology has changed in the last wait until 7PM to make a call because you didn’t want to use
ten years. During the last seller’s market, brokers were still your “daytime minutes.” You could only use it in your home area,
doing full-page ads in the newspaper, lots of classified ads, and not anywhere in the country, and you couldn’t even call long
relatively few brokers even had websites. Even if the brokers had distance without incurring additional charges. More importantly,
websites, they probably had a handful of pictures, no video, no it was just a phone. You made calls on it. You didn’t send text
mapping, and no other bells and whistles. Now, virtually all major messages, you didn’t check your email, you didn’t surf the web.
brokers have full-featured websites, allowing for multiple high-
resolution photos, mapping, video, school reports, and everything Compare that to today: according to Pew Research, 85% of
else. And major listing aggregators like Trulia, Zillow, and Realtor. Americans have a cell phone, and they use them without
com amplify the kind of online marketing that agents do for their limitation because they probably have unlimited talk minutes
sellers. throughout the country. Indeed, fully 45% of Americans even
have a smartphone -- little mini-computers that they carry around
What does this mean to you? Most importantly, it means that with them and get phone calls, text messages, emails, and even
good agents can really differentiate themselves from mediocre now video conferencing abilities.
and poor agents by making full use of modern marketing
technology. In other words, the old technology leveled the In other words, people have so many more ways to get in touch
playing field between good and bad agents, because all you had with you than they did even five years ago. Now, you might have
to do to market a listing was write a short classified ad, take a already adapted to the new realities of these communication
few pictures, and load them into the website. You didn’t have a technologies. After all, you have a smartphone, you know how
lot of opportunity to differentiate yourself in your marketing – to check your email every day, and you’re even using text
after all, how many different ways are there to write a four-line messaging to communicate with clients. That’s great. But here’s
classified and take a low-resolution photo of the front of the the new challenge – you’ve been using those communication
house? But now, marketing requires you to have a number of technologies in a market that has not had a high level of urgency.
high-level skills: the ability to take good photos, to write good You’ve been dealing with sellers who had no expectations that
advertising copy for your online description, and even make video you would be selling their home in a matter of days or weeks, and
presentations. Moreover, your implementation of those skills will with buyers who were confident that they could take their time
be amplified – the results of your marketing will be on display and wait for the right home to hit the market.
24/7 not only on our site, but on all the competing broker sites,
and on the aggregator sites. If you’re not good at marketing, But think about how these changes in communication technology
there’s no way to hide. People will know. are going to impact your life when you’re dealing with a seller’s