Volume XXVII • Number 3 • March 2013 Sponsored By:
The Future of Housing Sales and Markets We are asked frequently to opine on what the future looks like for the housing market. As one can imagine there are more opinions about the future than there are grains of sand on a beach. Where will unit sales head, what about prices and when if ever will technology replace the real estate sales professional, are all questions we hear frequently. While these are all important questions what we don’t hear questions about has to do with the actual workings of the market itself. Will the MLS survive and, if not, what will take its place? What new regulations will arise and what impact will they have on housing markets and sales? What would be the impact on the housing Commentary cont. on p2 market from a reduction in federal and state
inside 7 Keller Williams at 30: What has the Industry Learned?
9 ShowingIndex – February
10 Shelter Mortgage Completes Sale 11 Real Estate Professional’s Bill of Rights
Three Things to Watch Heading into the best spring season in 8 years real estate professionals should watch three things: Inventory - with inventories at 13 year lows according to NAR, will the banks, Fannie, Freddie and others begin to release the overhang of foreclosed properties still under their control? Will the increase in prices begin to bring more homes to the market from those who have been unwilling or unable to consider a sale? Interest rates - they have headed up for several weeks now and indications are they will continue Three Things cont. on p13
12 Interview with Jim Zellmer, Virtual Properties 15 REAL Trends Housing Market Report – January 2013 17 Two Giants Report Strong 2012 Results 18 As If We Didn’t Know 19 Lending Tree Survey on Homeownership 20 Survey from Prudential and HSF Affiliates 21 Turning the World’s #1 Sales CRM into a Real Estate Machine
GAT H E R I N G o f E AG L E S M AY 1 , 2 & 3 , 2 0 1 3 • D e n v e r, C O T h e We s t i n D e n v e r D o w n t o w n
Commentary cont. from p1 Office: 7501 Village Square Drive, Ste. 200 Castle Rock, CO 80108 Phone: 303-741-1000 FAX: 303-741-1070 E-mail: firstname.lastname@example.org Web site: www.realtrends.com
Editor: Steve Murray – email@example.com REAL Trends Team: Amy Broset – firstname.lastname@example.org Jaime O’Connell – email@example.com Travis Saxton – firstname.lastname@example.org Daniele Stufft – email@example.com Tracey Velt – firstname.lastname@example.org Doniece Welch – email@example.com Copyright 2013 by REAL Trends. All rights reserved. Material in this publication may not be electronically stored or reproduced in any form without written permission. Violators will be punishable by a fine of up to $100,000 per offense.
subsidies for housing (mortgage interest deduction, property tax deductions, etc.). Here are a few thoughts about the future of housing sales and markets based on some reports that we have recently seen. MLS History instructs that nation states usually fall, not from external pressures and changes, but from within. In the book Game Plan we pointed out that most of the major changes in the way brokerage works came from internal changes, not external pressures. New entrants such as RE/MAX, Keller Williams and core service development had far more impact than technology has in terms of real changes to brokerage. As far as the MLS, while we think that the listing portals could replace MLS (external challengers) it is more likely that internal changes will have a greater impact. The growth of Off Market Listings (OML) may upset the functioning of the MLS more than any external challengers. In some markets where the prevalence of OML has been
New networks take advantage of inexpensive and easy to use listing technology to share listings with a favored few. documented, between 12 and 16 percent of all sales are now being handled by Realtor® members outside the MLS.
To purchase a membership or any of the following REAL Trends products please visit us at www.realtrends.com: • Brokerage Compensation Report • Game Plan • Online Performance Study • REAL Facts • REAL Trends 500 • Valuing a Residential Real Estate Services Business
The growth of new private networks between sales professionals is potentially huge. These new networks take advantage of inexpensive and easy to use listing technology to share listings with a favored few. The networks that we have encountered have as few as 15 members to as many as 50 sales professionals. They share with each other, outside the MLS, their listings for sale rather than MLS. And in most, but not all cases, they gain the permission of the seller to do so. Why now? First the scarcity of inventory and strong markets has created a ripe situation where a sale Commentary cont. on p4 doesn’t necessitate marketing through
Commentary cont. from p2 an MLS. Second an OML increases the opportunity for a double ended deal and an increase in personal income to the listing sales professional. Another reason we hear about is that top sales professionals are tired of sharing listings with untrained or incompetent sales professionals where they are bound to share commissions with others who either can’t or won’t perform their side of the deal but merely “show up to get paid.”
was originally passed in 1968, to “combat and prevent the segregation and discrimination in housing including the sale or rental of housing, and the provision of advertising, lending and brokerage services related to housing.” Brokerage firms were clearly covered under the Act.
A plaintiff does not have to prove that you intentionally discriminated just that any of your policies, programs or services had the effect of discrimination against a protected class.
Now under disparate impact, finalized rules outline a three part burden-shifting (emphasis burden shifting) test for determining when a practice with a It may well be true that sellers agree to OML discriminatory effect violates the Fair Housing Act. without knowing that it may have a negative impact Under this test “the charging party or plaintiff first on their final selling price. There is some research bears the burden of proving its prima facie case that that seems to support the position that sellers who a practice results in, or would predictably result in don’t insist that their homes be marketed through an a discriminatory effect on the basis of a protected MLS have less exposure and sometimes receive characteristic. If the charging party proves a prima lower offers. Should these private networks grow facie case the burden of proof shifts to the defendant they may also become targets for litigation under to prove that the challenged practice is necessary to any number of federal anti-trust or antiachieve one or more of its substantial, legitimate nondiscrimination laws. Surely there are other discriminatory interests. If the defendant satisfies this challenges to this form of doing business. burden, then the charging party (plaintiff) may still establish liability by proving that their substantial, All that aside, the damage done to the foundation of legitimate nondiscriminatory interest could be served how residential brokerage is conducted is under by a practice that has a less discriminatory effect.” assault—not from outside, but from within. So, when someone asks about the future of MLS with a Got that? A plaintiff does not have to prove that you thought towards Realtor.com and their peers we intentionally discriminated just that any of your poliwould answer by saying that we don’t need to fear a cies, programs or services had the effect of discrimRealtor.com so much as we need to fear that our inating against a protected class. Upon establishing own structures are crumbling. this, the defendant has to prove that there was a
There are two areas that catch our attention. First, the final rules on “disparate impact” as it relates to our industry that have been recently released and secondly, the move of the federal government to promote “healthy housing.” Each has implications for our business that few seem to be paying any attention to. Under “disparate impact” regulations issued by the U.S. Department of Housing and Urban Development (HUD), you are no longer protected if you don’t discriminate against a protected class. You have to prove that your policies or programs don’t result in discrimination. The Fair Housing Act
legitimate business interest for running things the way they wanted to. And even if they do establish the
legitimacy of their programs, policies or processes, they may still be challenged if there is a better way for the business to have operated that has a less discriminatory effect. All based on a court’s ruling. The Feds no longer have to prove that your actions were discriminatory just that your actions either resulted in discrimination or that you could have done things differently. While the lending industry has been the first to feel the pain of this new approach by HUD to regulate the housing market you can bet it won’t be the only one to feel its affects. Wells Fargo and a smallish savings and loan in Los Angeles have already been through this and in both cases the lenders were not found to have intentionally discriminated against anyone, just that the outcomes of their actions were discriminatory and HUD found that they could have accomplished the same outcomes (in terms of loans made) in a different manner. Presumably by making loans to those who wouldn’t qualify under normal processes.
So, here is one likely outcome. Over time, HUD will stretch their coverage to all households (after all if it is good enough for low income households why not all households). Everyone should have a “healthy home.” As with lead based paint regulations, there will be similar regulations at the federal level for pests, moisture, radon, prior smoking inhabitants, etc. The list is limitless. Since it will be tough to have everyone who owns a home retrofit their homes to gain a “healthy home” designation and since everyone wants a healthy home, they will enforce upgrades at the time of transfer of title. How can they do this and make it stick you might ask? Remember that the federal government controls mortgage lending, with Fannie, Freddie and HUD underwriting or insuring more than 90 percent of all housing sales.
You can see it coming from a mile away. After all, who could argue with the need for healthy homes? Brokerage firms will need to examine each and every One can see the makings of an entirely new certified one of their policies, processes and programs to insure inspection program of healthy home inspectors that the outcome, if not the intent, of these policies roaming the land to check and be sure that you have do not impact a protected class. No discrimination a healthy home. is allowed on the basis of race, color, religion, sex, Back to the future of housing sales handicap, familial status or national origin. Federal initiative on healthy housing Vision: To lead the nation to a future where homes are both affordable and designed, constructed, rehabilitated, and maintained in a manner that supports the health and safety of the occupants. Mission: To reduce health and safety hazards in housing in a comprehensive and cost-effective manner, with a particular focus on protecting the health of children and other sensitive populations in low income households. Sounds benign doesn’t it? So did HUD’s antidiscrimination policies twenty years ago. As we stated above, now that important goal has been stretched to allow HUD and others to tell business people how to better run their businesses.
We discovered a non-scientific way to measure housing sales levels several years ago when we noted the correlation of the level of households to the level of housing sales. It appeared that about 5% of all households nationally bought a home each year when averaged over 30+ years. As the level of households grows so too does the level of housing sales. With about 120 million households in the country today we can estimate that 6 million total new and existing home sales would be “normal” or expected for 2013. According to the REAL Trends Housing Market Report for January 2013 we are running at an annual rate of nearly 5.8 million. So, it would appear that the current level of housing sales is just about back to normal. n
it ’ s a l l a b out you
Property marketing – it’s everywhere you want to be! www.merrill4marketing.com
See what all the chat is about! “The four-page flyers are my secret weapon. They have generated more new business for me than anything else I do or use. Sellers LOVE them! Gorgeous product!” – Joan Culwell, MB JoanSellsColorado, Inc.
Merrill’s SErVICE PLEdGE to you: s WELL PROVIDE YOU EASY TO USE TOOLS and services s WELL ADDRESS YOUR ISSUES PROMPTLY s WELL COMMUNICATE WITH YOU your way s WELL INVEST OUR RESOURCES to better meet your needs
Leave the mailing to us with Merrill mLIST With mLIST, you get a FrEE mail list with any postcards we mail for you. Search addresses by proximity, street address or zip code. Sort by single or multi-family properties, home owners or renters. Tell us to mail First or Third Class and we’ll complete your targeted mailing campaign.
additional commentary Keller Williams at 30: What Has the Industry Learned? by Jeremy Conaway, Contributing Editor They call it Family Reunion and for 2013 it was Dallas, Texas that played host to over 11,000 Keller Williams Real Estate participants from all over North America and nine overseas markets who gathered to celebrate the company’s 30th birthday party. For those who made an appearance at CEO Mark Willis’s State of the Company presentation there was even a birthday present. This auspicious event and accomplishment make this a good time to review the many contributions that KW has made to the North American real estate industry over the past thirty years. This article is not intended as a tribute to KW, although many might argue that one is due. Neither is it to suggest that there are not several entities within this industry that have made significant contributions to the industry over the past two decades because there certainly are. It is to say that in the annals of entrepreneurialism, the KW achievement deserves special notice for what it has done, how it did it and when it did it. Over the past 30 years KW has created and perfected a unique business model and corporate culture in many respects different than that of its competitors. By doing so it brought upon itself a level of attention and comment that frequently went beyond that reserved for mere competitors, approached ridicule and occasionally reached levels of unhappiness that one might have thought were associated with heretics. It developed and promoted concepts that often seemed almost revolutionary, but which were always progressive during a rich period in the history of the North American real estate marketplace. Much of this period happened to parallel the great real estate boom of 1992 through 2005, when many in the industry were proving all one had to do to succeed was to toss a net into the market waters. At every step of the way
KW convinced its growing community to go the extra mile and follow an approach that has become a prerequisite to “careers worth having,” “businesses worth owning” and “lives worth living.” During the past seven years KW polished its business model in a national market environment that, in and of itself, threatened what was left of the traditional business model as it raced through successive disasters including the market crash of 2005, the mortgage crisis of 2006, the recession of 2007 and the foreclosure nightmares of that entire era. During this same time literally tens of thousands of brokerages disappeared from the marketplace. Never once during the past 30 years has the KW community ever looked back on its decision to take a different road nor has it ever backed down from its objectives and commitment to follow a central vision that is the backbone of its current success. Without a doubt, history will view this as one of KW’s first contributions to the industry. Real estate has always been about accepting the risk, perseverance and courage. In following its belief that one should “never back down” KW has sustained the traditional industry value that long ago established courage and gumption as critically important attributes. The KW business model is unique in many ways and one can bet that as Keller Williams cont. on p8
Keller Williams cont. from p7 investors, who are even now beginning to once again see the industry infrastructure as a positive investment opportunity, move closer they will be closely examining what features and functionalities have allowed KW to succeed over the past decade.
rather community assurance that reaches out in a time of need and builds loyalty. It takes metrics to define a business. Within KW, business metrics reflecting virtually every aspect of the business have been raised to a level of the Holy Grail. KW maintains an exhaustive database that can either validate or invalidate every possible decision making process.
At the same time brokers throughout North America are also examining their traditional brokerage business models with many asking themselves what matter of business model will best serve their interests moving forward. The following KW innovations clearly deserve In order to be effective systems must recognize the attention and respect of both of these groups. the interdependency of all involved. It’s that old Jim Collins thing. Success requires Creating a culture that in and of itself is a having the right people, with the right attitudes hallmark of the company. and the right tools on the bus. At KW the term KW market centers and principals live in the same “right” is not about guesswork, it’s about homework. reality as traditional brokers when it comes to agent relationships. KW agents aren’t driven to success Profitability must be a rather they are drawn by a culture that includes universal value. them in all aspects of the operation. Such is the If one is not part of the “open book” approach. KW has created a massive profitability solution culture in which personal relationships and then one is part of the contributions to the company outweigh the problem. Within KW “I don’t need no stinking boss” attitude. everyone, at every level, benefits from profitability but most especially those who contribute to it. The KW profit sharing program has distributed almost one half billion dollars to participating agents. Many within the organization have created retirement programs funded by these efforts. Why wouldn’t everyone want to drive profitability? Technology cannot be an agent option. Everyday, KW agents and market center personnel Building a community of inclusion that will drive enter the market environment supported by that excellence. technologies that create an entirely new level of Within the KW culture the words care and caring competitiveness. KW’s eEdge transaction management are not brochure fodder, but rather are real and program is redefining the transaction experience. This powerful beliefs. Members of the KW family who participation is not optional; it’s what makes it all work. encounter crisis and financial nightmares find that each year literally millions of dollars are made Understanding the rule and role of knowledge. available to assist with their crisis through the KW Today’s Internet empowered consumer has a very Cares program and the annual Red Day celebration. low tolerance for agents who try to get by on their It’s not insurance that will guarantee a solution, but personality. KW knowledge management programs,
designed and delivered to create a competitive advantage, are not required by statute but by self-respect. Again, it’s the culture. Discipline, structure and accountability are the cornerstones of success. KW takes the position that laxity and undisciplined behavior are the root cause of low performance, wavering self-esteem and consumer dissatisfaction. No one forces perfection within the KW culture; it is just the most popular choice. Systems do not distract from one’s humanity rather they contribute to it. Systems are the foundation for all manner of success within the KW culture. One very seldom hears the term “independent contractor” in a KW environment. It may take a village to raise a child but it takes a system to create customer satisfaction. Respect is a commodity that adds great value. In an industry that often lives by the rule of “what
have you sold today,” KW has managed to introduce respect into virtually everything that it does. Yes, it is a respect that can be lost for the undeserving but at the same time it is a respect that is presumed and can be depended upon. Keller Williams has earned the status and respect that now comes with its new position as a leader among all brands. KW has contributed to the positive image of our industry. It has reinforced traditional industry values, it has made profitability a science, it has raised the level of respect for REALTORS® in the communities in which it operates and it has helped lay the foundations for an industry moving forward that can once again be seen as a great investment and business opportunity. It is success well earned and an achievement to be recognized. We are an industry facing many challenges over the next few years. Let’s be thankful for having another powerful and competent player to help us move the ball forward. n
- Leading Indication of Home Sales
200% 180% 160% 140% 120%
100% 80% 60% 40% 20% 0% -20% -40%
y-0 1 g-0 1 No v-0 1 Fe b-0 Ma 2 y-0 2 Au g-0 2 No v-0 2 Fe b-0 Ma 3 y-0 3 Au g-0 3 No v-0 3 Fe b-0 4 Ma y-0 4 Au g-0 4 No v-0 4 Fe b-0 Ma 5 y-0 5 Au g-0 5 No v-0 5 Fe b-0 Ma 6 y-0 6 Au g-0 6 No v-0 6 Fe b-0 Ma 7 y-0 7 Au g-0 7 No v-0 7 Fe b-0 8 Ma y-0 8 Au g-0 8 No v-0 8 Fe b-0 Ma 9 y-0 9 Au g-0 9 No v-0 9 Fe b-1 Ma 0 y-1 0 Au g-1 0 No v-1 0 Fe b-1 1 Ma y-1 1 Au g-1 1 No v-1 Fe 1 b-1 Ma 2 y-1 Au 2 g-1 2 No v-1 Fe 2 b-1 3
Percent Change from May 1, 2001
Source : "Housing Sales" is the actual property sales statistic as reported by the National Association of REALTORS. The "ShowingIndex" is a moving trend statistic that tracks the rate of showing appointment requests from the websites of more than 60 real estate companies throughout the U.S. 40 of the companies are Top 100 companies as reported by REAL Trends.
Shelter Mortgage Completes Sale Milwaukee-based Guaranty Bank announced the completion of the sale of Shelter Mortgage Company, LLC to funds managed by CIVC Partners, LP and the renaming of several branches across the country to reflect the company’s new ownership. The company, formerly an operating subsidiary of Guaranty Bank, was officially acquired January 18 by the private equity firm CIVC Partners. One of the first actions management took under the new ownership was to establish a consistent brand identity. As a result, the majority of branches throughout the country, including those operating as Guaranty Mortgage will now take on the Shelter Mortgage name.
Shelter will be able to provide more options to homebuyers and greater efficiencies throughout the home buying process. Established in 1984, Shelter Mortgage is a leader in mortgage partnerships, working with real estate companies, homebuilders, community banks and relocation companies to create an in-house lending solution. “We’re excited about entering this new phase with CIVC, a firm that understands the financial services market and has a record of helping management teams drive growth,” said CEO Jill Belconis. Beyond the name changes, which took effect January 18 under Shelter’s new owners, Shelter will be able to provide more options to homebuyers and greater efficiencies throughout the home buying process. Belconis told REAL Trends “the entire team we have had at Shelter has been retained by the new ownership. They saw a solid team that could continue to grow the
business significantly in the years ahead. Some have asked where our funding will come from to continue to grow. We have numerous warehouse sources as well as portfolio lenders. There is no shortage of sources of funding that we have access to in which to grow our business with our partners.” Belconis added that “we have about 60 joint venture partners at this time and we are eager to grow that part of our business strongly. We have communicated with our JV partners that this is the case and are reaching out to other residential brokerage firms and other potential partners that we want to grow these business arrangements.” “Our customers will be served by the same employees, with the same personalized service they’ve always received, but with greater access to more diverse mortgage products,” Belconis said. Jill Belconis “Moving forward, we remain committed to offering a wide selection of mortgage programs and ensuring a hassle-free lending process for homebuyers.” CIVC has been investing in the financial services sector for over 20 years and has significant mortgage banking experience having successfully invested in the sector on three previous occasions. n
Real Estate Professional’s Bill of Rights Ben Caballero, founder and chairman, National Association of Real Estate Professionals, Inc. requested that we share the following with the Realtor Community. Zillow, Trulia, REALTOR.COM and other real estate data publishers are not accountable to a code of ethics, MLS rules or real estate licensing laws. As a result they have been free to engage in practices that have caused much dissatisfaction within the real estate industry. Many solutions have been discussed but little has been accomplished to address industry concerns.
An analysis of all feedback will take place. All appropriate changes will be made and published for adoption by brokers and MLS’s. There will be a transition period for adoption and for publishers to adjust their business practices to ensure the continued flow of data. Accredited publishers will benefit by diffusing the mounting backlash from agents, brokers and MLS’s that has fueled the data strikes that began in 2011 and accelerated in 2012. Better industry relations
After discussions with many agents, brokers, MLS executives and industry consultants the National Association of Real Estate Professionals (NAREP) has concluded that since their data is provided by our industry, our industry has a right to set guidelines for its use. To address this need for guidelines NAREP has developed the Real Estate Professional’s Bill of Rights. Publishers who comply with this Bill of Rights will receive NAREP’s accreditation which they will prominently display on their website to signify their adherence. Industry members will know their data will be respected and consumers will know the information is accurate and current. Publishers not complying with the Bill of Rights will not be accredited and will risk losing listing data because brokers will then have a valid reason, which sellers can easily understand, for not sending their listing data to non-accredited publishers. NAREP believes that sellers will not be eager to have their home information displayed on non-accredited websites that refuse to comply with guidelines that ensure a quality experience for buyers or that do not respect their home’s information.
would increase cooperation and help to ensure the continued flow of valuable content so critical to their businesses. Accredited publishers’ credibility would benefit from the adoption of the Bill of Rights because by doing so they would be addressing the growing concerns of consumers who are becoming increasingly aware of the time they waste on publishers’ websites wading through duplicate listings only to find homes they are interested in are not for sale.
NAREP is a non-profit corporation organizing as a 501(c)(6) non-profit trade association under the IRS code. It was formed to address the widespread backlash among real estate professionals who are As a valued and respected member of the real estate frustrated with controversial practices by a growing industry you are among the first to receive this draft. number of real estate marketing websites. NAREP is The Bill of Rights may also be viewed at www.narep.net. overseen and managed by people who truly understand Please send your comments to firstname.lastname@example.org. real estate, licensed real estate professionals. n 11
featured leaders Jim Zellmer, Virtual Properties Interview with Tracey Velt, contributing writer REAL Trends: What’s your background? Zellmer: My parents are both entrepreneurs and that had a significant impact on me. Once I graduated from the University of Wisconsin, I worked in venture capital banking on the west coast. I also worked with Pepsi for a couple of years. I got into the software business in 1995 when my partner, John, and I saw opportunities arise with the Internet exploding. Since the University of Madison’s real estate program was so strong, we decided to present some new ways of doing things.
Zellmer: Virtual Properties’ mission was and still is to simplify the real estate process and that ranges from having beautiful imagery and presentation of the properties to the ease of finding information and comparing it.
Virtual Properties doesn’t homogenize real estate and how information is presented. After all, each area has local nuances and that localization is what we offer clients in terms of the data relevant to their market. That gets to the crux of the broker value equation—we support the broker value equation in their local markets. We localize business processes and information to support what they do, and we do it better and faster.
Virtual Properties creates, configures, implements and supports single entry cloud computing, mobile apps plus maps and media for leading real estate firms.
The path of Virtual Properties continues to be to present the things that are useful to help agents cut through the fog in the market.
Just think of how things have changed. My wife, Nancy, and I bought our house in the early 90s
REAL Trends: What are some trends you’re seeing in your vertical?
My wife, Nancy, and I bought our house in the early 90s when there were still MLS books. Today, there is data abundance.
Zellmer: Certainly apps are exploding. But, people need to understand the difference between putting their website into an app, which is essentially a website, and building an actual app, which is more simplified.
REAL Trends: Tell us about your career path.
when there were still MLS books. Today, there is data abundance. However, data doesn’t mean information; it’s just data. We’ve gone from a time 12
when data was scarce to data abundance. And, the value of the agents who can translate that data is more significant than ever. After all, there’s so much bad data out there and so many changing markets.
The second thing that’s interesting in real estate is that some brokers are thinking about reducing complexity. When you think about the data explosion, it’s led to all kinds of unintended consequences. I did an analysis of REAL Trends 500 home pages. In terms of complexity, they ranged from some that had 26 actions on their home pages
to 774 actions. How many actions do you want your customers bombarded with in one spot? Some brokers are recognizing that it’s gotten out of hand.
traveled. I spent 3.5 months backpacking through Europe after I graduated from college and the friendliness of the people made an impact on me.
The truth is that more complexity equals lower profits. In my opinion, SEO is yesterday’s news. There’s a great term out there right now—content inflation. Like any trend, once everyone is doing it,
In the last 10 years, our family has traveled extensively. Our favorite places have been Hoi An, Vietnam; Istanbul; Provence, France; Cordoba, Spain; Prague and Berlin.
There’s a great term out there right now—content inflation. Like any trend, once everyone is doing it, the point is lost.
For me, traveling helps me understand history and the things we’re told. It gives us perspective in the world and business. I’m always interested in what different cultures are doing and why.
the point is lost. So, putting more content out there won’t necessarily get you ranked higher. More doesn’t mean better. REAL Trends: Do you have any hobbies outside of your career? Zellmer: My wife, Nancy, and I love to travel with our girls. We have one daughter in her freshman year at the University of Madison, and one daughter is a junior in high school. My parents were well
REAL Trends: What are you passionate about as it relates to your business? Zellmer: I am passionate about decreasing friction—simplifying things. In technology, there are people who give you the end product first. For example, you pick the design, design it, then have to go find properties and enter information. That’s great the first few times you perform the task, and then it just gets in the way. We do it the other way, the contacts and listings are first and you can do things with them. It’s a widget approach versus wizard. The wizard is useful for a person who isn’t tech savvy. n
Three Things cont. from p1 to rise slightly. Historically, this brings sidelined buyers into the market. Will the clash of increased buyer activity and low inventory cause prices to leap in the the next few months - and will this bring even more sellers into the market? Off Market Listings - will the tightness of inventory and the opportunity to increase incomes from double sided transactions cause the percent of off market listings to grow even more than it already
has? And will this result in even more tightness in inventory available to the market in the highest activity time of year? While one part of the market drives demand for housing up another is potentially lessening the supply of homes for sale. Normally this drives prices up rapidly. Watch unit sales, pricing and inventory levels over the next few months as these will provide answers to these questions. n 13
Dedicated to helping you put buyers into homes Your goal is to turn buyers into homeowners. Our goal is to provide ﬁnancing to make that happen. And, as the nation’s leading residential mortgage lender, we provide a wide array of products and programs. So no matter what your client’s home buying goals, we can help you by providing ﬁnancing options to meet nearly any homebuyer need. · · · ·
Purchase loans including FHA and VA programs Mortgages for high-end purchases Investment property ﬁnancing New construction and renovation loans
No other lender is as dedicated to delivering quality products and services to you and your clients as Wells Fargo Home Mortgage.
We’re ready to help you put buyers into homes. Visit wellsfargo.com/mortgage to learn more.
Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. � ���� Wells Fargo Bank, N.A. All rights reserved. NMLSR ID ������. AS������ ��/��-�/��
market news Housing Market Report February 2013 February 12, 2013 – Housing unit sales for January 2013 were up 17.7 percent in the South, the strongest showing in the country. The next highest region was the Northeast where unit sales were up 12.5 percent, the Midwest increased by 11.4 percent, and the West saw an increase of 5.1 percent for the same period. The REAL Trends Housing Market Report showed that the combination of new and existing home sales in January 2013 strengthened from the prior year. The annualized rate of the combination of new and existing home sales increased to 5.888 million up from the 5.255 million recorded in January 2012. The average price of homes sold in January 2013 was up 0.3 percent from the average price of homes sold in January 2012 the smallest increase in pricing in the last six months and marking the tenth consecutive month of increased home sale prices.
The average price of homes sold in January 2013 increased 0.3 percent across the country. The South had the best results with the average price of homes sold increasing 8.9 percent followed by the Midwest region at 7.2 percent. The West region showed a decrease of -1.3 percent while the Northeast lagged with the average price of homes sold decreasing by 6.0 percent. “January 2013 sales of new and existing homes increased solidly throughout every region proving the sustainability of the housing recovery. The average price of units sold was up only slightly and the increase was the smallest on a year over year basis in the last half year. The most significant challenge to housing presently is the scarcity of inventory. While national figures indicate 4-5 months of inventory there are numerous large metropolitan areas where inventory is well under 2-3 months. This scarcity will have a negative impact on future housing sales,” said Steve Murray, editor of the REAL Trends Housing Market Report. n
There are numerous large metropolitan areas where inventory is well under 2-3 months
REAL Trends January/December Housing Market Report (Versus same month a year ago)
January 2013 Closed Sales
January 2013 Average Price
December 2012 Closed Sales
December 2012 Average Price
National Regional Report
January 2013 Average Price
December 2012 Closed Sales
25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%
January 2013 Closed Sales
December 2012 Average Price
Two Giants Report Strong 2012 Results Realogy Announces 2012 Results Realogy’s net revenue for fourth quarter 2012 was $1.2 billion, a 30% increase compared to the same period in 2011. The Company’s Adjusted EBITDA was $167 million in the fourth quarter, which was an increase of 61% year-over-year. The increase was primarily due to a 35% increase in sales volume at the franchised and company-owned real estate services segments combined year-over-year for the quarter. Net loss attributable to the Company in the fourth quarter was $292 million, which was after $400 million of primarily non-cash IPO-related costs, $18 million of debt extinguishment charges and $42 million of depreciation and amortization. Realogy’s net revenue for full year 2012 was $4.7 billion, an increase of 14% compared to 2011. Realogy’s Adjusted EBITDA for 2012 was $674 million, an increase of 18% compared to 2011. These improved results were due largely to an increase in sales volume at the franchised and company-owned real estate services segments. In 2012, Richard A. Smith, Realogy recorded a net loss Realogy attributable to the Company of $543 million, which was after $528 million of interest expense, $400 million of primarily non-cash IPO-related costs, $24 million of debt extinguishment charges and $173 million of depreciation and amortization. Based on the Company’s $3.1 billion reduction of debt from its IPO, which gives effect to the expected redemption in the second quarter of $200 million of Subordinated Notes with remaining IPO proceeds, the Company expects corporate cash interest expense to total $315 to $320 million in 2013.
“The strength of the year, and in particular our strong fourth quarter results, supports the growing consensus of a housing recovery,” said Richard A. Smith, Realogy’s chairman, chief executive officer and president. “The favorable housing trends we experienced early in 2012 were evident in the fourth quarter, and our first quarter 2013 closed sales volume and open contracts indicate the continuation of the housing recovery.” RE/MAX LLC reports strong sales activity RE/MAX LLC experienced significant improvement in closed transactions and sales volume in 2012. In the U.S., RE/MAX agents were involved with nearly 840,000 transaction sides, an increase of 12% over 2011. The 2012 U.S. sales volume for RE/MAX agents was $165 billion, up 18% from last year. Most importantly, individual productivity within the RE/MAX network rose 15% to an average of 16.3 transaction sides per agent. “For several years in a row, RE/MAX agents have averaged more sales than other agents. Again in 2012, RE/MAX agents closed more real estate deals than agents with any other brand,” said Margaret Kelly, RE/MAX CEO. “It’s clear that the advanced tools and technology resources RE/MAX offers makes our agents the best prepared to assist home buyers and sellers in this recovering market.” Margaret Kelly, RE/MAX Since 1997, closed transaction sides in the RE/MAX organization have never fallen below 1 million and have never been exceeded by any competitor. Worldwide in 2012, RE/MAX transaction sides rose 8.4% to 1.3 million and sales volume was up 10.1% to $296 billion. n
As If We Didn’t Know
REAL Trends comment: “We have suspected for several years that the federal government itself had a significant hand in the development of the housing crisis. Several books have detailed this in some measure with the interaction of politicians and the leaders of such firms as Fannie Mae and Freddie Mac substantially increasing the exposure of lending institutions to subprime and other exotic mortgage instruments. Our thought is that the next time the Feds say they want to “help” the housing market we say thank you, but no thanks.”— The Editor Read on: A new report from the National Bureau of Economic Research (NBER) asserts the Community Reinvestment Act (CRA) drove banks to make riskier loans in the lead-up to the financial crisis. The CRA, enacted by Congress in 1977, “is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low-and moderate-income neighborhoods, consistent with safe and sound banking operations,” according to the Federal Financial Institutions Examination Council’s (FFIEC) website. To that end, the act requires insured institutions to undergo periodic reviews to make sure they meet the needs of their surrounding communities. The NBER’s study finds that banks preparing for a CRA examination tend to show different lending practices than those that aren’t. “We find that treatment group banks [those preparing to undergo an exam] increase their origination rate three quarters before the exam. This effect is economically significant … treatment group banks increase originations by about four percentage points as compared to control group banks,” the report reads. “This corresponds to a sizable 5.5 percent increase in the likelihood of loan origination relative to mean sample origination rate of 72 percent, three quarters before the CRA exam.” 18
Because the exams take time, the study shows origination volume tends to remain elevated for several quarters after an exam is conducted. The NBER attributes the increased lending to two factors: The fact that CRA examiners interact with a bank over time—often submitting their reports two quarters after the exam is conducted—and inertia in lending behavior after the completion of the exam. What’s more, origination rates in CRA-eligible tracts (those that typically have a higher proportion of low-income households) increase by 8.2 percentage points at those banks. Results in the study show that delinquency rates increase around CRA examination, especially for loans made in CRA target tracts.
Delinquency rates increase around CRA (Community Reinvestment Act) examination, especially for loans made in CRA target tracts. The effects are strongest during the time period when the private securitization market was booming, the study says. “Taken together, we find evidence for elevated lending by banks in the treatment group around the CRA exam during the 2004-2006 period,” the paper reads. “Moreover, there is concurrent evidence that the performance of loans originated by the treatment group banks around the CRA exam are in particular worse than those originated by the control group banks during the 2004-2006 period. This is also the period when private securitization boomed and might therefore reflect an unexplored channel through which this market induced risky lending in the economy.” n
Lending Tree Survey Asserts the Attractiveness of Homeownership In a recent LendingTree survey of 1,060 homeowners conducted online by Research Data Technology, Inc. from November 16 to November 27, 2012, 79% believe that home ownership remains an essential part of the American dream. Seventy-six percent remain confident that if they wished to purchase a new home in the future they would be able to sell their current home, obtain a mortgage, and afford a down payment despite the recent recession and housing market crash.
Consumer confidence was even stronger when it comes to home loan refinancing with 89% of those surveyed confident that they will be able to refinance their mortgage with only 11% of responds uncertain. One in three surveyed had already refinanced their current mortgage, 28% still plan to do so and a remaining third are unsure of their plans to take advantage of the historically low interest rates.
Of those surveyed, slightly more than half believe the housing market will take 12 months or less to recover and only 19% are postponing a home purchase or sale because of a weak housing market. “Low rates, affordable home prices, and a recovering housing market have created a unique window of opportunity for potential home buyers. The good news is that the housing market is steadily improving and upcoming lending regulations will hopefully provide the clarity needed for lenders to have renewed confidence,” said Doug Lebda, chairman and CEO of LendingTree. “Consumers still value owning a home, and despite a few difficult years, they remain optimistic that they can make home ownership a reality. Now is a great time to
Consumers still value owning a home, and despite a few difficult years, they remain optimistic that they can make home ownership a reality. invest in a home and make the American Dream reality, if purchasing a home aligns with your financial situation, goals and priorities.
About the Survey 1,060 homeowners shared their views on the process and experience of obtaining a mortgage. These homeowners obtained a purchase mortgage or refinanced an existing mortgage in 2009 or later. They participated in an online survey conducted by Research Data Technology, Inc. on behalf of LendingTree, LLC on November 16 – 27, 2012. The 1,060 survey respondents represent a random sample of homeowners selected from a consumer panel of individuals in the U.S. who have access to the Internet. The margin of error in this survey is ±3.0%. This means that in 19 cases out of 20, survey results based on 1,060 respondents will differ by no more than 3.0 percentage points in either direction from what would have been obtained by seeking the opinions of all eligible individuals in the U.S. who are online. n 19
New Survey from Prudential and HSF Affiliates on Homeownership The survey found the “contemplators” to be the most fascinating. “Contemplators,” survey participants who considered but did not buy/sell a property during the past year, displayed a 10% increase in confidence over Q2 figures for both the U.S. real estate market and home prices indicating they will likely keep their eye on the market. Key observations include: • Home ownership remains important to 96% of Americans with 77% of respondents ages 25-34 and 78% ages 35-44 indicating home ownership is “very important.” More so, 74% of respondents agree that with interest rates at historically low levels now is a great time to buy a home.
• Younger generations are significantly more likely to have a favorable perception of the real estate market than older groups. 25-34: 29% 55-64: 11% • Younger groups are also more confident of a housing market recovery. 25-34: 48% 55-64: 32%
• Space, safety and investment drive the reasons to own a home, with 97% respondents stating that home ownership allows for more control over living space. Tax benefits finished a distant sixth on the survey’s reasons for buying a home.
• Older generations are more skeptical about current burdens of buying. 25-34: 23% 55-64: 27%
• 63% of Americans have a favorable or somewhat favorable perception of the U.S. residential real estate market and, again, younger generations are more likely to possess a favorable opinion when compared to their older counterparts.
• Finally, younger generations are more concerned about being able to find trusted sources of information and guidance. 25-34: 67% 55-64: 58% n
How Important Are Your Lead Response Times? A look at over 20,000 leads and the propensity to become qualified by response times. Source: Joint Study by MIT and Insidesales.com
• Younger generations find the prospect of owning a home very important, more so than older generations. 25-34: 77% 55-64: 72%
technology Turning the World’s #1 Sales CRM into a Real Estate Machine By Travis Saxton, marketing and technology manager In our technology consulting, we stress how important a Customer Relationship Management (CRM) tool is to building long term business success. Now more than ever, with so many lead sources and higher demands from the real estate consumer, if you want to help your business grow this should be an integral part of every brokerage’s technology and business strategy. We are inundated with website leads (even different types within our own site) Listing Portals, Social Media, Craigslist’s, Directories, Yellow pages, Rentals and we are just getting warmed up. How do you keep track and know what’s happening at your brokerage with all these and add into the mix 50100s of agents and sometimes many, many more. While there are many providers in this area that offer very good solutions, we have identified some critical aspects that are needed in order for a brokerage to really grow with technology and make it work for everyone. So if you are seeking a CRM ask yourself these few questions: • Can I customize it to fit my needs as a brokerage and potentially accommodate different departments and ancillary services? • Can I customize it for my agents? • Can I use it to automate my business workflows to make my agents more productive? • Can I make sure it’s seamlessly integrated with my existing systems? • Will it integrate with social media as we know it’s still growing like crazy?
Lastly, but not least, can I use it to automate follow up/relationship marketing campaigns to ensure we are engaging our consumer on the agents behalf? These are some tricky questions that when asked of many of the industry technology provide less than ideal solutions or answers. Sometimes it is the technology and often the processes and policies of a brokerage firm. Statistics show that the consumer’s real estate sales cycle has been blown wide open with mortgage regulations, tight inventory, and so many more factors that we now need to be conscious of this consumer for 2 years after the initial inquiry.
How many of your agents will email, talk to, or even know their clients two years from now? Ask yourself this: how many of your agents even email, talk to or even know their clients two years from now? It’s a difficult feat as they are always in the close the hot prospect modes. This leads to the #1 dilemma for most agents. As Larry Kendall with Ninja Selling states, leads are typically broken down into three buckets. Hot/Active/Approved buyers, Medium leads or warm leads and cold/new or passive buyers. Most real estate agents spend 90% of their time with the hot prospects for the very good reason that they are close to buying or selling. However, the best agents will have a system and strategy in place to keep all three buckets full whereas the average agent closes his hot bucket and has to consistently rebuild his/her business from the new lead bucket or focus on actually filling this bucket. It’s a never ending cycle.
We recently learned of a new entry into the CRM marketplace, Propertybase CRM built on the salesforce.com chassis. Many have heard of Salesforce.com; it’s widely considered one of the best CRMs in any industry, but until now nobody has made it real estate friendly. We know of several brokerages that have spent considerable amount of time and money in taking this category- leading platform and adapting it to the real estate market but have found that method is not perfect or easily repeatable. Propertybase CRM accomplishes exactly this. Since it’s built on the salesforce.com system all of the same features and plugins/apps are available but they have customized it to be real estate specific and they appear to have done this quite well at reasonable prices. Not only can you manage your leads with their system but integrations with social media and the customization to handle any lead sources a brokerage may have. Add on the ability to manage transactions and even go completely paperless with DocuSign integrations and more. The best part is that some CRM providers tie you into their websites or back office systems to get seamless integration, Propertybase appears to be completely adaptable so where a firm has a website company you are pleased with, Propertybase can be integrated with it. According to Steve Simmons, sales manager at Propertybase, “Our ideal clients, and the ones that thrive on our platform the most, truly want to improve their business from the ground up, and not just jump from one solution to the next. Propertybase is not a widget, or a website, or an app (well officially it is, but not in the mobile sense). It is an Enterprise solution for companies who embrace technology, build on their own knowledge and experiences, and put that to work in their business and thus in their CRM.“ Our two favorite features are: • The ability to completely customize the whole system to meet your needs, down to which fields 22
are shown, required and the best thing is any metric in the system can be reported on and customized for training. • The ability to automate workflows. You can not only automate follow up campaigns instantly on behalf or from your agents but any task like ordering signs, sign riders, taking pictures, ordering virtual tours, print brochures, and much, much more can be automated through their workflows in the system. If you can dream it, it can do it. Should you be concerned about an existing system that is ingrained in your brokerage culture and are worried this may not tie in, I urge you to set your fears aside. Salesforce.com appears to have a great API and has the ability to add on significant numbers of apps to accomplish many of the services you might have. Whether it’s an email platform, electronic signature system and more there is likely a solution. When speaking with Simmons one very important message he said to me was “Yes, sure, start simple, don’t overcomplicate, just get going, but over time, you will need more, and those other systems just won’t be enough. Especially from the business level. That is where Propertybase excels, with Brokers and Developers who believe in their business as a whole and not as the sum of the individual agents/staff. Those that often work together in teams and groups and really understand the value of collaboration and common goals.” Too often we see brokerage leaders that want really simple solutions yet end up limiting themselves for long term growth. We have also seen several brokerages become handcuffed with a custom made solution and in the end pay far too much to adapt with the changing industry. This is one reason we sense that Propertybase may be a great addition to the opportunities available to the residential brokerage industry. Through our consulting services we have helped leaders understand the proper uses of CRMs and we can demonstrate direct gains in business with a systematic and committed approach. Propertybase fits the mold we seek in a provider. For more information contact Travis Saxton at email@example.com. n
editor’s note 2013 Gathering of Eagles
The Wall Street Journal/REAL Trends The Thousand
On May 1-3, 2013 REAL Trends will host its 26th Gathering of Eagles in Denver at the The Westin Denver Downtown. With the theme of “A New Era” we will have one of the more unique line ups ever:
REAL Trends to rank top individuals and teams by state and metropolitan areas for first time.
• Former U.S. Senator Bill Bradley about a new emphasis on the importance of community • FirstBank CEO John Ikard, one of America’s top rated banks, talking about true consumer focus and reputational risk • Eric Belsky, managing director of the Joint Center for Housing Studies, Harvard University, on the future of homeownership • Panels of the top listing portals and system aggregators in a no holds barred questions and answer format • Mike Staver talks about lessons from his book Leadership Isn’t for Cowards
For the first time in the 6 years that we have been ranking top individual and team sales professionals we will be adding state and metropolitan area rankings for every sales professional who meets the minimum levels stipulated in our applications. We are receiving applications for this sixth year of this ranking of the nation’s finest and most productive individual and team sales professionals. The deadline for submission is March 31, 2013. The 2012 minimum production limits for acceptance are Individuals who closed more than 50 sides or $20 million in closed sales volume and Teams with more than 75 closed sides or $30 million in closed sales volume. For additional info re The Thousand please visit us at www.realtrends.com or contact Jaime O’Connell at firstname.lastname@example.org or (303) 741-1000. n
The Industry’s Best Conference for Operating Executives
• Leaders from Wells Fargo, Citi Mortgage and Shelter Mortgage will be sharing information about the future of mortgage banking in the brokerage business
2 0 1 3
G a t h e r i n g
E a g l e s
And much more. To register go to www.realtrends.com or call 303-741-1000. We expect 250-280 industry CEO’s to attend in an all general session format.
M AY 1 , 2 & 3 , 2 0 1 3 • D e n v e r, C O T h e We s t i n D e n ve r D ow n t ow n
REAL Trends Real Estate Newsletter March 2013