Red Pear Realty said:
Rents are up about 10-12% YOY. If your property manager or leasing agent isn't bumping rents, you are missing out.
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When we think about the statistics of the American real estate market, we automatically consider the most common market statistics, such as the number of properties sold and the selling price of those homes. What we often fail to consider is the number of constantly changing and/or transitioning factors that impact each and every transaction. In 2021 more than six million (6,120,000 to be more precise) residential properties were sold during what became known as the "hot" market. Each of these transactions and the individuals involved, both as professionals and consumers, presented participants with a slightly different set of market facts that had to be addressed.
For example, 2021 saw 30 percent of homes sell above list price, while the most recent data shows 43 percent of homes sold above list price in February 2022.
Homebuyers who offered cash were 334 percent more likely to win a bidding war than those who chose to finance the purchase, while those who waived the financing contingency and conducted a pre-inspection were 31 and 25 percent more likely to win bidding wars, respectively, according to the report.
Commission compression has been an issue for several years. In 2021 inflation was added to the mix. Out of all expenses REALTORS face, vehicle expenses were already No. 1 before gas prices reached their highest level in history this week.
Amid an immediate global response to Russia's war on Ukraine and inflation soaring to a 40-year high this week, the cost of gasoline rose sharply to $4.19 per gallon, 46 percent higher than the year before, according to the U.S. Energy Information Administration.
A survey of members of National Association of REALTORS found agents drove a collective 3.6 billion miles in 2011, or an average of about 3,300 miles annually for business-related driving. If that number holds true, agents driving a car that gets an average 25 miles per gallon a year ago could expect to pay $378 annually if they drove the average amount. At the current prices, they'd pay $553 annually.
HAR in 2020 created virtual tools to help its members serve consumers virtually during the COVID breakout. As gas prices rise, perhaps this is another appropriate time to use the 3D Tour, virtual open house and virtual showing tools. Not only will they save time and money for consumers but also for REALTORS.
Continuing on the subject of commission compressionone of its most significant contributors will be a generation of real estate tech companies such as Zillow, Compass, and Opendoor that have set their sights on agent commissions as a source of revenue and profit growth. Why it matters: Agents, including HAR members, remain the backbone of the industry, generating around $100 billion in commissions annually.
Zillow's new strategy (Zillow 3.0: Back to Basics) is centered on extracting an additional $1.5 billion from agents (Premier Agents) by 2025, for a total of $2.9 billion annually.
Compass wants to pay agents less. Compass has a demonstrated track record of "improving economics with agents" of one percent per year.
Opendoor continues to use its scale to push buyer agent commissions one of its biggest expenses lower.Property features and functionality are also in constant motion. Consider whether a property should have the ability to charge an electric vehicle. There is a growing likelihood that purchasers will own an EV while they are living in the property they are purchasing. Pre-wiring for EVs is "like in the late '70s to early '80s when we started to hardwire for cable TV in every home." By 2045, Ernst & Young predicts internal combustion engine (ICE) vehicles will make up less than 1% of new car sales globally.
- In Atlanta, Opendoor has experimented with buyer agent commissions ranging from 1.5 to 3 percent, having finally settled on 2.25 percent.
- Opendoor sold 20,000 houses in 2021. A 0.75 percent savings in buyer agent commissions is about $53 million annually.
- Compass's medium-term goal of a 2.5 percent commission split improvement on its 2021 revenues is $160 million annually.
- Zillow wants to generate an additional $250$300 million from agents per year.
Few consumers who have purchased a home in the past year would have anticipated the economic impacts of the current crisis in Ukraine. Russia supplies around 27% of Europe's oil and 41% of its gas. By pushing prices to new highs and prompting European leaders to seek energy independence from Moscow, the war in Ukraine could create fresh impetus in efforts to transition to cleaner fuels.
Without the technical expertise of Western oil companies existing from Russia, Russian supply will be constrained, likely keeping oil-and-gas prices high and providing a strong economic incentive for the switch to low-carbon alternatives
One of the most definitive factors currently impacting our marketplace comes from the work from home (WFH) or "remote working" patterns that continue to emerge around the country. Interestingly enough Houston has become a trend leader. Earlier this week we learned that many, if not most Houston companies have implemented hybrid strategies that combine working from home and returning to the office. A wide range of industries are adopting hybrid approaches. Halliburton, one of the world's largest oilfield services companies, has about 3,200 workers in Houstonabout one-third hybrid, one-third remote and one-third full time.
While many of our members make marketing real estate look easy, the fact is that just in the last week there have been several major market factor changes. It is highly likely that this pattern will continue throughout 2022. The HAR leadership and staff are working overtime to identify, report and educate members regarding these transitions. HAR can't make it easy but hopefully we can make it better.
Bob Hale
