Making predictions for the coming year isn’t easy. Some of them will be accurate, others will be partly true and some will be way off. Housing is one part of a bigger economic picture. It is necessary to examine the past and present when predicting the future.
In 2010 we saw a buying frenzy in the beginning of the year because of the homebuyer tax credits. As I look at numbers for the year it is clear that in my market sales were up until the tax credit expired … and then they went way down.
The tax credits motivated some to buy earlier in the year than they would have, and may have motivated some to move their purchase up a year.
We will end the year with fewer home sales than we had in 2009, and the total dollar volume will be lower than 2009, which was not a spectacular year for home sales or prices. We hit a new normal in 2009 and it is likely to stick around through 2011 and beyond.
2011 is going to be very much like 2010 in that home sales are going to be sluggish. If the shadow inventory is as large as some are projecting and a high volume of foreclosures hit the market in 2011, which I believe they will, home prices will go down again.
Some experts say that we have already hit bottom on home prices, but I am not convinced that we have in every market. The markets that were most affected by foreclosures may have already bottomed out, but I don’t believe we have hit bottom across the board.
Interest rates will go up next year but only slightly, and they will have little impact on the market — just as this year’s rates, which hit a historic low, did not have much of an impact.
For Realtors, 2011 brings us into the fourth year of a broken and contracting housing market and a deep recession. The recession may have "ended" in the spring of 2009, but it is still being felt in the job market and the housing market.
The unemployment rate is lower now than it was at the beginning of the year, which is a positive sign, but it is still at recessionary levels and is trending up as we end the year. Our commissions have gone down with home prices, and we have had fewer sales.
A healthy real estate business should be able to withstand a bad year or two, but getting through four or five bad years is another matter and we won’t all make it.
In 2011, agents will leave the business. But because the unemployment rate will remain high, new agents will join. I predict a small net loss of Realtors in 2011. There will be business — there always is — but as in the past, 20 percent of real estate agents will be responsible for 80 percent of home sales, and the dollar volume of those sales will remain low.
Real estate brokerages that have high overhead will continue to have a tough time making a profit, and the large chains will continue to close offices.
They will have trouble recruiting new agents because money is tight and fewer agents will be open to the big brokerage commission splits.
Agents who have been very loyal to the brands they have worked under are starting to grumble about commission splits because their average sale price has gone down but their expenses have not.
The trend towards smaller brokerages and more independent agents will continue. Some brokerages will grow as they operate under new business models — business models that do not rely on brick-and-mortar offices, with expensive equipment in them that is paid for with agent commissions and fees from buyers and sellers.
The agents who make the most money in 2011 will be those who know how to spend less money. They will be more entrepreneurial than ever, willing to try new things and break old rules.
They will leverage technology to reduce costs, and rely heavily on the Internet to market the homes they list.
They will rely on blogs and social networks to meet potential clients and win business because it is more cost effective than other forms of marketing and it is in alignment with the larger trend of using socially based marketing instead of interruption-based marketing.
In 2011 the digital divide between the agents who rely on technology to cut costs and improve productivity and those who don’t will continue to widen.
New practitioners entering the business will be Internet-savvy or they will not be able to stay in the business long enough to build the client base needed to make it as an agent over the long haul.
Business-savvy brokers will recruit agents who are independent and able to work effectively without brick-and-mortar offices, without colleagues to chat with face-to-face, and without office social events.
They will abandon the ideas that have been with us since the Industrial Age and embrace the Communication Age and learn to use Internet-based tools to promote the brand among their agents and the general public.
The next housing boom will occur when there are more jobs and more of Gen Y can start buying homes. There is pent-up demand but the unemployment rate for Gen Y is high and many would-be homebuyers are living in their parents’ basements or sharing apartments with friends because they cannot afford a home of their own.
There were agents who made a lot of money in 2010 and it will be the same in 2011, but it is a fact that less money was made selling real estate because of lower home values and fewer sales.
I believe the housing market will improve along with the rest of the economy — but not in 2011. Unless something changes dramatically and quickly, we can expect more of the same in 2011.
Maybe my predictions are wrong. They are not intended to be negative, just realistic, and I hope that you take the time to share your comment — especially if you don’t agree.
