Chris Heller has been watching the real estate industry for a long time.
Heller is best known among real estate industry watchers for his long stint at Keller Williams, during which time he served as both the president of the company as well as CEO. He eventually left Keller Williams, and for the last two and a half years has served as the chief real estate officer at technology startup OJO Labs.
Inman recently sat down with Heller to get a sense of what he envisions happening in real estate over the coming year. In short, Heller believes the market will experience a shift, while the agent and brokerage communities continue to focus on teams.
What follows is a version of Inman’s conversation with Heller that has been edited for length and clarity.
Inman: You’ve been watching the real estate industry for a long time, so talk to me about what you see coming up. What trends might dominate in the near future?
Chris Heller: If this were a baseball game, we’re in extra innings in terms of the run we’ve had. We’ve gone beyond the typical cycle. And maybe that’s the insight, that there’s not going to be any more typical cycles.
I was a business econ major and so I do fall back on basic economics and say, “But are any markets indefinitely sustainable?” And I don’t believe they are.
I think we’re already starting to see some shifts in certain markets, where maybe inventory levels aren’t magically ballooning but we’re seeing a lessening of demand or a decrease of demand. Whether it’s affordability, whether it’s confidence levels, whether it’s buyer fatigue, or a combination of all of those things, a little steam has come out of the market. Which, by the way, personally I view as a good thing because it’s not sustainable to keep going this way.
Also, the appreciation run that we’ve had has been just phenomenal and that’s not sustainable either. You can’t have year after year double digit appreciation numbers. At some point people go, “Okay I can’t afford this.”
With all that being said, I think we’re going to see the market shift. Then the question becomes, who does that impact and what does that impact? In my mind, it’s more of, what do these companies do, the companies in our industry? And all the agents who have only been in the business since 2012, 2013. There’s a big percentage of our industry that has only been in the business during that time and has only experienced a certain type of market. So now when there’s a new market, what happens to these agents? How do they react?
Having been through multiple downturns, we know that the experienced people and the people who have dealt with it before know what they need to do and are usually quick to respond. But there’s a lot of people who get sort of hung out to dry and a lot of companies that get hung out to dry.
It’s going to be interesting to see how that plays out.
On a macro level, I don’t see anything that’s going to magically add a significant supply of homes on the market. So what’s the demand look like and how much does that let up or not?
So two questions: One, do you think we’re going to see a significant number of agents leaving the industry? And two, is this a bad time to get into real estate?
I don’t think in 2022 we’re going to see a significant number of agents get out of the industry. It takes a while for that to happen.
If we look back to the last downturn, I think we went from like 1.2 million members of NAR down to about 800,000, which is a pretty significant drop. Could we see that type of drop again? Absolutely.
I think there’s going to be a trend toward fewer agents. Because I think it’s just part of the evolution. It’s why we’re seeing the number of teams continue to grow. We’re seeing sort of the reshuffling of brokerages and how brokerages are structured to stay relevant and competitive. So yes I think there will be fewer agents, but I think it will happen over time.
In terms of getting into real estate, that’s a question I think about a lot. If someone brand new came to me right now about getting into the business, there’s no part of me that would caution them or suggest that they don’t. I would, though, make sure that they’re getting in with eyes wide open. And I’d probably be having conversations with them that would be different than I would’ve four or five years ago.
So two things. One is really getting back to the basics. I’d tell them to everyday be focusing on new relationships. You absolutely should be building a database of people. You should be increasing the number of people in that database and marketing things of value, not just putting people on a drip campaign or sending a newsletter every month. But really being an asset, an advocate and an advisor, to people.
And the other thing I would tell them is they should be checking out things like the OJO Select Network and other similar platforms and getting involved with as many of those as they can as a way to augment their business. It may not be the sole source of business for them, but it’s certainly a viable source for them to be introduced to buyers and sellers over and above things they’re doing everyday.
So the simple answer is no, it’s not a bad time, but I will say this: It’s probably a more challenging time for an individual agent to get going on their own than it has been in the past. And that’s why you see a lot of them joining teams.
You mentioned teams. Is there any particular model that’s emerged in recent years that’s exciting to you?
Certainly eXp has, from a national standpoint in the last three or four years, they’ve just come from nowhere and blazed past everybody in terms of the rate of growth and the amount of agents and momentum they have. So that’s exciting to see.
The other thing, and I don’t know if this is good or bad, but we’re seeing these mega teams. Not just 20 or 30 people, but teams of hundreds of agents that are essentially displacing or becoming a brokerage but operating as a team.
At the same time, we’re starting to see a lot of brokerages operate as a team instead of the traditional brokerage. At a traditional brokerage, you have a bunch of agents hanging their license there. They all do their different things, they’re all independent contractors. Verses a brokerage where everyone is tied in to the technology platform that’s being provided. And they’re all held accountable to how they’re handling those leads.
So I think you’re going to continue to see brokerages operate more like a large team.
Finally, talk to me about what you’re working on at OJO that’s exciting you right now.
We just celebrated our one year anniversary of the OJO Select Network.
Last December, we went from essentially zero to 20,000-plus agents. We’ve made close to 1.2 million introductions of consumers to real estate agents in a year, which is really significant and I feel like we’re just scratching the surface. Not only with our growth but with the things we’re working on.
When you start from zero a year ago, like anything it’s bumpy, you’re scrappy. But we’re now moving from scrappy and reactive to being really purposeful and really making significant improvements in our processes, offering a better experience for consumers and a better experience for agents.
And we’re starting to see that. An agent posted yesterday asking, “Is it my imagination or is this group of agents unusual in the way they encourage each other and cheer for each other?”
Although our network is made up of agents from every brokerage under the sun, there is a real strong community that’s starting to evolve. And that’s exciting too, as someone who has led large groups of agents.
