25 HOT TRENDS in real estate

In our suddenly uncertain world, predictions can seem naive at best. Yet, there’s folly in not looking toward the future with an eye to change. It’s part of American business mantra that to survive and thrive, we need to continually search for ways to better serve our customers, grow our businesses, and adapt our product or service to meet new needs. Countless trends are taking shape every day. We’ve identified 25 that we think are likely to impact your business in the years to come.

BY STACEY MONCRIEFF AND SAUMYA ROY

RESIDENTIAL

1. Expanding the customer dollar
Keeping customers for life and creating new income opportunities with existing customers are at the top of the wish list of today’s profit-starved brokers.

Traditionally, brokers have expanded into selling mortgages and other financial services. But now brokers are delving into the fragmented world of home services. A prime example is Home-Link Services Inc. (www.home-link.com), a Shelton, Conn., company that provides brokers with a long-term connection to consumers, coordinating everything from the move to the maintenance of household records and beyond. As of October, 118 U.S. brokerages had signed up to offer Home-Link.

Consumers get the benefit of a “personal advocate” on their home services investment, says Home-Link founder and chairman William Raveis, and participating brokers get a transaction fee for every service coordinated through the company.

Brokers who’ve entered the ancillary services game say the key to success is tying your services into your core business. Salespeople won’t promote unrelated services, they say, and customers won’t look to you for them.

2. Creative compensation plans
Speaking of money, most of it seems to be in salespeople’s hands these days. About 97 percent of real estate companies pay commissions, and most salespeople say their splits have gone up in the past three years. But that doesn’t mean that brokers aren’t regularly contemplating ways to keep more of the loot.

“Margins are so low that some brokers are saying they’ve had enough,” says David Cocks of CompensationMaster (www.compensationmaster.com), a compensation plan consulting company with U.S. offices in Charlotte, N.C. Several companies are trying hybrid plans that include a smaller percentage commission along with a fixed salary, and a few others are successfully paying only salaries. Karl Sopke, president of SOMA Living in San Francisco, says, “Salaries allow us to control the activities and provide uniform service, while giving salespeople a stable source of revenue.”

Many brokers—particularly those in the 100 percent camp—remain skeptical. But Cocks says that in the right organization a salary structure can be highly profitable. The key to making it work is financial strength—it can take a year or more to start seeing results—and a managerial style that reinforces the structure. “You need an approach that’s very hands-on, almost military in nature,” he says, “telling salespeople exactly what to do and then monitoring results.”

3. Brokerage consolidation
Cendant’s 1996 move into real estate set off a consolidation push in real estate. Since then, the big have just kept getting bigger.

“Consumers are asking for faster and better services, and you need size and scale to do that,” says Charles “Chip” Roach, vice chairman, Prudential Fox and Roach, Devon, Pa. His company is the ninth largest in the country, according to REALTOR^® Magazine’s “Top 100 Companies” survey (July 2001, page 38).

Industry observers say medium-sized brokerages will continue to be the most likely candidates for acquisition or merger, with a good deal of acquisition happening at the corporate level (see “Corporate upsizing,” page 15). Just this fall, NRT Inc. of Parsippany, N.J., acquired the Corcoran Group of New York and Dyson & Dyson Real Estate Associates in San Diego. And HomeServices.com Inc. of Edina, Minn., bought Jenny Pruitt & Associates, REALTORS ^®, of Atlanta.

At least for the foreseeable future, don’t look for much consolidation of single-office companies, which still account for the majority of real estate companies. Says NAR principal economist Carter Murdoch: “This business continues to be very localized.”

4. Pressure on commissions
In hot markets around the country, homesellers have been looking for money-saving listing alternatives. A good number have opted to work with a company that offered a menu of services, charging for only the services the sellers wanted—such as being listed in the MLS or having their paperwork handled.

One such company, Reno, Nev.–based Assist-to-Sell, has doubled in size every year since the company started franchising in 1995, say co-founders Lyle Martin and Mary LaMeres-Pomin. Assist-to-Sell now has 150 offices in 37 states and Canada. That has put pressure on traditional companies to defend or lower their commission rate. “We’re seeing a response from traditional brokers to the impact we’re having in their marketplace,” says Martin. “A few years ago that wasn’t true.”

Depending on where you sit, fee-for-service operations are either the best thing that ever happened to real estate or the bane of your existence. Whichever side you’re on, you can be certain that savvy consumers will continue to question what they’re getting for their dollars.

5. Refining the team concept
Top salespeople have seen their market share soar in recent years—along with clients’ expectations. Many have responded by creating sales teams. With a team, a group of salespeople and assistants can service an increasingly complex and diverse market and provide better all-around service.

Or is it better? One problem with teams, say competitors, is that the lead salespeople are often inaccessible, even to their own clients. For that reason, some practitioners think the concept will continue to grow but teams will shrink in size. “The key to this business is the ability to maintain human contact,” says Toby Bradley, co-owner of Home Realty and Investments, Santa Barbara, Calif. “If you have more than three or four assistants, you lose that ability.”

6. Changing role of the salesperson
Thanks to the Internet, buyers and sellers enter into a transaction today with a lot more information than they had in the past. That doesn’t mean they’re able to make sound real estate decisions on their own. More than ever, they need a knowledgeable salesperson to ensure that they have the most current data and to interpret the data for their benefit. Recent NAR research shows that Internet users are more likely than their Luddite counterparts to employ the services of a real estate practitioner.

Yes, today’s tech-savvy consumers need you, but don’t let your desire for control show. Buyers and sellers want to feel in charge of what’s happening, says Scott Kucirek, cofounder and executive vice president of Ziprealty.com, Richmond, Calif. “They want to work as part of a team with their salesperson.”

TECHNOLOGY

7. Full MLS data on a website near you
Internet data exchange (IDX) standards, released by NAR in late August, clear the way for you to post your entire MLS database at your website.

The standards are a clear result of broker demand. In areas where data sharing was already allowed, brokers and salespeople were already posting MLS data at their sites; members in other areas wanted that option, too.

The new IDX standards give MLSs until Jan. 1, 2002, to put a solution into place. By then, most MLSs should be able to provide downloads of current listing information to participants who request it. Those who don’t want their listings on competitors’ websites will have the opportunity to opt out, but MLS operators say few will go that route, since it limits their potential exposure and restricts their right to show others’ listings.

For more information, search “IDX” at REALTOR.org, formerly onerealtorplace.com.

8. More cautious technology investing
“In the past, technology was overhyped and underutilized,” says Joel Singer, executive vice president of the California Association of REALTORS ^®. “Many people invested in dot-coms that are now dot-gones.” Now people are weary of being solicited by tech vendors and wary of new tech toys.

But even with the increased skepticism about all things electronic, few real estate salespeople would want to go back to the days before e-mail and websites, says Singer.

Stephen Canale, a real estate technology consultant, agrees: “They may not lose money without the technology, but they’ll lose opportunity.”

9. MLS via handheld computers
If one technology is getting a lot of attention these days, it’s applications for Palms and other handheld computers, which give you access to information in the field without a laptop. Perhaps the most promising are programs that allow you to view the entire MLS database on your handheld. A few years ago, companies were promoting wireless MLSs, but those systems failed because the connections weren’t fast enough and the monthly charges were too steep. With today’s systems, users pay a one-time software fee or a modest monthly fee, and new MLS data is uploaded daily. The two best-known products are the Supra eKey (supraekey.com, $40/month) and Pocket Real Estate (pocketrealestate.com, $199).

“We call our application the ‘Wow!’ category,” says Rich Jackson, vice president of marketing for Hand e Corp. of Aiea, Hawaii, makers of Pocket Real Estate. “Customers see what you can do, and they say, ‘Wow!’”

10. Online sales support
Dot-coms may be down, but they’re not out. A number of new online applications are gaining attention for their ability to help you conduct business online. These applications, at websites such as bridgespan.com, closeyourdeal.com, efrogg.com, and showingtime.com, let you carry out specific functions online, such as generating leads, creating listing presentations, scheduling, posting feedback, tracking transactions, and closing deals. Meanwhile, some brokerages and relocation companies are creating password-protected websites that enable buyer and seller clients to track the selling process.

What has yet to materialize is a one-size-fits-all transaction-tracking solution that takes the deal from first contact to close, but there’s been little demand from brokers to make it happen.

11. Online home tours
Virtual tours aren’t taking the work out of real estate sales. Most customers still expect to see a house in person before they sign a contract. But online tours have emerged as more than just high-tech gimmickry.

Consumers enjoy the tours, and they help buyers come into the market with a better understanding of the product, which can shorten transaction time. “Buyers are more informed when they come to us, so our salespeople can spend less time with them,” says Jeff Barnett, vice president of Alain Pinel, REALTORS ^®, Saratoga, Calif.

Expect online tours to get even more common and to evolve. Technology consultant Canale predicts there will be more video tours, allowing customers to “walk through” a house rather than view it through a 360-degree image.

YOUR RANKS

12. More diversity within
With homeownership among whites at historic highs, industry observers say minority buyers will be the impetus behind future homeownership growth.

Today just less than half of all minorities own their home, but there have been steady increases in minority ownership over the past few years. The Harvard Joint Center for Housing Studies shows a 24 percent increase in black homeownership and a 39 percent increase in Hispanic ownership between 1994 and 2000.

In an industry with a small minority membership—less than 10 percent of all REALTORS ^® are minorities—look for companies to more actively seek practitioners and assistants with an understanding of the cultural differences, and in some cases with the language skills, to serve underrepresented markets. “I can teach my sales associates everything about real estate,” says Roach of Prudential Fox and Roach, “but I can’t teach them new cultures. We need to get more diverse ourselves.”

Bradley, with Home Realty and Investments, agrees: “We have significant steps to take to improve diversity among
REALTORS ^®, and the market is moving faster than we are.”

13. Education level rising
If school counts for anything, REALTORS ^® today are smarter than ever. The 2001 NAR Member Profile shows that 72 percent of members have at least some college—up from 58 percent in 1978. And REALTORS ^® aren’t stopping there: Many go on to seek professional designations and certifications, such as the Certified Residential Specialist or NAR’s new e-PRO® technology certification.

The trend is a reflection of the increased complexity of the work, says Mark Lee Levine, director of the Burns Institute of Real Estate at the University of Denver. Levine, it should be warned, is an enthusiast. He holds a law degree as well as 32 professional designations.

Globalization and technology are accelerating the need for specialized education, says Internet marketing consultant Michael Russer. “The bar will be raised in the next few years.”

NICHE MARKETS

14. Senior power
Americans, on average, keep getting older. But few of today’s seniors define themselves as aging. Seniors are choosing to work and live independently longer than their predecessors. About four in five people over age 80 own homes. And the American Association of Retired Persons reports that, in a recent survey, 75 percent of respondents said they never intend to retire.

But even with their desire to remain independent, seniors face unique housing decisions as their children move on and their health declines. So it’s not surprising that they’re fast growing into a hot real estate niche. There’s even a certification: the Seniors Real Estate Specialist (www.seniorsrealestate.com). Founder Tim Corliss, a past president of the CALIFORNIA ASSOCIATION OF REALTORS ^® and broker-owner of Senior Advantage R.E. Services, Murphys, Calif., says the senior market has been underrepresented and poorly understood. Corliss seems to be onto something: Since 1998, 6,000 practitioners in 125 cities have completed their SRES certification.

15. Single women buyers
Single women aren’t waiting to find a mate before they take the plunge into homeownership. The Harvard Joint Center for Housing Studies found that the number of female first-time homebuyers under 45 living alone jumped more than 65 percent between 1985 and 1999, boosting the homeownership rate for the group to 29.6 percent. Eighteen percent of homebuyers were single females in 1999, compared with 13 percent in 1989. Single men made up 9 percent of homebuyers in 1999, virtually unchanged from a decade earlier.

Debbie Campagnola, CEO of the Colorado Association of REALTORS ^®, says the growth in women homeowners could signal a change in demand: “Women are more likely to want secure, low-maintenance homes such as condos.”

Remember, however, that it’s never a good idea to generalize about any group’s needs. “Psychologically, each buyer is different, and gender isn’t necessarily the key difference,” says Judy Moses, an associate broker with Coldwell Banker Hunneman in Boston. “I’ve sold many single-family houses to single women.”

16. A more worldly business
Since 1995, foreign-born households have contributed one-third of household growth in the nation, according to the Harvard Joint Center for Housing Studies. That statistic spells opportunity for bilingual and multilingual practitioners. Salespeople and assistants who are fluent in foreign languages can serve as a bridge to immigrant communities, helping their companies better serve the changing market.

Since Sept. 11, there’s been talk of making it more difficult to enter the United States. But there’s no indication that immigration will be shut down. “Even if there’s a downturn in numbers, there won’t be a significant percentage change in the market of immigrant homebuyers,” says NAR principal economist Murdoch.

A 2001 NAR survey showed 16 percent of REALTORS ^® conduct business in languages other than English. Still, practitioners experienced in the art of international transactions say language fluency isn’t a must. But it’s certainly a plus to understand the buyers’ customs and some key phrases in the target language.

For information on NAR’s Certified International Property Specialist Network, search “CIPS” at REALTOR.org, formerly onerealtorplace.com.

17. More urban dwellers
Cities are making a comeback as a nice place to live. And that’s a good thing, even after Sept. 11, according to former U.S. Senator Daniel Patrick Moynihan. The best defense against attacks on America’s free society is to “concentrate, not scatter,” Moynihan told an audience at Urban Land Institute’s annual fall meeting in Boston.

Revitalization of the nation’s urban housing has been a very real phenomenon over the past several years as more people have sought the convenience of city living. Singles, who are buying homes in greater numbers than ever, like to live close to work and social life, says Alan Pinel’s Barnett. In addition, more empty nesters—and others—are trading in the commuting lifestyle for the ability to walk to work, shops, theaters, and restaurants.

18. Targeted mortgage products
We’re not talking fixed rate vs. ARMs here. A decade ago, secondary mortgage market giants Fannie Mae and Freddie Mac began looking for ways to meet their commitment to serve the low- to moderate-income and minority markets. Since then, special-needs mortgage programs have proliferated to help groups that might otherwise be precluded from homeownership.

In the latest twist, Freddie Mac began testing a product specially designed for observant Muslims, whose religion forbids them to pay interest on mortgages and other debts. There are an estimated 2.5 million Muslim households in the United States today.

The U.S. Department of Housing and Urban Development also has created some unique offerings for specialty borrowers. HUD offers loan guarantees for Native Americans, as well as programs to promote homeownership among teachers and police officers in designated revitalization areas.

SHELTER TRENDS

19. Remodeling boom
Remodelers, like everyone, are feeling the effects of the economic downturn. Yet the remodeling boom of the past few years—in which owners have had to endure long waits to get their projects completed—is expected to be sustained over the next decade. The boom is being driven not so much by the economy as by other factors. For one, growth restrictions in many areas are increasing the cost of new-home construction. In addition, baby boomers looking to age “in place” will want to retrofit their home to match their changing lifestyle.

Look for much of remodeling’s growth to occur south of the Mason Dixon line and west of the Rockies. According to the Harvard Joint Center for Housing Studies, the nation’s oldest homes in the East and Midwest accounted for growth in the last decade, whereas homes in the Sun Belt and West will be in need of remodeling in the coming decade.

20. Reapportioned spaces
For years we’ve been hearing about the great shrinking living room. Today builders are offering models without the living room. But new buyers aren’t giving up all that square footage. They’re reapportioning it into transition spaces.

According to Builder magazine, those spaces can serve a variety of functions—for example, art niches; communications centers, where family members can post messages and recharge cell phones; or receiving halls, where owners can welcome visitors without exposing their entire first floor. This is good news if you’re selling homes in older neighborhoods: You can help buyers and sellers figure out how to turn all those nooks and crannies into modern, useful transition spaces.

21. Greener houses
Kermit the Frog used to sing, “It’s not easy being green.” But it’s getting easier all the time as natural or recycled building materials become more widely accepted, and conservation-minded builders find new ways to reduce homes’ energy use.

A small but growing number of buyers today are opting for building materials such as cob or straw bale, and builders are experimenting with recycled materials—carpeting made of recycled plastic soda bottles, bathroom tile made from recycled automobile glass, and insulation made of newspaper.

Energy efficiency, too, is getting a makeover. It no longer refers to the ultrasealed, radon-trapping homes of the past. Today, builders are putting significant energy savings into a home using special glass that blocks ultraviolet light, installing solar panels, and orienting homes to take maximum advantage of the southern exposure.

22. Automation goes mainstream
Hardware and software solutions abound for controlling all your home’s systems through your television or PC. And more and more, builders are making home automation a part of their blueprint. One system manufacturer, Home Director, recently announced an agreement with builder giants D.R. Horton and Toll Brothers to offer their new-home buyers its structured wiring system, which connects a home’s entertainment, communication, and security systems. Home Director is already available in select markets through such national builders as Centex Corp. and KB Home.

For more information on home automation, visit www.homeautomationmag.com.

COMMERCIAL

23. New office priorities
Office tenants now begin the task of sorting out and dealing with changing priorities brought on by the threat of terrorism. Tenants may seek to alter damage and destruction clauses, look more closely at what constitutes “normal conduct of business” and interruptions in business, and demand specific security measures, according to a report from Julien J. Studley Inc., which specializes in tenant representation. The report applied specifically to the New York market, but tenants in other cities are likely to have similar concerns.

Studley says some companies will decentralize—establishing satellite offices, dispersing workers among several buildings, or increasing telecommuting.

In addition, look for tenants to safeguard their data with redundant systems and remote data facilities. Speedy entrepreneurs have already begun to seize the opportunity: A former Titan missile silo in Moses Lake, Wash., for example, has recently been converted into an ultrasecure data center.

24. Gardens in the sky
Urban renewal in the millennium has a decidedly green tint. Green spaces have triggered growth in a number of cities, including Atlanta, where the creation of Olympic Centennial Park for the 1996 Summer Olympics transformed the surrounding area into a safer, more exciting place to live, driving up property values. Since then other cities, including Chicago, Cleveland, Denver, and Louisville, Ky., have gotten a green thumb.

Even downtown high-rise buildings are creating green spaces, according to Chicago-based Greengrid, which creates green roofs for commercial and multifamily buildings. The landscaping extends the life of the roof and saves on air-conditioning and heating costs, says Greengrid spokesperson Corliss Range. Not only that, but “people inherently respond well to green spaces.”

25. More renters by choice
Sure, the homeownership rate is the highest it’s ever been, but that’s not bad news for the multifamily industry. Apartment living is on the rise and growing fastest among those with the highest household income. Apartment household incomes of more than $50,000 jumped 11.2 percent from 2000 to 2001, according to the National Multi Housing Council (www.nmhc.org). Apartment dweller incomes of less than $20,000 were down 4.4 percent. Translation: More affluent households are choosing the convenience and freedom of renting.

WHAT'S IN

Mold . . . It can cause health problems from sinusitis to asthma. Worst yet is the serious illness that can come from Stachybotrys chartarum, aka black mold.

Phone headsets . . . Some 40 state legislatures are pondering whether to follow New York’s lead in banning the use of handheld cell phones by drivers.

Fannie Mae . . . The secondary market giant has resisted efforts by a few House lawmakers to curb its power.

Buyer choice . . . No more sweating it out to see whether you got the house.

Traffic calming . . . Communities are looking for ways to slow drivers down.

Smaller lots in mixed-use communities

REALTOR.org

WHAT'S OUT

Electromagnetic field radiation . . . After 20 years of debate, the jury is still out on its safety.

Handheld cell phones . . . Yes, you can still use them when you’re not driving—but will clapping a cell phone to your head ever be the same again?

FM Watch . . . The watchdog group keeps working to check Fannie’s and Freddie Mac’s power.

Multiple offers . . . No more sifting through bids that come in before the listing posts.

Road rage . . . Maybe it really is a kinder, gentler nation now.

McMansions on one-acre lots

onerealtorplace.com