If there was a universal message to sum up co-founder and chairman Gary Keller’s annual Vision Speech it was “get to work!”
“A professional knows what he knows, knows what he doesn’t know and knows the difference between the two,” said Keller imploring agents to learn the numbers that drive the real estate market and interpret them in a meaningful way for clients. “In order to look forward, you have to look backward,” he added.
So, just how is the real estate market? Overall, 2013 proved to be a good year for an industry on the road to recovery
Joined onstage by Jay Papasan and members of the KW Research Team, Keller ran through the numbers that drive the U.S. and Canadian real estate markets, as well as the economic impact of the previous year with a focus on sales, price, mortgage rates and inventory – key indicators Keller believes are essential for interpreting the data in a meaningful way.
Their findings revealed several things, starting with the news that prices are on the upswing. The annual pace of home sales outperformed 2012 numbers for every month this year until December, and was the best year for homes sales since 2006. The last time the market performed like this was 2003. “This is the fifth best sales year in the history of sales,” said Keller.
The median home price at the end of 2013 was $197,100, up 11.5 percent from the previous year. In order to understand that number in a relevant way, Keller turned to annual home prices, which he said “gives us total the perspective.” Though home prices have been increasing year-over-year for 17 consecutive months, that number still sits below the long-term 4 percent trend line.
Translation? There’s still room to recover.
Mortgage rates continued to hover around 4 percent, which was up 30 basis points from 2012. Keller wasn’t shy about predicting a future rise in rates. “Don’t be surprised if you see rates go up to 7 percent in the next three to four years,” he said. “Let’s put it into perspective. I got into real estate during the highest interest rates ever. We were asking people to agree to 14 points on their mortgage and people still bought. Every market has their pros and cons, so don’t ever get locked into ‘is it a good time?’”
It’s always a good time to buy, especially when you look at affordability – one of Keller’s favorite stats. “No other market is more affordable right now than real estate,” he said. He easily illustrated the point with a simple comparison. “The cost of a home is over double what it was in 1989, yet the monthly payment is only up $116! Compare that to the increase in the price of gas, bread and a new car and it’s pretty amazing.” The challenge is helping people understand that he continued.
“This is the graphic you want to put in front every single buyer because they’re going to look at rising interest rates and prices and think that there will be a better time to buy,” said Keller. “The truth is, if they could time the market, they would have already bought.”
Of course, the low interest rates and reasonable prices pushed household formation closer to the historic norm, leading to tight inventory levels and substantial price gains as new home construction was unable to keep up with the growth in housing demand.
Keller and the KW Research Team predict the business that the demand creates will go to the agents who focus on listings. “When you bring a property to the market, you create the market,” Keller said.
And listings boils down to one simple activity: lead generation. “The industry underestimates how powerful a real estate agent is when they have a new pair of tennis shoes and some scripts. He who controls the leads controls the industry.” The Internet continues to be a lead generation tool, though Keller believes it’s less of a creator of buyer and seller leads, saying “it just moves where the eyeballs are.”
Technology is wonderful as long as it enhances what agents do, he said. “You must still lead generate and deliver exceptional customer service.”
The changing landscape of the industry was also a hot topic addressed, and his thought leadership on the subjects of agent rankings, the MLS and third-party syndication were received with rounds of applause from the audience. “We have to be careful, production doesn’t always define professionalism.”
In closing the speech, Keller advised the audience to let the stats “serve as your compass. I encourage you to download the whole presentation, learn the language and put this in front of consumers!”