Those Spring Weather Patterns Have Appeared

Each December various industry thought leaders issue their predictions with respect to what is in store for the industry over the next year. Generally speaking only about 47% of these predictions end up being even close to true.

A much safer bet for the predictor is to wait until March, see what is actually in the air and then project those forces and directions. By way of example for 2017 there are four current initiatives that, as March approaches, appear positioned to have significant relevance and/or impact upon the American real estate industry and marketplace.

The first of these four forces would have to be the efforts of our friends from the Zillow Group. Much of Zillow’s success in 2017 will have to come from momentum gained from a terrific 2016. In 2016, after slowly climbing the market ladder for some ten years, Zillow exploded into an amazing level of success. The Premiere agent and brokerage programs gained significant altitude, the Zillow self-service program with its game changing tools was launched to an almost immediate success. We are informed that a number of new and exciting programs and products will be introduced over the next few months.

With a current market cap of $7.3 Billion it hardly matters that one of the things that Zillow is celebrating this month is having lost less money in 2016 than in any other year. Most amazing of all is the fact that Zillow’s recent success doesn’t just apply to the Zillow Group, it applies to the entire industry. Zillow’s victories are not just making Wall Street happy, they are reconfiguring an entire industry to approach the transaction in a fundamentally different fashion. That is impressive stuff.

While not a market force in the true sense of the word one must also note the probable impact of the fact that neither Keller Williams, Realogy nor Berkshire Hathaway, all of whose 2016s were rather free of flash and/or bling, have given either notice or even a hint that they will be pulling off or even presenting anything even remotely impressive in 2017. Perhaps the point that needs to be made here is that merely surviving another year in the current industry environment, while impressive versus not having survived, is not impressive enough given the nature and quality of the current leaders.

The second force that must be noted is the fact that Wall Street has seen fit to infuse over one billion dollars into the new (or at least relatively new) business model represented by Knock, Open Door and Offer Pad. These are the guys who are telling consumers that if they are tired, frightened or intimidated by the current real estate transaction experience, for a fee (small or large depending upon any particular consumer’s perspective) they will simply purchase the consumer’s property, give them a check and let them be on their way to wherever they were going.

The issue behind this force has nothing to do with whether or not this business model will be successful. What one needs to take notice of is the fact that a number of financial experts with power sufficient to bring a billion dollars to the table have determined that there is enough consumer dissatisfaction in the marketplace to make this gamble make sense. This is a small bell making yet another wake up call.

The third force that deserves careful analysis is the fact that NAR is currently conducting a search for a new CEO to replace long time change champion Dale Stinton. Hopefully most of our readers have long ago come to the conclusion that NAR no longer qualifies as a trade association. Over the past ten years the former trade association with its 1.2 million members has become an industry powerhouse with extensive and impactive investments and activities in technology, data and training services. The fact that many industry leaders are still scratching their heads and wondering why these investment and efforts were made is an embarrassing admission of a total lack of knowledge with respect to what is happening in the industry and the true nature of Wall Street’s involvement in this industry.

It is sufficient to say that the REALTOR® community is in line for forty days of rain and the only entity that has had the foresight and/or courage to build an ark is NAR. Everyone else is investing in the Yeti Life Preserver project and hopes to profit from the disaster that, in all likelihood, will befall the industry and its brokers and agents in late 2018 or early 2019.

There are forces within the industry that believe that the CEO selection process is only a cultural exercise designed to determine what color the office wall should be painted moving forward. Not only are these forces not aware of the impending rainstorm, or the critical role of the ark, it is likely that when they discover it they will use it as a stable for the industry’s horses.

The fourth force that is now poised to critically impact the industry is the fact that the clock is running out on the Upstream Project. Under the terms of the October 28th, 2015 contract between UpstreamRE, (the operating entity for the Upstream system), RPR (the contracting vendor that is building the Upstream system) and NAR (the entity that has provided the funds to finance the project), UpstreamRE must assume the responsibilities and costs of operating the Upstream system on or before January 1, 2018. Using plain English this means that UpstreamRE, within the next 240 days, must have, in place and ready to go, equipment, staff and facilities capable of operating a national program with a several million dollar annual budget and working relationships with hundreds of brokerages across the country.

The initial issue here is not whether or not such a feat could be completed, rather it is a matter of inquiring where along this amazing road the players are currently lingering. Those who believe it really doesn’t matter because NAR will just come to the table at the last moment and write the check, ought to give such an option a bit of thought, the ramifications of such an event are unsettling at best. Even more unfortunate is the fact that many in the industry are of the opinion that a failure of this project will have no ramifications other than to generate a tone of belly laughs and one million “I told you so’s.”

This is simply not the case. A failure of the Upstream Project will have significant ramifications for the industry moving forward. It will cripple operating relationships and arrangements that have been put in place to protect the industry. Such a failure would play right into the hands of entities whose fortunes are currently gambling on the industry losing altitude, strength and momentum.

What makes these four forces intimidating and potentially disastrous to the industry isn’t their inherent powers, but rather the fact that few in the industry understand how they are related and fewer yet have modeled out the ramifications of their coming together in 2017. Perhaps a few less junkets and a few more study sessions might be in order.

 

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