A Dose of Industry Perspective

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I’ve been traveling all over the country to real estate conferences during the past few weeks, some of them exclusive to C-level executives, and wanted to share a few of my takeaways from these timely industry events. Gathering this knowledge helps us move forward with strength, having developed a deep understanding of both long and short-term headwinds.

Throughout the four events I attended (Zillow Forum in Carlsbad, CA, Inman Connect in New York City, T3 Summit in San Antonio, TX, and Realtor.com Thrive 100 in Albuquerque, NM), there seemed to be a much stronger focus on the real estate consumer experience than previous years.

There was a lot more conversation about the customer and articulating value. I think our industry as a whole is finally realizing we need to do a better job with centering the humans who buy and sell homes in everything we do. That human focus is something NextHome has been passionate about since day one, and it was nice to see the broader industry conversation headed that way. 

Beyond added emphasis on the consumer, what was most apparent to me were the things people weren’t talking about.

I was disappointed by the tough conversations that people just weren’t willing to have about the National Association of REALTORS®’s (NAR) pending litigation with the Department of Justice (DOJ) as well as others. It felt like the elephant in the room wasn’t being addressed, which is a big problem considering it is one of the most significant topics and threats in real estate right now. 

This litigation has the potential to completely change the way commissions are handled. I understand the fear of talking about it publicly, but if the DOJ gets its way where buyers pay the buyer’s agent, and sellers pay the seller’s agent, the damage to brokerages, agents, associations, MLS’s, and more importantly, the consumer, would be catastrophic. Simply put, in this market, buyers can’t afford to pay the buyer’s agent commission and no agent representation would be the worst thing possible for them. Silence is not going to make things go away. Conversations with and significant pressure on our politicians in Washington DC about how bad this would be for consumers and our industry is something we all must be doing today at the very minimum. There needs to be political pressure on the DOJ to change course.

The other conversation that we weren’t having was about diversity. That silence was pretty deafening. 

At NextHome, we have nearly 75% of our corporate staff and 50% of our management team comprised of women. From an ethnicity and cultural perspective, NextHome is remarkably diverse. Yet, when I looked around at the decision-makers in this massive sector of the American economy, I saw mostly white men, myself included. It didn’t represent an industry where a majority of REALTORS® are women, and certainly not the ethnic makeup of America. 

It made me think that NextHome might be looking at diversity a little differently than the industry as a whole. Returning home, I felt gratitude for the diverse perspectives that we get to benefit from as a company, and it made me even more committed to our effort to pay for each and every NextHome member to complete the At Home With Diversity® certification course. Earlier this month, nearly 700 NextHome members completed the training and are in the process of finalizing their certification through NAR.

I do want to make it clear that the conversations we did have at these events were valuable and enlightening – especially conversations around America’s severe inventory problems. 

The pressure on inventory is accelerating with 77 million Generation Y buyers coming into the market (with more than 23 million Generation Z buyers hot on their heels). This is the largest generation of home buyers in American history since the Baby Boomers. These people have the drive to buy a house, but there are a lot of dynamics working against them including the ability to save for a down payment due to high costs of rent and student loan debt.

Interest rates are likely going to continue an upward trend. Most people think they will eventually land somewhere between six to seven percent. That increase is and will continue to remove part of the buyer pool, but it still leaves us in a significant inventory shortage. The latest numbers now show an inventory shortage of about 5.8 million homes as of the end of 2021. That number was 3.84 million as of the beginning of 2019. As you can see the problem is only getting worse – especially with inflation and continued supply chain issues.

Recent historically-low interest rates add a unique twist to this inventory problem as well. For example, let’s look at the potential seller. This person decides to sell their house, but interest rates are going up. The potential seller looks at their current mortgage payment with possibly a two to three percent interest rate, plus the cost of moving. Then, they compare that to their new house payment with a significantly higher interest rate. Suddenly, moving doesn’t sound so appealing. As a result, more people are staying put, and inventory remains low. That’s an interesting short-term dynamic that I don’t think a lot of people are considering when they talk about our inventory shortage. 

The wild cards in this discussion continue to be inflation and supply chain disruptions. With the war in Ukraine, COVID lockdowns continuing in China, and frankly, some inept leadership on both sides of the aisle, these supply chain issues aren’t going to get resolved any time soon. 

However, despite its challenges, real estate will remain strong (by historical standards) for the foreseeable future based on the simple fact that we are still 5.8M million units short in housing in the United States. It comes down to supply and demand economics. 

Shifting gears toward innovation, there was a lot of talk about the continued pursuit of end-to-end technology that can streamline the consumer real estate experience. Although sales, mortgage, title, escrow, etc, remain pretty disjointed in a lot of cases, we are finally getting to a point where a more seamless experience will emerge. That completely streamlined experience isn’t here just yet, but it’s coming based on some of the technology I’m seeing in the market. That’s exciting for everyone involved in the transaction. 

More than anything I took away from these recent conferences was that NextHome’s emphasis on humans over houses is something that people are definitely starting to pay attention to. In the end, it’s all about the humans pursuing the American dream of homeownership and NextHome is proud to lead the charge as the broader real estate industry moves in that direction. When we all stay focused on that, we’ll continue to remain at the center of the real estate transaction. 

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