Steve Murray - Keynote - Preparing for the Future


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Leaders of residential brokerage firms have many questions about the right direction to take their firms, who to affiliate with, what business models work best in today's market and which ones will work best tomorrow. In studies done by REAL Trends over the past five years, it was discovered that the discriminating factors are not location, size, brand or business model but rather the discipline of the leaders in setting standards, defining success, building a culture and holding their teams accountable. These and related factors will be addressed in Steve's presentation.

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Steve Murray - Keynote - Preparing for the Future

  1. 1. State of the Union<br />Discussion about housing market issues and trends<br />January 2010<br />
  2. 2. A Brief Message<br />I regret that I have so little voice <br />That is scratchy and hard to hear<br />I had Thyroid Surgery two weeks ago this morning<br />
  3. 3. A Brief Message<br />The docs say it is regular that one loses ones voice when having this surgery<br />And it could be 1 month or six months before I have my voice back<br />
  4. 4. A Brief Message<br />(Friends say the longer the better) <br />That’s OK – can take the ribbing<br />Its when my wife T says the same thing it gets to me<br />
  5. 5. A Brief Message<br />BUT I SAVED 15% ON MY CAR INSURANCE WITH GEICO<br />
  6. 6. A Brief Message<br />So what would you do if I sang out of key<br />Would you stand up and walk out on me???<br />Lend me your EYES and I will try not to disappoint thee<br />
  7. 7. Have a little help from my friends<br /><ul><li>And the greatest blessing I have is friends like Gino Blefari and Ed Krafchow who will together paint the picture of the State of the Union
  8. 8. And friends like many of you who will give me a pass this once to not be ready for my assignment </li></li></ul><li>State of the Union <br />The slides that you will see will be shared with everyone in the audience who wishes to have them<br />
  9. 9. State of the Union<br />Overall economic observations<br />Housing market observations<br />Brokerage market place issues<br />The path to prosperity<br />
  10. 10. Economic issues<br />Employment<br />Interest rates<br />Household formations<br />
  11. 11. It All Starts with JOBS<br />
  12. 12. Employment<br />Unemployment varies from state to state<br />Ranging from 5% to 14%<br />Not expected to see dramatic change to the better until late 2010 or early 2011<br />
  13. 13. Interest rate trends <br />
  14. 14. Interest rates<br /><ul><li>The Federal government has and will spend >$1.25 Trillion to purchase mortgage backed securities to push interest rates down;
  15. 15. The Federal government has injected an additional >$1.2 Trillion in cash into the economy and increased deficit by >$1 Trillion since the beginning of the year.</li></li></ul><li>Interest rates<br />The mortgage backed security acquisition program will end in early 2010;<br />The Federal government will now begin a slow process of withdrawing the excess liquidity from the system in early 2010<br />
  16. 16. Interest rates<br />As a result of these actions and other influences mortgage interest rates will begin to increase in the early part of 2010<br />
  17. 17. Household formation<br />The Joint Center for Housing Studies at Harvard and the U.S. Commerce Department project new household formations will average between 1.25 and1.45 million each year for the next 10 years<br />
  18. 18. Household formations<br />For 2008 and 2009 the actual numbers of new household formations are 950,000 and 890,000 respectively;<br />Neither organization is projecting a return to projected levels until unemployment returns to more normal levels (&lt;6%)<br />
  19. 19. Household formations<br />Household formations and total number of households are critical because they create new demand for all things related to housing;<br />Long term trends indicate that 5% of all households will purchase a home each year<br />
  20. 20. Housing market observations<br />Foreclosures will continue to have a significant affect on the housing market<br />Softness in pricing particularly in the upper and middle price brackets<br />
  21. 21. Delinquency Rates Continue to Rise<br />
  22. 22. Brokerage market issues<br />For all of 2009 there will be approximately 5.0 million existing home sales and approximately 400,000 new home sales<br />The total is 5.4 million home sales<br />The number for 2005 was 8.3 million<br />
  23. 23. Brokerage market issues<br />The total gross commissions generated from housing sales peaked at $65.7 billion in 2005;<br />For 2009 the corresponding number will be approximately $38.4 billion<br />
  24. 24. Brokerage market issues<br />The number of Realtors® is estimated to be 1.1 million today;<br />That is down approximately 15% from the peak;<br />
  25. 25. Brokerage market issues<br />Gross commission are down &lt;45% while membership is down &lt;15%;<br />Competition among sales professionals will continue to affect commission charges to consumers and commission splits among the best producing sales professionals<br />
  26. 26. Brokerage market issues<br />For those brokerage firms offering Core services the environment for doing so is seeing increased regulatory action;<br />FHA capital requirements<br />GFE and other RESPA reforms are increasing costs<br />
  27. 27. The Path to Prosperity<br />The housing market will likely show flat to slightly increased housing sales in 2010;<br />Existing home sales could grow by 3-4% in 2010 and new home sales by 10-12% in the same time frame<br />
  28. 28. The Path to Prosperity<br />Prices will remain soft particularly in the mid to upper price ranges;<br />Expectations are that nationally the median price of homes sold may be flat to a slight increase in 2010<br />
  29. 29. The Path to Prosperity<br />Average Commission rates have risen four years in a row rising from a twenty year low of 5.02% in 2005 to 5.29% in 2009 (est.);<br />Brokerage costs per unit of productivity and per sales professional have returned to the level of 1999 – 2000;<br />
  30. 30. The Path to Prosperity<br />Consolidation among brokerage firms will be a continuing trend as the 4th quarter of 2009 and the first two quarters of 2010 challenge many firms from a cash flow and balance sheet perspective<br />
  31. 31. The Path to Prosperity<br /><ul><li>Brokerage firms are nearing the end of a 30 year cycle of discounting their services to sales professionals;
  32. 32. Leading brokerage firms will tighten their focus on attracting sales professionals to their models and learn to be consistently profitable in their market niche</li></li></ul><li>We are beginning a long steady recovery<br />The business of brokerage will continue to be challenging;<br />$38 billion is still a considerable amount of income;<br />
  33. 33. With a little help from my friends<br />Thank you for your attention<br />Now let me turn this over to Gino Blefari and Ed Krafchow two of the finest leaders in residential brokerage today<br />