The Other Side of the Industry: How Are Professionals Taking Advantage of the Internet?

Most of the topics my blog has addressed up until this point have involved the ways that technology is shaping real estate. The industry continues to change, and as the picture to the left points out, it is increasingly becoming one based around the computer. One issue that I addressed earlier in my blog was how homebuyers are taking advantage of technology, mostly through the use of the Internet. As a contrast to that topic, I have decided to focus on the other side of this issue: how real estate professionals are using technology to keep up with the evolving industry. Rather than make my own post, I have once again decided to feature a couple of posts from other blogs that I found to be very relevant with this topic. The first post was written by Richard Nacht, the CEO of Blogging Systems, a company that, according to their website, “provides real estate professionals with marketing and communications solutions using leading-edge blog technology.” Nacht mostly focuses on how the majority of agents are failing to keep up with the changes in the industry. The second post is from RealtyMadeEasy.com, which is a prominent online real estate classifieds website, and has no author listed. The company questions whether or not real estate professionals are savvy enough to keep up with the evolving industry. My comments to both of their arguments can be found on their respective blogs, and can also be seen below.

“Homebuyers Are Using the Internet; Agents Are Not”
Comment #1:

It seems to me that every real estate professional would be eager to take full advantage of the different opportunities that the Internet and other technologies have given them. Fully utilizing the Internet would give professionals a greater reach in advertising, and would also give them a way to offer easy to use services to a lot more people. You brought up in your post through a quote from another agent that this could be due to the number of real estate professionals using the industry as a second means of income. Do you think the Internet will separate out those people? I would think that in a few years, the industry will revolve heavily around the Internet, and those not involved in it will be somewhat obsolete. Also, could these new developments end up hurting smaller companies, who have less resources and capital to enable them to fully take advantage of the new options available to them? I am still in college, but I am planning on going into the real estate industry when I graduate. Personally, I can’t think of a better way to run a successful business and reach new customers than to take full advantage of the Internet. Maybe there is too big of a generation gap, and those real estate professionals that are part of the older generations will never fully utilize the many opportunities available to them through new technology. What do you think about this?

“Are Real Estate Brokers Internet Savvy Enough?”
Comment #2:

I am currently a junior at the University of Southern California, and plan on pursuing a career in real estate when I graduate. I first want to say that I found your post very interesting, and I think it really applies to the path that real estate is currently heading. It seems like real estate professionals as a whole are adapting to the Internet much slower than homebuyers are. Do you think this is true? You said in your post that "a home buyer in today's market wants to go online and do just about all of their work in terms of locating their next dream home." Why do you think homebuyers are so much more willing to use the Internet as a tool? The Internet provides so many great ways that professionals can reach a large number of people, and so many different services that they can offer. I cant think of a better way to run a successful business in real estate, as well as in any other industry. Do you think that the older generations of professionals will be able or willing to learn how to use these tools? I personally don’t think that the industry will fully utilize the opportunities available through technology until younger generations enter the market. What do you think? I would really appreciate your input on this issue.

Housing Slump Continues: New Information Shows Further Decline In Market

The housing market has been on a down slide for a over a year, but the National Association of Realtors recently released information from last month showing that the slump is far from over. Data regarding home prices and home production over the past month, as well as most of the results from the last quarter of 2006, brought with them bad news for the real estate industry. These figures come one month after the lone promising piece of information was released by the National Association of Realtors. Pending home sales jumped 4.9% last December, a number that, according to the National Association of Realtors was the largest jump in almost three years. Although that piece of news is a step in the right direction, the new data regarding prices and production make it clear that the market still has a long way to go. The market's current state is obviously affecting homebuyers, but it is also having a great effect on homebuilders, who have become extremely uneasy with the housing market. The slump is going to continue until homebuyer demand catches up with the overwhelming amount of supply left over from the housing boom, and hopefully then homebuilders will become more comfortable with the market.

One piece of recently released information that plays a big role in the continuing housing slump is home prices. The graph above shows the continuing downward trend that the numbers have been following over the past year. In other data released by the National Association of Realtors, home value dropped in the fourth quarter of last year in half of the United States' metropolitan areas for the first time since 1979. Throughout the nation, the median home price in the last quarter of 2006 was $219,300, a drop of 2.7% from the year before. James R. Hagerty said in an article found in RealEstateJournal.com that “prices began falling in many areas last year after a boom that pushed prices up at double-digit annual rates in much of the country in the first half of this decade." The biggest drop came in the Sarasota area of Florida, which fell 18% from last year. Florida is home to the majority of the biggest decliners this year, which Hagerty attributes to the "glut of new condominiums" that are "weighing on the market." Ohio is another part of the country whose homes have significantly dropped in worth, more specifically in cities like Youngstown and Toledo, which Hagerty claims are being "hurt by shrinking industrial employment."

One reason that this decrease in prices has gone on for so long comes from the overwhelming abundance of new homes in most areas throughout the country. These new residences were developed while the market was still at its peak, and are a big reason why numbers remain low in most areas. Prices will not begin to rise until homebuyers' demand can catch up to the current overwhelming surplus of supply. Hagerty's article presents another reason for the continuing slump, arguing that the lenders are being more strict with regards to their credit standards, making it harder for some potential homebuyers to obtain loans. This comes at the same time that late payments and defaults have been on the rise, something that could increase the number of foreclosures in the market.

Another statistic proving the slump will continue is the decrease in home production. As is shown in the graph to the right, housing starts, which is another term for home production, have dropped considerably over the past year due to lack of consumer demand. The Department of Commerce recently released data stating that the number of homes being produced decreased by 14.3% last month, bringing that number to its lowest point in ten years. In an article found on RealEstateJournal.com, Jeff Bater and Brian Blackstone break down the decrease in housing starts by region. According to the authors, "housing starts last month decreased by 28.5% to 301,000 units in the West, 15.2% to 195,000 units in the Midwest, and 11.8% to 716,000 units in the South. Starts rose 8.9% to 196,000 units in the Northeast." It is clear that builders still hold a pessimistic view of the market, and seem to be afraid to continue to build new communities. There might not currently be high demand for new homes, but if homebuilders remain skeptical and refuse to build communities in the future, they could end up hurting the market once homebuyer demand does catch up with supply.

Although on a big scale there has been a continuing decrease in all aspects of the real estate market, there are some areas of the U.S. that have shown signs that the trend could change relatively soon. Home prices may have declined in 73 metropolitan areas last quarter, but they also increased in 71 areas. The article written by James. R. Hagerty also reveals that places such as Atlantic City, whose median home price rose 26%, show signs that the market could turn around relatively soon. David Lereah, the National Association of Realtors' chief economist, is very optimistic about the housing market: he said, "Hopefully, the fourth quarter was the bottom of this current business cycle." Although the housing market will most likely continue to drop over the next few months, the fact that not every area in the country is struggling offers a bit of positive news for the future of real estate.

Another positive that can be taken out of the housing market slump is the increase in pending home sales that occurred last December. Rex Nutting, a contributing writer for TheRealEstateJournal.com, said in an article that during the last month of 2006, pending home sales rose in all four regions, the highest being 8.1% in the Northeast. In the article David Lereah spoke on the subject, "Some of the monthly gain may be weather related, but it appears buyers are becoming more comfortable, sensing the timing is good and that their local market has bottomed out. I expect modest sales gains throughout the year, with what I believe are sustainable levels of activity." Unemployment and mortgage rates remain low, which could go a long way in ending the market’s slump relatively soon. Still, the key to stabilizing the market remains with the homebuyer, and the slump will come to an end as soon as demand can meet the overwhelming amount of supply in the market.

Online Education: One More Way That Technology Is Affecting Real Estate

This week, rather than creating my own post, I have decided to focus on a couple of posts written by other people that I found both interesting and helpful. The topic that both of these posts relate to is online education, a trend that has been growing in popularity over the last couple of years. The classroom has become a thing of the past, and the picture to the left is a perfect example of a new type of classroom, the computer. The first post is regarding online education in general, and whether or not it is the best means to receive an education. The second post that I found is more specifically about the role that online education is playing in the real estate industry, focusing mostly on the positive changes that online education is bringing to the industry. I have included below the links to each of these posts, as well as displayed below the comments I made to each of the writers. I hope you find these posts as interesting as I did.

Post #1: "Pros And Cons Of Online Education"
By, Harris Jhosta

Comment:
I am currently a junior at the University of Southern California, and am planning on getting involved in the real estate industry after I graduate. It seems like online education is becoming a very popular method in learning about real estate, as it is with every other industry. You seem to be more on the pro side of the argument, but I was wondering if you thought that anything would be lost through an online education. You said in your post that it might be looked down upon, or not understood by employers, but do you think there is a good reason for that, other than the fact that it is a new and somewhat unknown means of education? Are there things that can only be learned through the classroom, like communication skills or working well in groups? One of the more important things that I have gotten out of my time at USC has been the ability to work well with others, and allocate different jobs within a group. This is an important aspect of professional life that could not be fully taught through an online education. There seems to be no question that online education is more convenient and less expensive, but could there be a limit to how popular and respected online education could become?

Post #2: "Are You Learning Online?"
By, Dave Shaut

Comment:
I am currently a junior at the University of Southern California, and am planning on concentrating in real estate development next year. As of right now, I would like to get involved in real estate in some way or another after I graduate, although I’m not quite sure exactly what I would like to do. It seems like postgraduate online education is a really practical and much more convenient means of learning about the real estate industry. Your post focuses only on the positives of online education, which there seem to be a lot of. However, I was wondering if you could explain some of the reasons why online education isn’t as popular as it could be. What are some of the negative aspects that come with learning about real estate online, rather than through the classroom? It seems like it would be hard to regulate all of the online educational programs to ensure they remain creditable. Are there certain things about the real estate industry specifically that could be lost or harder to understand if learned through the Internet, such as communication skills or working well in groups? Any advice or information you could give me would be very much appreciated, thanks.

The Future of Real Estate: Better Educated Consumers Begin to Shape the Industry

Recent developments in technology have had a big effect on the real estate industry with regards to production, but production isn't the only aspect of the industry being affected by technology. These developments are beginning to change another part of the industry: the role of the homebuyer. The Internet has greatly changed the amount of information available to the world, something that can be clearly seen through the effect it has had on real estate. The Internet, along with a drastic change in homebuyer demographic, is starting to change the industry entirely. The homebuyer is not what it used to be, and continues to get younger and more knowledgeable with time. The picture to the left features a young couple getting their information primarily from the Internet, rather than using traditional means like brokerage firms. This is the new homebuyer; a young couple, or even single man or woman, who mostly researches the housing market through the Internet. This new search method allows potential homebuyers to get more information from a better variety of sources. The increase in information available through the Internet might not have a direct effect on the housing market, but it has done a great deal in creating a better-educated and more informed homebuyer.

The homeowner has been changing drastically over the past few years. According to Stefan Swanepoel, a contributing writer at realblogging.com, “in 2005, 40% of homebuyers were first time buyers and 50% of them were between the ages of 25 and 34 (Gen X and Echo Boomers). Even more telling - 38% of all homebuyers in that period were under the age of 35…According to numerous studies undertaken by NAR and the California Association of Realtors, approximately 70% of all homebuyers start their search on the Internet.” This means that the traditional ways of buying and researching homes has become a thing of the past. The new homebuyers are beginning to take full advantage of the resource that is their computer. A new medium has taken control of the industry, and there are a number of ways with which it is doing so.

One of the many recent developments keeping consumer's informed has been, interestingly enough, the blog. According to reTrends.com, one of the top 10 trendsetters in real estate in 2006 is Blogging Systems, “for leading the way in expanding blogging into the real estate industry.” The blog allows a means for homebuyers and homeowners throughout the country to communicate with one another about whatever they desire. One site, Outside.in, currently collects blogs from over 3,000 neighborhoods in 55 cities. Blogs on this site can range from types of restaurants in any given area to the quality of schools. Sites like this bring with them a huge amount of information, and have begun to severely limit the role of the real estate professional. However, blogs are not the only resource being used by the new generation of homebuyers.

Broker review sites are another trend that is turning the real estate industry upside down. Homethinking.com offers reviews of brokers in any area in the United States. A feature like this, according to Les Christie, a staff writer for cnnmoney.com, allows consumers to “engage the most professional real estate agents available." It also forces brokers to pay more attention to how they treat the people using their services. It might not be the most ideal situation for brokers, but it will ensure that their customers receive the best service.

The most dominating theme in the changing industry is the amount of information becoming available to the common man. As long as there is Internet available, there are no boundaries to what any homebuyer can learn about the housing market. Having a more educated and informed consumer not only means that they are able to make a better decision regarding the purchasing of a new home, but it also means that the role of the real estate professional is becoming increasingly less important. Before the introduction of the Internet, brokers were relied upon for most of the information regarding their housing markets. If they are going to remain a major role player in real estate, brokers will have to adapt quickly to the changing industry.

There are a number of ways professionals can use the Internet to reach the new generation of homebuyer. Although the Internet might limit the consumer’s reliability on real estate professionals, the Internet does offer a new medium through which the industry can advertise. The Internet is a relatively cheap way to reach a large number of people, and is becoming large part of most companies advertising campaigns. Also, companies could begin to offer certain online services via their website, which could once again increase their role with consumers. There is a lot of potential for brokerage firms with the Internet, and they must utilize that potential in order to keep up with the evolving industry.

If the people currently working in real estate would like to keep up with the industry they will have to adapt to the changing environment; if they fail to do so, the entire industry will pass them by. With that said, real estate professionals can take advantage of certain aspects of the new direction the industry is going by offering a number different services that only the Internet allows. There is an opportunity for professionals to make themselves more available to homebuyers and owners. This generation has a lot of information available to them, and they have begun to utilize it. The homebuyer is no longer the traditional family in the United States, and the real estate industry is becoming anything but traditional.