It's not too early to look ahead to next year. The year 2001 will be a watershed, as it will launch a changed economy which will affect the working environment for REALTORS® nationwide. What are the current trends that you need to consider in order to plan your year, and how will that affect the way you do business?

Financial pundits agree that there is little likelihood that the Federal Reserve will raise interest rates before the November presidential election, for two reasons: the Fed wishes to avoid the appearance of giving one party a political advantage over the other, and the economy has shown signs of slowing due to the several interest rates that were instigated throughout 2000. In addition, fuel prices have skyrocketed, the NASDAQ has tumbled from its spring high of over 5000 points, and new home starts and existing home sales have slowed which are all signs that the Fed has met its goal of slowing the conditions that lead to inflation.

The results of these causes and effects will be felt strongly in the year 2001, as the post-election consumer psychology changes and the slowed economics cause a shift in the overall buying and selling habits of consumers.

The unprecedented sellers' market of the past four years may give way to a more normal market in most areas, and it may shift to a buyers' market in the areas where businesses have cut back on expansion or let staff go. The shift to a buyer's market reflects a decline in consumer confidence and the attendant lower absorption rate of goods, services and housing.

Concurrent real estate trends

During the bull real estate market of the past several years, certain trends have been noteworthy. Despite a burgeoning economy enabling more people to buy goods and services, the real estate industry is experiencing a fee recession, as more consumers question service vs. traditional fees from real estate service providers. This is the primary result of several trends.

1. More consumers are going online to find homes. Over 50 percent of buyers in the year 2000 are shopping for homes online, according to Steve Ozonian, president of Realtor.com. Local brokers such as John L. Scott Realtors puts the number even higher. Wired communities such as Seattle and San Francisco see as much as 70 percent online buyers. Yet, agents are migrating to the Web at a slower rate than the average consumer. While four out of five buyers use the Internet to buy homes, only one out of ten Realtors actively use the Internet for marketing, according to the Florida Association of REALTORS®.

2. Consumers are demanding better service. Fee compression is directly related to the quality and level of service that consumers feel that they get versus what they pay for. "There is clearly a value crisis among consumers," says Larry Romito, president of Quality Service Certification(tm), a training and accountability program for real estate brokerages. "If you wanted to buy a $300,000 house in Dallas, about $15,000 to $18,000 is spent on brokerage fees. When we ask the consumer how they feel about the services they received for what they paid, universally they feel the price is too high. That is the issue from the consumer standpoint."

"The process of buying and selling a home is unclear and mysterious. The steps aren't part of a process that the individual practitioner can follow, instead they make it up as they go along. There is a price expectation continuum, from inexpensive to expensive. As the consumer moves toward expensive, they expect more service; they want consistency, reliability, accountability, and responsiveness. Consumers don't feel that these service models are true of real estate practitioners."

3. The industry is moving toward non-agency relationships. Approximately twenty states have enacted laws that are designed to abrogate the common law of agency, putting statutory laws in their place. These laws include the legal definitions of representation that can be obtained from a real estate licensee. Most of these laws have introduced a form of representation that is non-fiduciary in nature. Depending on the state, these relationships can be called transactional or facilitator brokerage or designated agency. They allow the broker to serve and collect fees from both sides of the transaction, while limiting the broker's liability in the transaction.

4. Agents have forgotten the lessons of the past. The current market has enjoyed a momentum of its own, but no market lasts forever. Spoiled to quick sales and high prices for homes, Realtors may be surprised to learn that the service level they have employed for the current market is far from adequate when the market returns to normal or flips to a buyer's market. A normal real estate market means that only about 60 percent of homes listed sell with the firm that originally listed them, according to RealTrends research, says Romito. "That's a low batting average," he says. "The practices that would lead to a better batting average just aren't being followed."

All of these trends taken together mean that conditions are changing and countertrends are emerging. That necessitates a change of marketing strategy for agents. What has worked for agents during the past few years may not be as effective in 2001, because while the economic climate was changing, the world of real estate was changing also.

"The real estate industry has been more concerned with what is good for the industry," observes Romito, "The service providers who are more consumer-centric will be the ones who survive."

Find out tomorrow what will happen in 2001 as counter trends and market conditions of the future are revealed. Click Here for Part II