About the industry
A recent overview of the real estate industry by Franchise Help gives a well-rounded summary of the industry at large. “Real estate tends to be a particularly cyclical industry, going up and down based on trends in the economy at large such as the fluctuation in interest rates. The story of real estate often mirrors the general story of the American economy. Real estate soared in the post-World War II 1950s, sank in the 1970s, rose again in the early 1980s until the depression at the end of that decade, and was prosperous again at the end of the 1990s. Because of low interest rates in the mid-2000s, residential real estate was booming even when the economy was slow until the mortgage crisis hit and the bubble collapsed. After that point it sank and as of 2011 has yet to truly recover. Brokerage firms have taken on property management divisions in order to diversify their revenue streams and combat poor economic climates.
The real estate industry has been under scrutiny in recent years with the mortgage crisis and other current events, but it is still a large field which generates billions or dollars in revenue. There were 165,000 companies operating in the residential brokerage and management field last year, which generated $170 billion in revenue, and there were 25,000 companies operating in the commercial brokerage and management field, generating an annual revenue of $30 billion.
Potential obstacles for the industry include factors beyond the control of the business owner, such as downturns in the local or national economy, as well as changing neighborhood demographics where agencies are located. Also out of the owner’s control is the building of properties, and what properties in the area are available. For management companies, indoor air quality liability has become a serious legal issue in recent years. Removal of mold growth in particular has been increasingly necessary for property owners and managers.
The use of technology will continue to transform the field in the years ahead, enabling home buyers to research both properties and the areas in which they are located, including looking at pictures and finding out about the neighborhood’s schools, crime rates and other statistics. Marketing over the internet with pictures of properties and virtual tours will be important for brokers. More than ninety percent of people use the internet before purchasing real estate. United States population growth will also be an important driving factor in the growth of the industry at large. The workforce is expected to to grow fourteen percent between 2008 and 2018. The internet arguably may eliminate the need for brokers altogether in the future. Banks also represent a potential competitor. Recently they have been freed by rule changes to enter the commercial real estate field in a limited way, and it is possible to see future rule changes allowing them to enter the residential field. The biggest growth areas are expected to be in the southern half of the country, particularly in the southwest. A recent survey revealed the hottest buyer’s market to be Albuquerque, New Mexico.
Even in spite of the poor economic conditions and the state of the industry, analysts are confident in the future growth in the industry. The output of United States real estate businesses is expected to grow at an annually compounded rate of six percent between 2010 and 2015.”
Analytics in the industry
Unfortunately, numerous homebuilders still rely on small data, Excel spreadsheets, and their intuition as the basis for strategic and tactical decisions making (and not in that order). Only the very few and forward thinking homebuilders, construction companies, land developers, and investors are truly deploying advanced analytics.
How do we serve your industry?