Swanepoel
Trends Report 2010

Protecting Your #1 Asset:

For a decade and a half, starting with Real Estate Confronts Realty in 1997, the 10 subsequent books and white papers in the Real Estate confronts series and in the five annual Swanepoel TRENDS Reports since 2006, we have been writing about the importance of real estate information and data.

Often the comparison has been made that real estate agents are analogous to Google — they also own no gold mine or manufacturing plant but have the ability to sort through lots of data. In the case of real estate agents it’s sorting through listings for sale and assisting buyers in determining the properties that meet their particular needs by providing them with the desired results through interpretation, guidance and counseling.

Information is at the very core of Google’s astronomical rise to global dominance. Taking real estate data and mixing it with an agents knowledge of neighborhoods and current sales data in particular is at the very core of being an effective, successful real estate professional.

The access to quality data and the ability to analyze interpret and offer up that data more efficiently than anyone or anything else sets the professional apart. Sitting in the center of one of the largest, most exciting and most active industries that is at the very core of our economic system.

We live in it, work in it, drive on it and play on it. It's a matter of fact that there is very little we do that doesn’t, in some way, involve real estate. Without data — quality real-time data — real estate agents may very well consider their job, their profession, a threatened species.

Therefore, the single most important task at hand is to store, protect and control real estate’s most valuable asset – the property data. Luckily, in 2009 someone stepped up to do just that.

The time has come for Realtors® to protect and organize their #1 asset: Real Estate Data. Learn more about AVMs, MLS clouds, LPS and RPR. Topics discussed include:

* Challenges
* Possible Solutions
* Competition
* Pros and Cons

The economic crisis has been laid at the feet of many parties and how we got there and what caused it has been the fodder for countless arguments for months. While not everyone agrees on those issues, they are generally in agreement that it is going to take a revitalized and healthy housing market to turn things around. But in light of tighter credit standards, falling house prices and an economy in recession that goal appeared to be out of the question in the near term. So in an effort to jumpstart the housing market, the federal government took a first step with its First-Time Homebuyer Credit (FTHBC).

The government, supported by the NAR and many in the industry, believes that the tax credit is working and is the stimulus that will entice first-time buyers sitting on the sideline to make the move into the market. When the credit was due to expire last fall the NAR supported the extension proposed by Washington under the Worker, Homeownership and Business Assistance Act of 2009 that was signed by the President on November 6th. In the process of lobbying for that extension and the discussion of the results to date, two very distinct camps emerged: those who believe the program is the key to turning the market around and those who believe it is ineffective and will not help.

Is the FTHBC a key to turning the market around? Has the tax credit and other Federal Government initiatives facilitated the downward spiral of the home market or only delayed the inevitable? How should we handle an uncertain tomorrow? Topics discussed:

* The Federal Government
* Helping Homeowners
* Tax Credit
* The Question of Cost

It’s been almost 40 years since franchising entered the residential real estate industry and it has shaped the industry like few other concepts or strategies before or since. Its impact ranks with the MLS and the Internet as one of the top three game- changing strategies in real estate since World War II.

Today there are a growing number of agents questioning the value proposition of real estate franchising as they point to some of the older models that appear to offer little more than a brand. Even in today’s online world the value of a brand is often questioned. Looking back, one can view the first two decades of the franchising revolution as dominated by the speed and extent of its growth. Within a few years, we were not only introduced to new brands but they seemed to quickly enter almost every market.

During that time there were also some re-engineering phases as RE/MAX and Realty Executives offered up a different franchising business model. The majority of the large national real estate franchises, however, retained a very similar traditional model.

During last two decades, franchising has gone through a strong consolidation phase in which three groups have acquired over 10 significant real estate franchise brands. It started when Realogy acquired franchises (Century 21, Coldwell Banker and ERA Real Estate) and licensed the right to other established brands (Sotheby’s and Better Homes & Gardens). Later Andrew Cimmerman amassed Realty World, Home Life and Red Carpet and recently Brookfield RPS became the owner of Royal LePage in Canada and GMAC Real Estate and Real Living in the U.S.

Then, during the mid 1990s, things seemed to change and a smorgasbord of hybrid models (Collaborative, Residual, Niche, etc.) began appearing and gaining traction. Today the number of real estate franchising brands and business models brokers can choose from has expanded significantly.

Brokers, of course, have always had the option of continuing to operate under their own brand and are generally referred to as Independents, but this is actually misleading as most franchisees are also independently owned and operated. And so, as we march into the next decade we are faced with the fact that selecting the right franchise has become a complicated process. Choice is good but continuing to ride a non-stop carousel isn’t.

The evolution of the Real Estate Business Model continues as franchising proliferates, expands and gains renewed momentum. Topics discussed include:

* Evolution of Business Model
* Franchising Categories
* Changes

In today’s rapidly changing economy there is more innovation and transformation than ever before. Many people are confused and waiting on someone else to take the initiative and step out with an answer — from the federal government on down.

Stop waiting. The time has come for you to take the necessary steps to change your business, your company and your career. Real estate as a business has been changing for more than a decade now, but the pace is accelerating as we near the transformation years (other trends in this Report that clearly illustrate the transformation are Trends #5 and #6).

Innovation, education, re-positioning, re-structuring, implementation, etc. are all but a few of the keywords that need to fuel your daily thinking. The time has come to take the industry to the next level both structurally and professionally — and you, Mr. and Mrs. Realtor®, need to play your part.

Professionalism isn’t a new term and it means different things to different people. But whatever it is or however we define it, it is a key building block as we move forward. There are many elements that comprise this paradigm shift but three have become the core influence over the past few years: the economy, the consumer and technology. Renewed enthusiasm surrounding #rtb (raising the bar) gains momentum as the industry searches for new knowledge based solutions. Topics discussed include:

* Solutions
* Improvement of Knowledge Levels
* Connecting with Consumers
* Using New Media

CBS announced in December 2009 that it was cancelling the 54-year-old soap opera “As the World Turns.” This followed the earlier announcement of the demise of its daytime staple, “Guiding Light,” that had been on the air (radio and television) for 72 years. December also saw the demise of Editor & Publisher Magazine, which had been around since 1854. It lays claim to being the chief chronicler of the American newspaper industry and has presided over the business for 125 years.

In a mid-2009 study, Anthea Stratigos, CEO of Outsell, Inc. (outselling.com), a media research and advisory outlet, predicted that $65 billion would be siphoned away from traditional advertising channels in 2009 and be spent on companies' own websites and Internet marketing.

There are no reliable industry-wide magazine ad revenue numbers that are publicly reported (for obvious reasons), but according to a report compiled by The Magazine Publishers of America's Publishers Information Bureau (PIB; magazine.org), automotive ads for the first six months of 2009 were down 21.3% and technology down 17.5%. Most of those to whom we spoke tended to agree that magazines are still doing better than newspapers.

Newspaper and magazine readers are now primarily going to online resources to find what they want, a fact clearly reflected in the continuing decline of the newspaper industry. So where is the consumer? Follow the shift away from newspapers and mail, and gain a better understanding of the impact of the Internet on Real Estate Advertising. Topics discussed include:

* Shift Away from Newspapers
* Shift Away from Mail
* Impact of the Internet
* Where Consumers Are

Change is tough. We all know that. It is, however, even harder when decisions that impact change, and thus your future, are made by a group or committee. Some say it is actually impossible and that change invariably comes from external sources. Existing players can invest in game changers, but they can’t really be game changers themselves — or so they say.

It is that very premise, which has been proven correct more often than not, that has now been challenged by no one other than a 100-year old, unwieldy association — the National Association of Realtors®.

In August 2009, the NAR instituted the Game Changers Challenge, challenging its 1,400+ local Realtor® Boards, State Association of Realtors® and Institutes, Societies and Councils. They were charged with creating new benefits and the NAR encouraged state and local associations to develop new perspectives towards day-to-day work and to focus on the value of finding new ideas and formulating them to answer the challenge. These game changing ideas must have an impact on the association, a new product, program, process or service that would improve the organization. As NAR re-engineers the association model on State and Local levels with 14 game changing concepts, they search to innovate an industry. Topics discussed include:

* Professional Associations in Real Estate
* Reevaluating Value Proposition
* New Initiatives

A recent study for CareerBuilder.com (careerbuilder.com) reported that one in ten Americans surveyed is currently working more than one job and an astounding 61% are living from paycheck to paycheck. The ranks of the real estate industry are no exception. The slumping economy and housing markets, fueled by fierce competition, are forcing many agents to rethink their career choices. The once heady market now has them scrambling for supplemental income or leaving the industry altogether. History has shown that even in good times, only one infour agents make it past their first year and with the boom days of 2001 to 2006 long gone, the ranks are shrinking by the month.

What is the impact of Dual Career Realtors® on an industry that is already struggling with commitment and barriers to entry? How Should Realtor® Associations handle this growing phenomena? Topics discussed include:

* Impact on Consumers
* Impact on the Industry
* Impact on Dual Career Realtors®
* Barriers to Entry

Co-founder of socialmedia.com, Seth Goldstein, says that we are witnessing a profound change in the media and advertising industries due to the emergence of Social Media. Companies that did not exist ten years ago, like Facebook (facebook.com) and Twitter (twitter. com), have captured a significant share of the attention from traditional publishers.

Even at the moment when the media begins to master the basics of Social Media with blogging, the social graph, search engine optimization and cost-per-impression (CPM) yield management, a new set of consumer behaviors — extensive use of mobile devices, location-based services, mixed reality concoctions and Web 3.0 apps — dives into the mix. The game has changed. The new game is called the Golden Triangle and here are its players: Social Content Production, Mobile Media and Real-Time Information.

2009 saw a shifting opinion not only in how information was consumed but also by whom it was controlled. Gone are the days when news corporations and television studios controlled all the information. With the advent of Social Media, information has not only become freely available, it's freely sourced. This new business marketing innovation is creating continual confusion and endless opportunities. Read more about the rise of real-time, location-based services, mobile media and augmented reality. Topics discussed include:

* Mobile Media
* Location-Based Services
* The Rise of Real-Time
* Social Beyond Mainstream

Over the years this Report has limited its research and comments to the residential real estate sector and for the most part left the commercial sector to others. But with the impact the $6.4 trillion commercial real estate (CRE) market is having on the economy it now also impacts the residential real estate brokerage business.

Historically, CRE has more often than not followed a predictable pattern every five to 10 years: Prices rise; Developers expand supply; Vacancies increase as supply increases; Owners default; Banks forced to foreclose; Vacancies decrease as product is absorbed; Market returns.

However, this time has been different as an oversupply of money pushed the CRE over the edge. The commercial sector has become a ticking time bomb. Net absorption of space is down and falling as vacancy rates across the board are increasing. The fact that banks are tightening their lending requirements, commercial mortgage backed securities (CMBS) — which were responsible for roughly 50% of the CRE financing market — and money from Wall Street are no longer available, is being reflected in the rising number of commercial properties in default, foreclosure or bankruptcy.

What is the underlying problem of the Commercial Market and what is the current state of affairs? Is it a ticking time bomb and what should you do about it. Topics discussed include:

* The Underlying Problem
* The Current State of Affairs
* Next Steps
* Networking and Knowledge

It seems like it all started one morning when Wall Street woke up and realized they really didn’t have anything to sell their best customers: China and India. So they sat down and packaged up some new products: Collateralized Loan Obligations, Commercial Backed Mortgage Securities and Residential Backed Mortgage Securities. A great idea but as Richard Bove, a financial strategist with Rochdale Securities, noted: “They had a problem — where to find someplace to generate $2 trillion worth of product.”

The obvious market was real estate but the boom was rolling along with a shrinking population. But not to worry, Wall Street just pushed deeper into the market. They got buyers qualified with the help of the government and a plethora of home-baked mortgages — Interest Only, Negative Amortization and of course all those Subprime Mortgages — all of which grew debt three times faster than income. The lack of control in the sector resulted in excessive lending and often an absence of credit checks that brought about the only possible outcome; a total collapse of the economy. Then we watched as the federal government rushed in and began doing what only it can do: throw obscene amounts of money at the crisis.

Have we turned the corner or do we still have a delayed downturn? What are the concerns for the future and what's on the table? This chapter looks at the two primary views. Topics discussed include:

* Two Different Views
* Concerns That Lie Ahead