As part of a new ongoing series of posts on our blog, we’re going to apply our brainpower here at Matthew Ferrara & Company to looking at the latest numbers from real estate industry research and helping our readers make sense out of their meaning. Many organizations from NAR to Case-Schiller to research firms and universities worldwide study consumers, agents, brokers and the business of real estate. They release “findings” – lots of numbers – but rarely interpret their meaning. Of course, that’s where we have always been helpful to our clients: leveraging the research facts about the marketplace to make sensible decisions – not gut reactions – to be one step ahead of the consumer.
And forget about the competition – since they’re mostly not really competition, when you look at the numbers. In that spirit, let’s start with some startling numbers that may indicate that NOBODY in this business is really in competition for the online consumer: The sorry state of social networking usage by real estate professionals.
According to the latest numbers from the 2008 National Association of REALTORS Profile of Home Buyers and Sellers (which, by the way, most REALTORS don’t even know exist – so here’s the link to go buy it) 44% of all buyers use social networking every day. If we look at age groups 18-44, which represent the first-time Gen Y buyer through the move-up Gen X seller/buyer, the number rises to 61%. Another 34% of that same group participates in social networking at least a few times a week. Add them up, and here’s a critical consumer fact:
95% of consumers between the ages of 18 and 44 who bought a home last year used social networking sites at least a few times a week, and a majority used them daily.
Now, let’s make some sense out of those numbers. First, it means that nearly everyone who bought a home last year with a REALTOR has made social networking a way of life. We shouldn’t be too surprised. Last August MySpace beat Yahoo for online ad displays in one month – which means more people were viewing pages on a social net than on a search engine. Yet the real estate industry is still talking about SEO and PPC and other search-portal strategies. The consumers on train have already left the station, and they’re not coming back.
Where is the pent-up demand in real estate today? When the market comes back, it won’t be from the 45-and-older group, especially not the Early Baby Boomers aged 60 and older. Why? Because their homes will have returned to 2001-level values, their retirement accounts largely decimated by the recession and their willingness to make another move limited. Certainly, the retirement trend will continue to push Boomers to sell and buy “one more time” but it will be a segment of highly risk-averse, commission-sensitive sales. Boomers are going to demand super-low commissions because they have no equity left to spare in their home segments; and no extra income to cover the costs, because, after all, they are retiring.
The growth segments for this business – and for any brokerage and agents who plan on being in the business beyond the Boomers’ Last Hurrah – is the move-up and first-time consumer market.
These are the new income-earners, whose families are expanding, and whose lifestyle needs are already creating pent-up pressures to make moves as early as possible. Remember that 43% of buyers bought last year because “it was just the right time” and 30% bought homes because of family situation, jobs and large-space needs. Only 3% bought to “downsize” last year, which may bounce up in the next five years, but certainly not apace with the Gen X / Gen Y trends.
And now, the problem: While nearly all of the current (not just future) real estate consumer population uses social networking sites every day, most real estate professionals barely know what social networking is. Not that social nets are new phenomenon: there are hundreds of millions of ordinary people worldwide on MySpace, LinkedIn and Facebook. So it’s not a secret technology, or a fad. And it’s not going away.
According to the 2008 National Association of REALTORS Technology Survey, as of July 2008, daily REALTOR participation in social networking looks like this:
- 10% on Facebook
- 11% on MySpace
- 15% on LinkedIn
There is a little activity on RealTown and Activerain, but these are largely blogging sites, not really social networks in the same sense as FaceBook or LinkedIn. They are also heavily slanted toward agent-to-agent interaction, whereas MySpace and Facebook are more heavily agent-to-consumer-sphere oriented. The broadest measurement in the survey found that 60% of REALTORS did not engage social networking sites or blogs for business (with an additional 7% “not sure” if they did or not).
At the same time, 61% of REALTORS said they were “dissatisfied to very dissatisfied” with their experiences on these social network sites. Whatever that really means, it probably boils down to “I don’t get easy leads or sales” from them.
If we’re wondering why the industry is struggling – and why the downward spiral isn’t entirely the economy’s fault – there’s only one way to make sense of the research: A new REALTOR-Consumer gap has emerged. It’s larger than the chasm the industry crossed when it moved from printed MLS books to online inventory. It affects much more than how homes are marketed, bought and sold. And it makes a mockery of the cliche that “my local market is different.”
When social networking moved online, the primary mechanism by which consumers meet people and create relationships moved with it. Real estate is a sales business. It depends upon meeting people and building relationships. It requires sales people to chase customers, not the other way around. And by the looks of the numbers, it means that the industry’s woes are only just beginning. When consumers have moved to an entirely virtual country club, it should be little wonder why REALTORS aren’t getting any leads from their postcard golf carts.