Gary Keller’s 2016 Vision Speech Family Reunion

Gary Keller's 2016 Vision Speech Family Reunion

So How Is the Market Doing?

Gary Keller’s 2016 Vision Speech delivered at Family Reunion where Keller & Papasan discussed the current status of the market & examined the future of the industry.

Source: So How Is the Market Doing?

Here are the Ah Ha! Notes from Ken Wimberly, CCIM taken during Gary Keller’s 2016 Vision Speech

  • 2015 was the 5th best year in Home Sales in history

    • 3 of the top 5 best years have happened in the past 5 years
  • Median home price increased from $209,000 to $222,400

    • Prices are at the highest peak in history – higher than 2006
    • “If that doesn’t make you nervous, you SHOULD be nervous.”
    • We are in the 2nd highest tranche of home price appreciation since tracking started in 1989
  • Mortgage rates continue to be the savior of home price affordability

    • 85% is way lower than where the Federal Government would like rates to be
    • If interest rates increase by 1%, the monthly cost of ownership rises by approximately 10%
  • Government WANTS GDP growth to be 3% to 4% annually; what we are actually getting is between 2% and 3% annually

    • In today’s global economy, what is happening around the world directly affects your local economy
    • RECESSION – defined as two back to back quarters of negative GDP growth
    • National GDP matters, but what really matters is what is happening in YOUR LOCAL ECONOMY
  • Unemployment is at 5.3% – very healthy rate

    • 5% unemployment helps wage growth
  • Inflation – target rate is 2%

    • We are at 2% without energy and food
    • With energy and food, we are only at 0.4%
  • In 2015, there were 9 available sides per agent in the US

    • Historically, the average is 10.3 sides per agent
    • Need to drop 100,000 agents to get back to the historical average
  • Federal Reserve Policy

    • The Fed would LIKE to raise rates in 2016; however, with the poor GDP growth, they may not be able to raise rates this year
  • New Home Construction

    • Historical average is over 1 million homes per year
    • 2015 had just 715k new homes
    • 30% off the historical averages; growing, but still quite a bit off
  • Student Loan Debt

    • Between 2003 and 2015, the total amount of student loan debt quintupled, going from $241B to $1.2T. A 398% increase!!!
    • This has forced many new entrants to the job market to put off being a first time homebuyer, in favor of renting
  • The World’s Wealthy

    • US HNWI has grown 63% since 2005
    • 30% of all millionaires in the world live in America (yet we have only 4% of the population)
  • Allocation of Financial Investments – Globally

    • 18% in real estate
      • Real estate benefit is DIVIDENDS/CASH FLOW
      • It never goes to ZERO
      • Can sell off all or part of the property to realize appreciated value/equity
    • 26% in CASH
    • 17% fixed income
    • 27% stock market
    • 13% alternative investments
  • Commercial Real Estate

    • Job Growth
      • Added 2.6M jobs, contributing to lower unemployment
      • Businesses then need more space; remodeling; new furniture
    • Vacancy Rates
      • MF – 4%
      • Retail – 10%
      • Industrial – 10%
      • Office – 16.4%
    • Loan Delinquency Rates can be find at GTRWallet.com
      • Historical average is 4.01% (since 1991)
      • Today is at 1.14%
    • Commercial Property Price Index
      • Up 110% since 2001
      • Dipped form 86% to 13% from 2008 to 2010
      • THOUGHT: KBB to look at market data every month together (CoStar data; REIS reports; Other)
  • CFPB Warns Against MSA’s

    • Actions that have resulted in punishment include:
      • Feels based on referral business
      • Not providing all the services of the MSA while still receiving full payment
  • Technology Trends

    • Chasing technology for the sake of new technology is NOT the way to go; being on the “leading edge” could mean you are the first person to fall off the edge
    • In the past 24 months, $2.6B has gone into disruptive technology for RE
      • 58.3% of it has been in search technology
  • The Sharing Economy

    • The number of 16-19 year olds getting their driving license has decreased significantly
    • Median Net Worth
      • Renter: $5,400
      • Homeowner: $195,400
        • A home is basically a “forced savings” that is significantly increasing one’s net worth
  • Real Estate Online Advertising (Search Portals – Zillow, Trulia, Realtor.com, etc.)

    • 2007
      • $2.6B online ad spending
      • $3.6B online lead revenue (38.5% ROI)
    • 2015
      • $8.9B online ad spending
      • $6.1B online lead revenue (-32% ROI)
    • Zillow has 120M unique visitors; yet there were only 5.1M homes sold last year
      • THE MATH DOESN’T WORK
    • UpStream model
      • Single entry portal for data; feeds to
        • MLS
        • Broker Public Portal
        • Zillow
        • Realtor.com
        • Homes.com
        • Trulia
        • KWLS
        • 300+ others
      • Then UPSTREAM owns the data and the other portals cannot sell/manipulate the data
        • This puts the BROKER in control; which means in the KW Model, it puts the Agent in control
  • Commission Rates for Agents

    • The agents who make the MOST in commission do 2 things
      • Show up ready to talk about commissions
      • Have a flexible commission plan / menu of choices
      • People do NOT tend to choose the cheapest plan
    • Limited service, discount brokers
      • Their market share is just 1.1%, an ALL TIME LOW
    • Average Commission – Nationwide
      • Sellers: 2.6%
      • Buyers: 2.7%

PDF Download of Gary Keller’s 2016 Vision Speech Family Reunion Slide Deck