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
      • 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

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