Inman Connect Las Vegas 2022

After 8 years of wanting to go, this year I finally got to go to an Inman Connect conference. Earlier this month, I joined 3,000 other real estate professionals at the Aria in Las Vegas to talk about real estate. It was awesome! This is my summary from 36 pages of notes.

Major Themes:

• Customer service: this is a relationship business
• Focus moves from growth to profitability
• Increase efficiencies, streamline systems
• Reduce expenses
• The ultimate goal is to be efficient and transparent.

Profitability:

Sustained unprofitability was accepted 2 years ago and now it is a liability. Cash is still king. There are real estate tech companies that are hemorrhaging huge amounts of money, some have a longer runway than others. Opendoor can weather quarterly losses (Q3 will be brutal) and the FTC $62M fine for now, with roughly $2.5B in cash, it has months of operating costs covered.

A profitable business allows for continued growth during tougher markets, not just survival.

Big tech and start-ups are looking to continue growing and many of these companies are looking for a portion of Realtor commissions to fund that growth. Opendoor does so by lowering co-broke offered. Zillow and Realtor.com do so with leads, Compass plans to adjust up its splits to become more profitable by “improving economics with agents.”

Profitability is a big struggle for many brokers. How do they attract talent by offering great tools and resources along with competitive splits? The answer, is they don’t. It isn’t possible. The race to the bottom is over and there are no winners.

Brokerages are able to increase profitability by increasing headcount, and productive headcount. For example, not only does eXp’s model has lower overhead, it has grown substantially in agent headcount.

Big tech and the overall market have stopped trying to eliminate the Realtor and have realized that technology doesn’t sell houses, agents sell houses. The technology enables them to scale. With the understanding that agents are central to the transaction, businesses are coming after commissions, which in 2021 were $20B higher than in 2019 due to more sales and increased sales price.

What happens to these models if the DOJ’s suit against Realtor commissions finds on the side of the plaintiffs? What happens if buy-side commission is reduced or the requirement eliminated?

Zillow’s recent partnership with Opendoor brings seller leads back into Zillow’s offerings, a strategic plan given today’s uncertainty.

Real Estate Volatility:

Real estate is less stable than it used to be. Redfin’s CEO, Glenn Kelman explained why changes are speeding up in real estate, “I just think as Wall Street owns more of Main Street, the housing market will look more like the stock market, which is extremely volatile.” He went on to explain that investors are more likely to make drastic price drops to move inventory, which complicates selling for regular homeowners competing with institutions – which represent one-third of the available market.

The Consumer:

Derek Thompson, a journalist with the Atlantic, explained what people want. He said, “we have a deep bias for the familiar.” Meaning that while people think they want novelty and newness, they also want at least a hint of something similar to what they already know and love. He said that we stop listening to new music when we are 33 years old because he like what we like. And often what we like is based on what we see regularly. The more often we see it, the more we like it. People want surprising yet familiar. This is why anything too novel is rejected.

Industry Changes:

Expect a significant increase in mergers and acquisitions across the industry. Expect outside businesses to enter through acquisitions. Expect the brokerage model to shift and to see an increase in splits. Gross broker revenue has declined from 22% to 11% today.

Final Thoughts:

The real estate industry is fiercely competitive and the best of the best shared their “secrets.” There were power buyers, iBuyers, and investors. There were also attorneys and venture capitalists. There were machines that “hand-write” notes. There were CRM and lead generation companies. Photography. Virtual assistants and high-end print marketing. There were mortgage and title companies and a lot of top-producing Realtors. It was an exciting and exhausting 3 days. I am thrilled I got to go.

A special Thank You to Dane Briggs and Clear Title for sending me to represent the company.