­­­­­Across much of the country a new real estate market has either arrived or will be arriving over the next few months.  One can feel its energies and potentials. It is renewing the passions and regenerating the energies of brokers and real estate professionals nationwide. Communities that are already experiencing it have declared it to be glorious and exciting, the kind of thing that real estate dreams are made of. Others are eagerly awaiting its arrival by drawing up daring schemes and crafty proposals that will guarantee that they will score big with this new opportunity.

The new environment is being referred to as the “hyper-market.” This article represents an attempt to create a “hyper-market” warning label, to beseech real estate professionals and industry leaders to take a moment to understand the unique characteristics of this new market, and to work to ensure that brokers and agents alike adopt a long-term approach to both the opportunities and threats it will be presenting.

Across the country sales are dramatically increasing while inventories remain extremely low and prices are beginning to precipitously increase. Much of this activity is being driven by pent up consumer demand, the reticence of homeowners to enter the market, artificially low mortgage rates (even after record increases over the past month), and residually low prices.

Accompanying these symptoms, and appearing amazingly early on in this new market, are observations that suggest real estate professionals at both the brokerage and agent levels may be demonstrating behaviors that are inconsistent with their own long-term interests. There is a growing sense that both brokers and agents are so focused on making up for the lost time and revenues brought on by the crisis events of 2005 through 2011 that they are willing to risk destabilizing critical institutions and relationships to meet their objectives. “Off MLS” marketing activities are rapidly increasing and in some markets are reaching levels that may well threaten the stability of the Multiple Listing Services (MLS).  At least one major market is now experiencing brokerage commercials that promote the availability of properties not yet on the market. There is a growing sense that both brokers and agents are so focused on making up for the lost time created by the events of 2005 through 2011 that they are willing to risk destabilizing critical institutions and relationships to meet their objectives.

The MLS related circumstances that emerged during the NAR mid year meetings offer further evidence that potentially dangerous trends are afoot.

Other markets are reporting increased levels of consumer related stress and anxiety brought about by a number of factors. Apparently many real estate professionals are still in the dark regarding the contemporary real estate consumer and the simple fact that this consumer is not going to accept the tricks or the manipulative behaviors of the past. Even beyond the “Off MLS” situation another classic example can be found with real and/or artificial multiple offer situations that are being routinely converted into auction events with resulting sales prices that are far above sustainable market levels.

In many markets brokerage and agent competiveness is being raised to new levels that include direct and often unproductive behaviors between agents and agents, brokers and brokers, agents and brokers, brokers and organized real estate and, most dangerous of all, agents and consumers.

This is not to suggest that enlightened and effective competiveness is not a quality to be encouraged within this or any industry, quite the contrary. However, what is emerging is not the work of qualified marketing strategists or skilled tacticians following an enlightened business plan or blueprint. What is emerging to play a dominant role are the actions of those who fail to grasp the big picture of the housing industry, the long-term perspective of the consumer or the current political and regulatory environment.

There is nothing more wonderful than a vibrant real estate market. What was demonstrated on many occasions between 1992 and  2005 was that everyone involved can receive real benefit from markets that are consistent, sustainable, accountable and internally regulated by respect and common sense. A new and successful market would, if managed correctly, provide an economic space to make up for lost time and revenues, a time to reposition one’s self or firm in the marketplace, and opportunities to create an environment that benefits professionals and consumers alike.

However, the current situation doesn’t appear to be headed in such a noble direction.  For many these observations paint a picture of a market that is artificial, unsustainable and out of control.  Unless actions are taken the growing situation could well lead to any number of ill effects.  Consider the following possibilities:

  • Destruction of long-standing business relationships that represent the “health” of the market.
  • The destruction of long standing institutions that play key “under the water line” roles.
  • The legal ramifications of a growing propensity to ignore rules and regulations as being irrelevant to personal production and financial objectives.
  • The further deterioration of the existing professional value proposition.
  • Driving increased consumer support for the already successful and empowered Internet based and alternative brokerage.
  • Further damage to homeownership, the flagship experience of the American family that could easily become even more illusive to a whole generation of Americans

Consider that the ultimate disaster that might be ignited from these circumstances could be a round of unfettered regulation from various levels of government. While historians will spend the next twenty-five years articulating the lessons of the past five years the one thing that is clear is that they will universally come to the conclusion that an out of control real estate market can and did mortally damage the national economy.

Any suggestion that this reality is not fresh in the minds of the present administration, the regulatory mind set or the consumer memory suggests that someone is not following the current adventures of the Consumer Financial Protection Bureau. Is it reasonable to presume that the powers to be are going to allow the actions of a very few interfere with an economic recovery that has been so long in coming?

As is often the case the ultimate solutions here will be gleaned from creative, innovative and focused leadership at all levels of the industry. The basic question isn’t whether the market is going to be regulated but rather who will be responsible for the task. Will it be internal or external?There is every reason to believe that unless influenced by some manner of community respect and common sense the hyper-market could and will deteriorate into a “wild west” environment as the various industry constituencies relentlessly drive their conflicting and confrontational business and financial agendas forward.

Unfortunately these circumstances could not have occurred at a worse time given the fact that the very institutions established by the industry to resolve such situations have, over the past several years, abdicated their assigned role in favor of participation in the business and financial aspects of the industry. There are a number of respected industry voices that are suggesting that this transition has left the industry without the moral or ethical leadership necessary to affect a non-governmental resolution of this situation.

It isn’t clear whether or not we can or wish to meet this challenge but if we are going to try we better get started soon.