Realtors In Trouble Over The Next Decade?
Over the past couple weeks, I have been writing about the impact that technology is going to have on different industries. We are at a point where technological progress is accelerating. This means that a lot of careers are going to be upended as industries change or disappear altogether.
Real Estate is one of the biggest industries out there. Globally, it is in excess of $200 trillion dollars. The buying and selling of real estate is lucrative for many types of jobs involved in the process. On profession, the real estate broker/agent, see a nice sum of the transaction costs.
But will this always be the way?
With technology moving into this arena, what will the impact be? One thing we know is that, historically, technology serves to lower costs. Real estate is costly to move, in large part, due to the lack of liquidity. This is not like buying a stock where one can go online and simply place an order.
That could be changing though.
Tokenization will radically alter the real estate market if it becomes widespread. This has the potential to do to real estate what the Internet and online trading did for the stock market. When is the last time you ran across a stock broker? The answer is likely decades ago. The profession has about died with many either morphing into money management or leaving it altogether.
Even without the shift towards tokenization, there are already a number of technological advancements that are seeking to alter how real estate is handled. In my opinion, if a number of these take off, the profession of realtor could go the way of the stock broker.
Here is a list of 21 AL based technologies that are already on the market. I would expect more to come.
https://builtin.com/artificial-intelligence/ai-real-estate
The applications basically deal with two factors. Part of the difficulty with real estate is to assign a value to properties. This is not an exact science. Companies are starting to use AI to create data points where they can more accurately, and easily, assess value. This will only help to automate the process.
At the same time, these technologies are looking to make the matching of buyer and sell easier. Again, using the data points that are provided by a digital footprint, many of these companies are looking to automate this process. Just like YouTube offers recommended videos, the applications could start offering up "recommended properties" based upon data received from the individual. This data is, of course, both what is provided and by analyzing what people do on the different websites.
For this reason, with Zillow having the most traffic, it is no wonder that it is at the head of the list. It is probably the best known of all the companies listed with the ability to radically alter things on a national basis.
The challenge that I see is we are looking at this situation through 2019 technology. What happens 3 or 4 years from now when these systems are greatly improved? How much more accurate will their assessments be? Will this make for an industry that transitions?
On top of all this is the second biggest factor I usually point to when assessing what will take place over the next decade. Right behind technology is demographics. We have an aging population that is accustomed to doing things a certain way. The same is not true for the Millennials.
And here is where the other major issues enters.
As people get old, they do not going on spending sprees. In fact, they tend to tighten things up. Over the next decade, it is the Millennials who will be doing the home buying as opposed to the Baby Boomers. Basically, the later is accustomed to using realtors while the later has no problem with technological applications.
Those companies that are able to set up platforms that cater to this group of buyers are going to do well. Ultimately, this industry is going to change whether those involved in it or not are ready. There is simply too much money not to tap into it.
When one adds up all the real estate commissions that are paid, we are talking hundreds of billions of dollars globally. This is large enough for companies to start chipping away at. It is not uncommon for sellers to have to pay tens of thousands of dollars in commissions at closing.
This is money they will want back. I fully expect to see the realtor basically gone by the end of the next decade. Automation and digitization is going to make buying a home much easier. I have a feeling it will be as easy as acquiring stock. One will simply log on and buy what is desired.
We will see how this all unfolds but I do not believe realtors should be sitting there thinking that they are not vulnerable. The money is too great for them to not be.
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