They reveal their expectations for the economy
Real estate brokerage leaders are rarely a pessimistic group, yet more than half believe the economy will deteriorate in 2023, according to a new report.
The newly released Delta Real Estate Leadership Survey heard from more than 100 brokerage leaders of firms collectively responsible for more than 60% of all transactions last year, according to the study.
The survey showed that more than 61% believe the global economy and the US economy (51%) will deteriorate in 2023.
Mortgage Professional America reached out to Michael Minard, CEO and owner of Delta Media Group, for more insight.
Brokers’ responses not all that surprising
”On one hand it did and on another it did not,” he said in being asked if the results surprised him. “I was somewhat surprised because real estate firms are still doing transactions and the real estate industry is still experiencing historically low inventory levels. The past two years represent the overall lowest housing inventory in history and while December 2022 inventory levels were higher than 2021, they are still very low. Where the pessimism did not surprise me is that business leaders, who are typically optimistic people, are experiencing what I like to call "odd times” that don’t make sense to them.”
He expounded via the COVID-19 line of demarcation: “Prior to 2020 (COVID-19) most business leaders ran their businesses with leading indicators that they used to track where their business would be in the next twelve to twenty-four months,” he explained. “However, for the past two years, since early 2020, those leading indicators have become almost useless. Every business leader that I know, regardless of industry, have been experiencing good times and growth in spite of leading indicators that should cause concern. I like to say that today I am pessimistically optimistic about business. Revenue is up, profits are up, but all leading indicators are flashing warning signs (PPI, Inflation, Savings Rates, GDP, etc.).”
Pessimism about mortgage industry understood
Minard said he understood the prevailing pessimism from respondents: “The pessimism is being driven from future uncertainty and the reality that many of the sales professionals in the business today have never experienced such a market,” he said. “It is also driven from the fact that most businesses in the past two years have grown top-line revenue but the reality is that the bottom-line revenue did not grow at the same rate.”
Pessimism is clear cut
The survey also found that most (72%) real estate leaders believe their state economy will stay the same or improve over the next 12 months. An even larger majority (75%) believe their local economy will remain the same or improve.
“It is and it is not contradictory,” Minard said of the differing view on the local and national economies. “I think it is best explained by what I have been hearing from many business leaders for the past year. I am continually hearing how business leaders are concerned about various data points related to the economy, employment, and money and how all the data they are seeing should be bad for business but, despite those things, their businesses are still growing and still making more money. Historically, for example, when inflation was so high businesses would be slowing down, but they haven’t, or they haven’t at drastic rates of decline. I think this comes down to one’s person purview versus the overall domestic and global data that should be concerning - but those concerns aren’t playing out in declining business and profits.”
Few remain bullish on economy
The independent study found only 4% of real estate brokerage leaders believe the global economy will improve in 2023. However, many leaders are more bullish on their local economies, as 28% of real estate brokerage leaders believe their local economy will improve, and 25% believe their state economy will improve over the next 12 months.
“It’s important to note not a single real estate brokerage leader of the more than 100 professionals surveyed believes the global, US, state, or local economy will ‘improve significantly’ in 2023,” Minard added.
The survey also revealed real estate brokerage leaders were split on what they believe will happen to housing demand in their local markets in 2023. About one-third say it will improve, one-third say it will stay the same, and one-third believe it will deteriorate. Only 3% of those surveyed believe their local housing market will decline significantly in 2023.
Moreover, the survey gauged the confidence level of real estate brokerage leaders today compared to 12 months ago. The survey shows two in three leaders are less confident than a year ago in the global and US economies. In addition, about one in three are less optimistic about their state and local economies. But, overall, most real estate leaders (59%) have unchanged confidence in their state and local economies.
More bullish about their own business in 2023
More than half (53%) of real estate brokerage leaders see their profitability decreasing this year, and their total transactions dropping from 2022.
“What is surprising is despite the fact many real estate brokerage leaders believe their profitability and transaction count will decline in 2023, 56% believe their brokerage will increase their local market share,” said Minard said, adding, “They clearly see opportunity in a chaotic market.”
