Gary Keller Leads, Speaks Out on Hard Times
Thinning the Real Estate Herd
Gary Keller leads Keller Williams, and is both controversial and respected – he holds a unique position in our industry that’s hard to describe.
The company he and Joe Williams founded in 1983 has grown to become hugely successful over the last 20 years when measured by recruiting. The privately held company currently claims 160,000 real estate agents.
Keller and the other large incumbents that focused on recruiting including ReMax, Coldwell Banker, C21 have big changes in front of them as recessions have a way of thinning the herd.
Inman published his letter describing four key points to surviving the downturn. Assuming not everyone takes his advice, what kind of impact will the downturn have on the industry’s membership numbers? How many agents are there and how many will be affected in a bear market downturn?
National Association of Realtor membership report is a good barometer we can use to measure the total number of agents. Prior to the Great Recession, NAR membership peaked at just under 1.4 Million nationwide in 2006. Membership would drop roughly 400k members to just under 1 million in 2012. That’s a 28.5% drop.
Today the most recent data is from the 2019 membership report, which boasts an eerily similar pre-recession 1.4 Million NAR members.
Additionally, “Total active agent population declined in California 35% from 2007 to 2014. In other words, 94,000 individuals dropped out of the working agent pool, unable or unwilling to survive in the harsher housing market environment brought on by the recession and slow-moving recovery.” (https://journal.firsttuesday.us/how-real-estate-agents-can-survive-the-next-recession/65702/)
Similarly, Goldman Sachs looked at data from back to 1835 to estimate the average stock market drops of all major Bear Markets in the US. According to their research, a Bear Market starts at a 15% drop off the high, and we ought to see a 29% drop in the stock market.
29% seems to be some sort of unlucky recession number.
Gary has built his business on recruitment and retaining of agents. He’s likely looking at the potential of losing up to 29% of his workforce, and their corresponding transactions.
However, if this is similar to the great recession, It’s very likely that the agents that drop are not top producers, they are the agents that are subpar performers. Many who simply hang their license “in case” a family member or friend needs an agent. They frequently decide the cost of having that license is not worth the potential and depart. There are also the agents that typically lack systems, support and processes and have not been very successful – they typically depart quickly when times get tough also.
This change was obvious to me in the great recession, and I’d expect to see similar numbers and stories this time if the trajectory holds.
The Silver Lining
Thinning may actually be good for the rest of us. From a consumer quality viewpoint, removing bad apples (those agents that don’t have enough experience and are not “good” yet) improves the quality of the average real estate transaction. Better quality improves trust and greater trust makes for more smooth transactions and less commission friction.
Again – this is not a KW isolated problem – this is true across the US real estate ecosystem. But Gary came out with four lessons learned to help his agents – and I like his direction and wanted to comment on them with you.
Leads to The Future
“Your future hasn’t been written yet. No one’s has. Your future is what ever you make it. So make it a good one” -Doc Brown.
To summarize Gary Keller’s thoughts.
Wake up. This is not last year or last month any more. You have to change to win. Save money wherever you can, and definitely invest in leads.
Investing in lead gen helped many top performers in real estate and mortgage weather the storm of prior economic downturns, bear markets and recessions.
Focusing on lead generation is solid advice from a leader and industry veteran with 4 recessions in his pocket.
Ask yourself are you in? For those that want to continue as part of the industry during turbulent times you now have a pretty clean four bullet roadmap. Customize it and make it your own – add bullet points or change it up. But definitely develop a plan to generate leads based on experience and advice, and don’t operate in a vacuum.
I want the best for our industry, and I know that thinning the herd will help long term. Will you be a part of our herd going forward? If so – will you be investing in leads?
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(Disclaimer: We do not have a professional relationship with Gary Keller nor Keller Williams.)