Swanepoel's Inner Circle

Swanepoel's Inner Circle: The upside of downturns 

Even in the toughest market, at least four million homes get sold. Strap in for a bumpy ride while keeping yourself informed and looking for opportunities.

December 2, 2022
4 minutes

Key points:

  • The ride down is faster than the path upward, but it is not permanent.
  • Change is scary, but it can be healthy. It opens doors to new opportunities.
  • Innovation, just like a downturn or an upturn, is around every corner.

Editor's note: Stefan Swanepoel has four decades of leadership experience in many facets of real estate, including brokerage, global franchising, association and MLS management. He is a widely respected strategist, sought-after trend analyst, best-selling author and the founder of Real Estate News and T3 Sixty, one of real estate's leading management consultancies.

In real estate, as in life, downturns and upturns are an integral part of the journey. I entered the real estate industry 40 years ago and have seen markets change and crumble. The '70s had the energy crisis, the '80s the savings and loan disaster, the '90s the dotcom bubble, the '00s saw 9/11 and the Great Recession, and most recently a global pandemic turned the world upside down.

I've seen people pity themselves during challenging times and blame someone else or the downturn for their misfortunes. Some may decide this is a terrible industry and feel like running. But when a market is in decline, that does not mean you also must be on a downward path. Strap yourself in and embrace the bumpy ride while constantly looking for gaps in the market.

Remember that even in a bad real estate market, there are still around four million home sales. (That's eight million transaction sides for brokers and agents to participate in.) Life continues and people still want and need a place to live. The data bears this out 100%.

Four million home sales a year is certainly less than the five million in a healthy market or the six million in a strong market. But it's never anywhere near zero. Don't listen to doomsday prognosticators or end-of-times prophets. Houses (and of course condos and the like) still sell, and in large numbers. Yes, homes will take a little longer to sell; financing will be more difficult; prices will certainly be lower. But you already know that. Turn your focus to sound strategies and effective activities, also things you already know.

Gather information and intelligence from credible resources and wisely plan your next series of moves. There are many respected resources, and I hope Real Estate News will become one of your most trusted. You can of course go even deeper with T3 Sixty's data-driven research such as the Swanepoel Trends Report and the annual study and rankings of brokerages (Mega 1000), technology companies (Tech 500) and executives (the SP 200) — all combined into the Real Estate Almanac.

The world is not coming to an end, it is simply evolving. See it as a chess match that you are playing. You need to be knowledgeable and understand what is going on. Which pieces are in play? Who is advancing and who is retreating? Is someone potentially being disruptive? What are they doing and what are your options?

Disruption and innovation are also part of the journey

You don't need to know precisely when each disruption is occurring, nor the exact inflection point in a changing market. This is not a mathematical equation you have to solve. But you must align yourself with the direction of the shift, arm yourself with multiple feasible strategies, anticipate the next shifts, be deliberate with your moves, maintain your focus and follow through with precision.

Century 21 was disruptive when they started franchising in the '70s. RE/MAX became a disruptor in the '80s with the 100% concept (allowing agents to keep all of their commissions while paying a fixed management fee). In the 2000s, Keller Williams caused disruption with the team concept and the profit-sharing model. Kudos to all of them for creating and then seizing the opportunity to grow exponentially.

Innovation, just like a downturn or an upturn, is around every corner. Many companies created in the recent innovation cycle — Redfin, eXp Realty, Realty One, Compass, HomeSmart, United Real Estate, etc. — are growing faster than many of their more traditional competitors because they are the modern-day disruptors and innovators attempting to change the industry.

Some of their business models are distinctly divergent while other models are only slightly different than what already exists. But that's OK, because it's not the degree of difference that determines success, but the determination and excellence with which they execute their plan.

Success doesn't mean that you have be first or be the only. Succeeding during times of change means you must do things better than you have before, and better than your competitors, gain ground on those that are scared and distracted, grow your market share and seize as many opportunities as realistically possible. That is the upside of a downturn.

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