RE/MAX Reports That Rebound In New Franchise Sales Will Be Early Sign Of Metro Chicago Real Estate Market Resurgance
Chicago, IL (PRWEB) September 9, 2009 -- When will we know the metro Chicago real estate market has hit bottom and is poised for a rebound? Expert views differ, but RE/MAX is confident that when sales of new sales of new real estate franchises in northern Illinois start to accelerate, the housing market will be well on its way to recovery.
RE/MAX Northern Illinois has good reason to consider franchises sales as a key barometer of the housing market because they are responsible for selling real estate franchises for RE/MAX in northern Illinois.
According to Jeff Metz, the senior franchise sales consultant for the RE/MAX Northern Illinois region, real estate franchises usually are purchased by two distinct groups. One consists of experienced real estate agents who want to start their own shop. The other category, called conversions, consists of the owners of established independent real estate offices who want to be part of a larger organization with more tools and resources, as well as greater brand name recognition among consumers.
"In the last two years, we've seen an increase in conversions but a slow down in the sales of franchises to people who want to start new offices. When that latter group returns to the market, a housing recovery is well on its way," he said.
This is, in many ways, an ideal time to start a new real estate office, according to Jim Merrion, Regional Director, RE/MAX Northern Illinois, "but as you might imagine, there is a lot of nervousness out there among real estate professionals, just as there is among many consumers. However, the professionals will be the first to realize that the market is heading back to solid ground, and when that happens, we expect to see franchise sales for new offices accelerate dramatically."
Metz notes that many of the factors making this a good time to open a new real estate office also make it a great time for anyone who is starting a new business.
"Among the biggest challenges for a new business is controlling expenses while you get established," he said, "but right now those upfront costs are lower than they've been for years. There is a not only a lot of reasonably priced office space available for lease, but it is a buyer's market for lightly used office equipment, from chairs and desks to computers, copiers and phone systems, he pointed out.
Another reason this is a good time for new businesses to open their doors is the ability to hire quality staff.
Merrion notes that many talented people are unemployed and looking for new opportunities. Second, even successful professionals are probably re-examining their situations now and can be recruited by a new organization.
"We're certainly seeing that in real estate, where many agents are looking at how the business is changing and reconsidering their affiliations. There is a recognition that the industry is becoming much more dependent on technology, especially the Internet, and that agents who aren't affiliated with a brand that has mastered the key technology, as RE/MAX has, will find business harder to come by," Merrion said. "Among successful agents, we see a flight to quality as more of them affiliate with the dominant brands."
For those opening a real estate office, another factor to consider is that changes in the industry have reduced the amount of office space needed and cut overhead.
"With today's communication tools, real estate agents typically visit the office with which they are affiliated only occasionally and do most of their work from home, the front seat of their car or the back seat of a taxi," noted Metz.
"Offices are greener, leaner and more high tech. This trend has encouraged a number of our franchisees who had multiple offices to consolidate, so in some instances, five offices become three or two offices are merged into one, yet the remaining office space often has the capability of serving a similar number of agents," he said.
The lower overhead is really a win-win situation because with fewer resources devoted to office space, more is available for marketing, training and other things that directly benefit agents and consumers.
Merrion says he is already beginning to see the start of a bounce back in real estate franchise sales that he expects to begin in earnest within the next 12 months.
"We're getting more inquiries about franchise opportunities than we have for the last year or more," he reports. "Even though the housing market is still a bit wobbly, people in our industry are realizing that more normal conditions will emerge before long."
Metz points to three reasons for that upbeat view:
- The current recession, severe as it may be right now, is likely to give way to sustainable economic growth in late 2009 or early 2010, and housing prices, which are still declining in most markets, should level off and start to rebound next year.
- The real estate industry has contracted, with many fewer offices and agents today than three years ago. That means when the market recovers there will be fewer competitors, so that earnings per office as well as per agent should look quite healthy.
- Beyond the current economic recovery, future housing demand in the U.S. will be buoyed by the continuing influx of new immigrants and the emergence of the so-called "Echo Boom" generation (children of the Baby Boomers), into their prime home buying years.
"There are about 80 million Echo Boomers in our country born between 1980 and 1995, so the oldest of them will soon turn 30. They will be driving the housing market for many years to come, and we should begin to feel their impact in a big way in two to three years," Metz said.
"We expect to see a much more robust housing market again within the next 18 to 36 months, and franchise sales should accelerate even sooner. That may sound overly optimistic to some people, but we think it's a fairly conservative forecast," he said.