$10/Gallon Gas Good for Real Estate Industry

As I watch the price of gas at the pump continue to climb – yesterday I paid $4.19 per gallon for premium here in Loudoun County, Virginia – I secretly pray that it continues to go up. I know this might sound crazy but if you think about the implications of extremely expensive gas on the real estate industry, it is actually not a bad thing at all. In fact, many of the problems the industry either can’t or won’t correct would be solved by a gas crisis here in the United States.

Thin The Herd – $10/gallon gas would force a lot of the agents that are just getting by or part time agents that have a license but sell very little real estate to not renew their license. We have already seen the effects of real estate price corrections on the ranks of licensed agents and continued economic pressure would continue to “thin the herd”. And with dues a major source of revenue the associations would never reduce their ranks even if it means a better membership and an improved industry image.

Improve the Membership – Ineffective and lazy agents would leave the industry if gas was $10/gallon. The ineffective agents would have to because it would no longer make financial sense to drive clients around to houses for 8 hours a day without the hope of a sale. The lack of ability to properly prequalify, preview and close deals would cost them too much money and they would be forced out of the business. The lazy agents would refuse to drive the car and preview homes for their buyers in an effort to save money. This would eventually backfire as their lack of local industry knowledge would be realized by savvy buyers and they would be fired/abondoned by their clients.

Reward Technology Savvy Agents – $10/gallon gas would make technology savvy agents more effective, more productive and more relevant. As sellers realize the importance of high quality pictures and dissemination of their listing throughout the online world of real estate, they will turn to agents who are already doing this for their clients. As buyers stay home and preview and house hunt in an effort to save precious gasoline, they will overlook listings with poor online exposure. They will demand more information about a home online and eliminate homes from their search that have little or no information. We are already seeing this happen at $4/gallon but $10/gallon would really deepen the chasm between technology agents and non-tech agents.

Agents Forced to Think Local – Another positive result of $10/gallon gas would be a return to agents focusing on their local area instead of going wherever they can get a listing or wherever a buyer wants Priusto buy. Agents taking listings two and three counties away will become a thing of the past when the agents realize all their profits will go right out the exhaust pipe of their cars. Agents will instead form referral networks in neighboring counties and jurisdictions outside of their area of expertise. This will also eliminate problems caused by listing agents unfamiliar with areas mispricing homes and creating badwill.

If there was a truly revolutionary broker in the real estate business, they would be anticipating the continued rise in gas prices and would create a brokerage that required their agents to use technology to its fullest extent, use only recycled products such as signs and paper and require all their agents to drive hybrid or electric cars. But are there any truly revolutionary brokers?

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24 Responses to $10/Gallon Gas Good for Real Estate Industry

  1. Now, if only we could make Real Estate fun… :)

    I fully support making real estate markets more local, but don’t you think that the high gas prices will just make all the less-than-career-minded-agents all “listing agents?” I mean, really it’s not difficult to find a listing currently.

    Also, for point of clarification, I assume when you say tech savvy agents – you mean uber-tech savvy; not the “Hey, I’m savvy because I have Top Producer and E-mail agents?”

    I struggle with this a bit, because there is still a lot of wisdom in those not-so-tech savvy Realtors who have survived for 20 years. Sure, you and I have book smarts, but there are things to be said for an agent who has survived because of exceptional customer service for 20 years or so.

    Those who have made a career out of Rea Estate, have not often been afforded the opportunity to create or sharpen computer skills. It’s only been of late that the industry has started to create education programs.

  2. Julie Emery says:

    Matthew’s got a good point. And, let’s face it, up until the last few years the industry was a pretty frustrating place for anyone who was tech savvy. When I came in and saw the MLS system in use at the time I thought I’d gone into a time warp and gone back in time ten years!

    I’m also not seeing the thinning of the herd much in our association. Our numbers have barely budged through all this. I’m shocked. I’m waiting for the blog explaining this one!

    All that being said, the rising price of gas will do good and bad things in all our lives. Pain forces change and that’s a good thing. The trick is surviving the pain in order to benefit from the lesson.

    I’m not yet seeing a lot of revolutionary brokers. But I agree that there is likely to be creativity coming out of all this. Different business models are being invented. We just don’t know yet who the winners will be.

  3. Tony Arko says:

    Matt, the focus of the post was at the bottom 10% of performers and all the part-timers. The top 10% will always do well because they either have a tremendous referral database that they have developed over 20 years or they are at the leading edge or marketing and sales techniques and spend time and resources on growing and maintaining their business. It is the bottom 10% that need to be eliminated. And any influence that makes them give up their licenses, be it a recession, increased dues, increased educational requirements or a higher cost of doing business is good for our industry.

  4. Jim Duncan says:

    And that’s why I love Tony.

    Rising prices are going to change everything, no doubt.

  5. Dwayne Gardner says:

    Matt has a valid opinion but I’m not in 100% agreement with him. Although rising gas prices may offer temporary relief for the tech savvy agent it will drive up the prices in other goods and services as well. This will make the consumer more reluctant when purchasing a new home which will reduce the numbers of buyers that much more. In short having allot of listings does you no good if you have no buyers to purchase them.

  6. Though I am a fan of less part time and savy agents in the industry it is short sighted to say that this is good for the market. Good for hard working agents trying to seperate themselves, yes. But that is all.

    What good will it be for less agents in the industry if there are also less buyers in the market. We have already began to see the effects of inflation on the market. Keep in mind that higher gas prices inludes higher food prices, travel expenses, business expenses, less people moving to the area, ect…

    http://www.TheRealEstateBakery.com

  7. So True!
    I applaud you for bringing this subject up. Sure $10/gallon gas would be tough for everyone, however when I see agents trying to sell homes 4 or 5 counties away I can see your point. Agents will need to work locally and smarter!

  8. I know that one bad apple can give us all a bad name – and I am with you on wanting those agents to move on to other careers. But, let’s not encourage $10/gal gas to do that. Even saying that in jest implies that you don’t understand how the gas prices are truly hurting the families of those we love.

  9. Pat Kline says:

    I’m an agent with 20yrs experience, too. I don’t mind driving MY buyers around (within reason), but I do mind when a buyers’ agent instructs his/her clients to call the listing agent to show them the listing. My gas isn’t any cheaper than theirs but they seem to be “unavailable” a lot. What do the rest of you think?

  10. Jim Duncan says:

    Vicki –

    We’ll get used to higher gas prices – relative to the world, they’re still fairly low. We (consumers) will shop more locally, will change our habit, buy closer to work …. We (Realtors) will do the same, and the economy will sort things out, but the short term will (is) painful and we are all adjusting.

    Higher gas prices will force innovation in all segments of our economy – from alternative energy sources to “alternative” methods of transportation – biking/walking, and on an on.

    But – the higher gas prices will be but one part of this shift that will likely (hopefully) move us to a more efficient herd of Realtors.

  11. Jim Duncan says:

    @Jonathan –

    Less agents and less buyers = equilibrium, and that’s fine. People are still going to buy, sell, live – but perhaps at a less rate than we’ve become accustomed to in the past seven years – and that’s fine too.

    @Pat – I’d call that Buyer’s Agent and have a (professional) word or two.

  12. Sharon Bucholz says:

    Praying for $10/gal gas says that you lack understanding of the adverse and devastatingly wide impact such an increase would have on our economy. The price of oil and rising transportation costs causes the price to rise on every product we buy. It could cost some lower wage earners that have far commutes to not earn enough to survive. Hardly a desireable or reasonable trade-off for weeding out some unproductive agents.

  13. So I guess agents could just add a taxi-flag to their vehicles! lol

  14. Darrell Williams says:

    Driving 40 milse round trip 5 days per week is 200 miles weekly or 800 miles per month. At 20 miles per gallon is 40 gallons per month at $10.00 is $400.00.

    If the family needs 2 cars to go to work that would be $800.00 per month. That is a house payment.

    I would be amazed at such stupidity until I compare what Americans have sent to Washington. I am more afraid of a large segment of Americans than terrorists.

    You are astounding!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    darrell Williams

    4

  15. Matt Wilkins says:

    I completely with you Tony. I am a tech guy at heart but only use systems where there is a cost and/or time benefit for me and/or my clients. Most of my client base are IT, Government, or other industries where technology and instant communications are part of job. I connect very well with these groups as they can communicate with me as they do in their everyday lives.

    Also, one thing not mentioned about going far distnace for deals is that not only is it using gas but it is also using time. Although I have a BlackBerry driving time is still not always the most productive part of the day.

  16. I disagree with this for this reason: what about the new agents such as myself? We don’t yet have enough listings to be able to pay for a crazy $10 per gas. And what would happen to the REALTORS of the future? I don’t see how this could be a long term solution. Think of more than yourself please.

    Miguel

  17. Fil Quesenberry says:

    All the comments make valid points when looking at them individually. Overall, down periods for whatever reasons tend to balance all industries and that is not a bad thing in itself. And the current escalating costs of the basic needs of people will play a major role. In our industry, I agree with the “weeding out” of agents to “jumped on the bandwagon” for the “low hanging fruit and easy money.” However, I have an issue with the “bottom 10%” as you call it. Some of those part time agents are such out of necessity. For example with health problems but still need some income or on social security but still need some income to “make ends meet.” Why should they not be able to use their accumulated experience to do so? On the other hand I definitely look forward to the weeding out of the “uninformed”, the “real estate uneducated” and the “unethical”. Our industry could use some purifying for sure. Those serious about assisting people find the housing they need and work hard at it deserve some of the “cream” to go along with the inevitable “sour” business that comes along. As a famous writer once said “The pendulum swings again.”

  18. Caryl Dawson says:

    Hey,aren’t we being a bit short or narror sited here? $10/gallon means higher prices for food, buyers wanting to stay close to their work and not buying in outer areas, less money available for saving for down payments, higher utility costs.

    It may thin the herd but who will the remaining herd have to work with?

    “Take public transportation” has been uttered by some dummie. How do you do that when it is not available?

    After almost 40 years in the business I have kept up to date in technology but also learned that one has to look at the entire picture and all of the consequences of an action.

    I still love what I do but I don’t know if I will have that many buyers to help in the future. Our nation is not completely urban (appears to be happening quite fast though) so we do have to consider those folks who have no choice in long commutes. Where will they move to and who will buy their homes?

    $10/gallon – the reverberations will be huge!

  19. Tony Arko says:

    Inexpensive gas has caused the US to become a less than ideal country. Traffic jams, 100 mile commutes, concrete cities, bike un-friendly neighborhoods, obesity, pollution, smog, global warming, wars. The list goes on and on. And 1.3 million Realtors driving 4 or 5 counties away to list a home doesn’t help.

    If your only argument against $10 gas is it will hurt the economy and create less buyers, then you don’t really get it. In a capitalistic society like ours, there will always be buyers and always be sellers. Real estate will never become obsolete like typewriters or buggy whips so there will always be a need for real estate professionals.

    But a professional doesn’t sell 3 houses a year to their cousins. A professional doesn’t worry about the $10 gas that is coming. A professional prepares for the $10 gas and hopes that it comes sooner rather than later because they understand that cheap gas is bad for America.

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  21. What you wrote is only about half-true. I hope you know that.

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  23. Sue Puleo says:

    I agree with Tony completely. I heard Friday that economists are predicting gas prices to be around $7.50 a gallon as early as next year so he is spot on. A smart professional we’ll be prepared and not waste their time wishing it away. The economy will adapt. People will move closer in and roll a lot of big SUVS into the junk yards.

    I have been driving a Civic Hybrid since 2003. Buyers think its really cool and are amazed at the facts (you don’t have to plug it in, it turns itself off at stop lights, etc). I’m getting close to 50 miles a gallon.

    You have to admit that before gas prices hit $4 a gallon no one was thinking of ride sharing, trip savings, or even the incredible lack of public transportaion we endure in this nation.

    $10 a gallon gas is coming, get ready. The transition will be painful for awhile but it will be a good thing in the end. Way to put it out there Tony!

  24. Almost all of the new homes built today meet the minimum requirements for the Energy Star rating. Currently, a few builders exceed those requirements and build homes that are very energy efficient. To stay competitive with an increased consumer demand, developers are going to have to build even more energy efficient homes. Green buildings may become the standard in the next five years due to energy costs. But its likely that location will still play a huge part in the buying decision. It may effect resales of older, less energy efficient homes in the coming years. Those home sellers will be competing against more energy efficient homes for buyers. A rise in the number of “green” remodelers is a definite possibility and such remodeling may become a necessity to get top dollar for a resale home in the future, since it is doubful that energy costs will be going down any time soon.

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