Charlie Young, the new president and CEO of Coldwell Banker Real Estate, says a shortage of single-family homes is the main obstacle to better sales growth for the international brokerage firm.
Young, who took over the top job at Coldwell Banker on Sept. 1, discussed market trends in an interview with The Real Deal prior to the start of the brokerage firm’s Gen Blue conference in Miami Beach. He was joined by Duff Rubin, the senior vice president of Coldwell Banker Residential Real Estate who oversees South Florida operations.
TRD: What is the Gen Blue conference and why is it in Miami Beach?
Young: “Gen Blue is the international gathering of Coldwell Banker agents, managers, owners of franchise companies who come together from all over the world. We have about 2,500 people here. About 500 of them are from overseas. We operate in 47 countries.”
“Why South Beach? There’s a number of reasons. Our people love to go to iconic locations. When you think about luxury real estate around the world, Miami Beach is one of the places [where] you want to be. So that’s how we ended up here.”
TRD: Why is it called the Gen Blue conference?
Young: “Blue is the corporate color, and in real estate, there has been a shift and change. Look at what has happened in our society. There is a demographic shift to the millennial generation entering their home buying years. The tech boom has brought a lot of change, too … Gen Blue is about trying to get people thinking about the future.”
TRD: Where are we in the residential real estate cycle?
Young: “What NAR [National Association of Realtors] tells us is transactions this year in this country are basically flat, up about 0.8 percent. Pricing is up about 5 percent. If you look at their forecast for next year, it’s similar.”
“I think the real story and the real challenge on a national level is, there simply isn’t enough inventory to satisfy the demand that is out there. NAR will also tell you about 55 percent of homes are selling within 36 days of going on the market. The inventory is below five months. Six to nine [months] would be considered a normal-market inventory.”
“You really have a challenged-inventory market. We’ve benefited by having average sale price carry us the last three to five years. But because we don’t have a lot of inventory, we don’t have a lot of closings. You can only close what you’ve got.”
TRD: How do various market segments compare?
Young: “You’re going to hear a lot about the high-end market cooling, the super-luxury end of the marketplace. There is a stabilization of pricing there. … But there’s still a market there. It is a much more educated buyer than three years ago.”
“But back to my main point: The real issue around housing that’s keeping us from seeing bigger growth is really about inventory. Single-family inventory. When you look at the economy as a whole, all the factors are there. Job creation has been strong, unemployment is relatively low, the economy is growing. The challenge has really been about inventory.”
TRD: What is your assessment of mortgage loan availability?
Young: “Mortgages are not the challenge with the marketplace. The inventory is a much bigger issue than mortgage loans. We are very supportive of the lending criteria that’s in place. That’s smart. That’s what really got away from us in the crash. We find that people who should be getting loans are getting them.”
TRD: What is Coldwell Banker’s presence and position in the South Florida market?
Rubin: “Coldwell Banker is a company of acquisitions and affiliations with the franchise owners … We have 22 offices in South Florida — Palm Beach, Broward and Dade — and 1,700 agents. We’re pretty much No. 1 in every submarket we’re in. We made some very significant acquisitions in 2003 and ’04. Arvida, which was one of the biggest real estate companies, was one of our biggest acquisitions nationally. That really put us on the map in Florida and most importantly South Florida. We also bought Wimbish and a company called Gimelstob.”
TRD: What percentage of Coldwell offices in South Florida are company-owned versus franchised?
Young: “Our parent company Realogy happens to own many of the markets we’re in, South Florida being one of them.”
Rubin: “When you look at our South Florida footprint, we’re mostly company-owned stores. Realogy owns most of South Florida.”
TRD: Is South Florida getting more competitive?
Rubin: “There’s no question a lot of the New York brokers, when they saw the recovery in 2010 and ’11, decided to come here. We saw Douglas Elliman and Sotheby’s come in. Brown Harris Stevens is here.”
“But it’s been hard for them. They’re used to being so strong in New York and I think it’s been tough for them to be in third, fourth and fifth place. And the splits and the competitive nature of the agents here is very new to them. Up north, they don’t have to pay as much to their agents. But down here, there are a lot of South American-based companies — Fortune, Cervera — so not only do they have the normal competitors they have up north, but down here you have South American-based companies that are very South Florida-oriented.”
TRD: What can Coldwell Banker do to boost market share in South Florida?
Rubin: “We’re an agent-centric company so we are focused on providing our agents the best tools … As long as you have the best agents in the market, you’re going to have the best market share. Our job is to make sure we retain and recruit the best talent out there”
“The biggest challenge in our business is the transition from the baby boomer agent or the Gen X agent to the millennial agent, and how we get more, younger agents engaged. Demographically, when you look at the top agents in the country, specifically in my market [South Florida], they are north of 50. That has to change.”
Young: “The challenge really is about being the best destination in the business for talented agents. We have to have the most tech-forward set of tools. We have three tools in particular that are more forward-looking than anybody else in the marketplace.
“One is CBX, a tool that utilizes big data to help agents really pinpoint and market property to likely buyers … It also helps agents to price competitively.
“We also have the CB Zap product. It’s a Google-quality front end for consumers to search for properties, and on the back end, for agents, it has marketing tools to reach consumers. For agents the real secret sauce is, we score all the consumers who are on the site. That score tells their readiness to buy based on their activity. We’re in the middle of the rollout of that product across the country.”
“And third, we have what we’re calling the smart home initiative. And this is relationships we’ve created with vendors like Nest, Lutron, and we’ve got something we’re going to be announcing this week with Amazon, with Alexa, their voice-recognition search vehicle.”
TRD: So it would cost a home seller about $1,000 to install Coldwell Banker’s smart home staging package?
Young: “That’s right.”
TRD: How does that benefit homeowners who list their property for sale?
Young: “Less time on the market.”
TRD: What trend has Coldwell Banker seen in South Florida with respect to foreign buyers?
Rubin: “Canada is still the largest foreign buyer in Florida … We have seen French buyers coming here more than other European buyers because of terrorism there. We are seeing the benefit of Brexit. The currency issue is working against us, no question. But we also see this as flight capital … Florida real estate has almost become a commodity. People buy condos, rent them out for 3 to 5 years, and earn a return, whether It’s 5 percent or 7 percent.”
TRD: What is your assessment of mortgage loan availability?
Rubin: “Down here [in South Florida] we have 40 to 45 percent cash deals, so the loan market doesn’t really impact us here … It’s because of the foreign nationals who can’t really get loans, and most people who buy second homes don’t take mortgages.”
Young: “Mortgages are not the challenge with the marketplace. The inventory is a much bigger issue than mortgage loans. We are very supportive of the lending criteria that’s in place. That’s smart. That’s what really got away from us in the crash. We find that people who should be getting loans are getting them.
“The inventory challenge is going to take a while to dig out of. All you really need to do is look at what has happened to new home construction in this country. Pre-recession, we were building about 1.5 million new homes a year. Recession, about 400,000 a year. Post-recession, I think we’re at about 650,000 now. We haven’t kept pace; household creation is back up around 800,000. But this inventory thing is going to be with us for a while.”