The Evolution of Real Estate
People would have laughed at you if you had told them a decade ago that real estate has evolved. The internet has made it easier than ever to learn just about anything you want. So with all this content and information available, how did you know which ones to learn from and which ones actually work?
Luckily for you, CORE Member, for today’s blog we will be discussing the evolution of real estate! Remember, that while the first step is completing any of this amazing information, the second and possibly more important step is taking action even if it’s imperfect action.
The U.S. economy’s structure has changed as a result of the internet and high tech industry’ rapid expansion. The idea of a “new economy” has gained widespread acceptance as the economy finished its tenth consecutive year of expansion in 1999, making this the longest expansion in history. What function does real estate serve in the modern economy? What future changes might we expect in the real estate sector?
Looking back in time and analyzing the rise and fall of real estate in various sectors of the economy is a useful strategy for finding answers to these concerns.
In order to demonstrate how the real estate industry’s contribution to the economy has changed over time, this video studies economic statistics. The examination period runs from the early 1980s through 1999. For two reasons, this time frame was selected. First, during this time period, the real estate business saw significant financial breakthroughs such as real estate investment trusts (REITs) and mortgage-backed securities (MBS). Second, during this time high tech industries grew quickly and “.com” enterprises were established.
Several studies have attempted to calculate the total size of the real estate market or the total market value of all real estate assets. Estimates of the total value of investable real estate assets on the public and private markets were made by Miles et al. (1994) and Miles and Tolleson (1997). A similar estimate was made and published by the Urban Land Institute (ULI) in its America’s Real Estate series, which also includes extensive data tables on a variety of real estate valuation-related topics. There are public and private real estate markets, and within each of those markets there are several categories. An approximation of the overall worth of real estate in public marketplaces is possible thanks to transaction and money movement statistics. Documenting the total worth of non-securitized or private market assets, however, is more difficult.
This kind of thorough accounting has two drawbacks. First of all, it needs a vast amount of data that is typically unavailable in cross-section or across time. For instance, one of the major segments of the private market is commercial real estate. On the market worth of the real estate that corporations own, however, there is no direct statistical information. Furthermore, past research mainly relies on parameters that were chosen at random in order to assess asset values. Almost always, these parameters are time-invariant. The lack of time variation restricts the relevance of the data when studying changes over decades because results are sensitive to these important characteristics. Given the lack of consensus over the real size of the real estate pie, it is not surprising that there is a wide variety of estimates.
Instead of generating a single, arbitrary aggregate number, our strategy is to develop a number of indicators that reflect various facets of the real estate market and are based on more trustworthy data. Among the characteristics are real estate’s contribution to the GDP, which measures the value added by the real estate sector on an annual basis, real estate’s percentage of total family and company wealth, real estate on the debt market, and real estate on the stock market.
These are some of our main findings. The real estate industry’s contribution to GDP has remained fairly consistent throughout time in terms of value added. The real estate sector contributes about 11% of total output annually.
The importance of real estate has been waning in terms of asset allocations among households and businesses. The stock market’s outstanding performance is one of the causes of this occurrence. Since 1985, real estate investment trusts (REITs) have grown in importance in the financial markets, particularly the stock market. It is still a relatively small portion of the entire equities market, though. Last but not least, real estate has become increasingly important in the debt market as a result of the securitization of residential and commercial mortgages.
The first known example of the real estate industry is a stone engraving from the second century that shows a real estate transaction. However, the 1900s saw the beginning of real estate as we know it when real estate brokers started listing homes for sale and organizations started to form.
1900s–1920s: The “Wild West” of Real Estate
In the late 1800s and early 1900s, the first records of home sales in the United States were kept. In order to unite brokers and agents in the sale of homes, the National Association of Real Estate Exchanges, currently known as the National Association of REALTORS, was established in 1908. But prior to 1919, anyone could claim to be a real estate broker without having any kind of formal training or qualification. This resulted in a kind of real estate “wild west” where anyone could put a sign up to sell a house. As a result, “curbstoners” started putting signs in front of houses to compete with the brokers and each other. The seller then had to choose a sign at random to help sell their home.
Brokers first invited the public to open houses in the 1910s to sell houses. The residences would be open 24 hours a day until a buyer was found, with open houses frequently lasting days or even weeks. The brokers could only represent one listing at a time because they spent the entire day inside the house.
“To identify real estate brokers who are members of the National Association of Real Estate Boards and conform to its rigorous Code of Ethics,” the term “real estate agent” was first used in 1916. States started establishing real estate licensing regulations in 1919 to prevent shady individuals from putting up yard signs and to make sure the person selling the home is reputable and of high moral character. The National Real Estate Journal first proposed the idea of “staging” a completely furnished home for open houses in 1925, initiating the use of psychology to promote home sales.
Growing the Industry: 1930s to 1980s
When real estate firms started using numerous agents in the 1930s, they were able to handle more listings. Additionally, agents started using open houses as a means of self-promotion, using the contacts they made there to promote other listings that would be more suitable for the buyer.
The Great Depression caused the real estate market to take a dive, but after the soldiers from World War II returned home, there was a large demand for new development, and the market soared in the 1940s and 1950s. Homes weren’t on the market for very long thanks to radio and newspaper advertisements, which allowed agents to take on more listings.
In addition to advertising homes in the radio and newspaper, agents started using more sophisticated strategies to attract purchasers to homes at this time. For instance, the first instance of utilizing incentives to draw customers dates back to 1952, when a Dallas real estate agent selling a model house in a brand-new community provided free soda to guests and a Cadillac to the customer. The open house attracted 30,000 visitors.
A finished home could be displayed to thousands of prospective buyers as another unit that was up for sale thanks to the model homes that were built at this period. Local multiple listing services (MLS), which compile all of the listings in a particular area in a database, started to appear state by state by the 1960s.
The 1970s and 1980s saw a continuation of the real estate market’s expansion. For instance, the real estate company RE/MAX, which was started in 1973, pioneered the idea of a 100 percent commission. In addition, one of the original real estate firms, Coldwell Banker, started franchising in 1982.
The 1990s and Today’s Real Estate Technology
Real estate firms quickly followed suit when property listings on the internet became accessible to the general public in the 1990s. For instance, one of the earliest real estate websites, realtor.com, launched in the middle of the 1990s. The first real estate company to go public, Homestore.com, now known as MOVE, did so in 1999, advancing the market further. The IPO raised $140 million. Early in the 2000s, the internet’s technological advancements continued to have an impact on real estate, and Home & Garden Television (HGTV) developed shows like Room by Room, Dream Builders, and You’re Home that popularized and glamorized home buying, renovating, and flipping. However, this development was ultimately eclipsed by the 2007 mortgage crisis and the 2009 recession. As a result of the collapse in real estate values, many homeowners owe more on their mortgage loans than the value of their homes.
In 2012, when the economy began to fully recover, real estate once more rose to prominence. Another technology boom, but this one centered around social media, mobile devices, paperless technology, cutting-edge personal websites, and more, also occurred at the same period. These technology advancements were soon embraced by the real estate industry.
In order for sellers to contact real estate agents today, they literally need to have an effective website and social media presence. For both buyers and sellers, real estate websites that include various firms, agents, and listings are now essential. For instance, the 2004-founded website Zillow uses listings from both MLS and non-MLS sources, such as for sale by owner and auctions.
Companies have advanced as well, providing better ways for purchasers to view homes and improved work prospects for realtors. Real estate agents can plan for their financial future with the help of companies like 1995-founded EXIT Realty, which provides residual income for its agents that lasts through retirement and even after the agent passes away. Interested buyers can SMS the number on a For Sale sign outside a house, and GPS technology will guide them directly to the listing, thanks to EXIT’s Smart Sign technology. Additionally serving as a mobile business card, this sign links potential clients with the agent.
Our predecessors migrated with the four-legged food supply of their different regions for about half of human history, leaving only traces of their existence in the form of cave paintings, stone tools and weapons, and other artifacts.
Our ancestors eventually gave up their hunter-gatherer lifestyles over time. Between 30,000 and 15,000 BC was the time of this transformation. Although this transformation was not widespread, hunter-gatherer societies are still present in several parts of the world.
However, it did signal a significant transition toward an agrarian culture. Additionally, it signaled the beginning of homeownership in a nation anxious to expand settlement from east to west. In this essay, we examine the initial investment, the origins of homeownership, and modern American real estate.
Placing a Bet
The development of many agrarian systems was fairly similar. The fertile plains were staked out and populated according to the principle of “might makes right,” whereby the land belonged to those who could defend it. A system of tribal leaders eventually emerged, and those who had the tribe’s blessing would distribute lands, resolve conflicts, and demand recompense from every one of their subjects.
A pooling of labor and a sort of chief executive officer (CEO) to guide efforts resulted from the trend toward increasingly strong tribal leaders. Strongholds were constructed, farming techniques were refined, irrigation channels were created, and temples were built.
The population grew as a result of the land renovation. Now, farmers might have several children while a family of hunters and gatherers might only be able to maintain one or two. There were more workers available as a result of the higher fertility rate.
The First Line of Defense Hunter-gatherers like the Racket people lived in tribes, but due to scarcity and the unpredictability of existence, a tribe could only maintain two or three extended families. However, the lusty farmers soon discovered that they were no longer able to name every member of their tribe. People in these little societies acquired the security of numbers in exchange for the loss of familiarity.
Any desperate raiders were readily repulsed by a well-fed army. The inhabitants all paid tribute to the lord or monarch who claimed to be the land’s owner in exchange for this security. In a sense, this was the first rent system.
Since their ancestors were the ones who beat all other opponents senselessly, the leading families were able to keep ownership when these farming communities developed into cities. As a result, they became the kings, pharaohs, daimyos, and various other rulers of feudal dynasties. The United States’s first significant land purchase was the Louisiana Purchase. In 1803, the French sold Louisiana to the United States.
Salute the King
In the majority of nations, this labor-for-protection system split into two distinct systems: taxes and tenancy. By granting titles and deeds to properties that allowed the holders to collect the income or rent generated by the peasants residing there, royal families distributed their wealth to friends.
All citizens of a ruler’s domain were typically compelled to pay a tax in addition to this rent. The leader of the government made a number of other conditions, including military service. Due to their military prowess and birthright ownership of the country, these monarchs were only reluctantly able to satisfy these requests. Rulers might be deposed by other rulers (sometimes by peasants). The common peasant would occasionally experience little change when a new ruler sat on the throne.
However, the news wasn’t all terrible for the farmers. The ability to trade with other kingdoms and an increase in overall wealth led to the emergence of a merchant class as well as specialized workers or tradesmen who could support themselves using talents other than farming.
This led to the emergence of non-agrarian shops and homes that continued to pay rent and taxes to the numerous lords and monarchs but were instead purchased, leased, and rented by the general populace. The first common-born landlords were wealthy businessmen who rose in status and fortune. Although the residences on the land were not theirs, the merchants did.
The King is no more
Eventually, many aristocracies were ousted, frequently by separating the head from the body of an aristocrat. This was accomplished via ostensible meritocracies or political structures where the very best and brightest people rule a country for the benefit of all.
Politics was instead developed as a result. Title lands were divided into smaller parts and sold on a fictitious free market, but the buyers of the deeds were typically merchants or erstwhile aristocrats who had managed to avoid being reduced to breeches by revolutionary enthusiasm. From the ancient farming-tribesmen of 30,000 years ago, peasants hadn’t advanced much.
Abraham Lincoln enacted the Homestead Act of 1862, allowing Americans to buy and inhabit 160-acre parcels of land in the Western United States. Due to the law, almost four million claims were filed. In 1976, the law was repealed.
The Mechanical Era
Only the development of weapons may have been a greater equalizer in human history than the Industrial Revolution. Industry has both positive and negative effects, depending on the application. A few privileged peasants were given time for education and specialization in new sectors of work created by the modernization of industry, while many peasants were liberated to work on other duties thanks to the use of machines for physical labor.
In order to make a living, cobblers, seamstresses, and cabinet makers had to go back to the land and the coal mines beneath it. Their once-valuable skills had become outdated.
A variety of goods catered to the lower classes as well as track housing for laborers were the results of ambitious people being able to leap classes and bring some of their low-class sensibilities with them. The middle class, blue collar, white collar, and a few more socioeconomic classes had now been established among the populace. They had homes, automobiles, and later radios and televisions, which gave rise to the possibility of more possessions they could desire.
No one nation claims ownership of the mortgage invention. For a very long time, mortgages were restricted loans available solely to the aristocracy. But during the Industrial Revolution, global wealth rose to the point that banks allowed “higher-risk” mortgage loans—those to regular people—to be made. This made it possible for people to own their own homes and, if they so wished, turn into landlords.
After 30,000 years, practically everyone can now become a homeowner. In fact, it got to the point that many people now buy too much or borrow too much money. It’s crucial to use moderation because having the choice to possess something can be a powerful force. Too much mortgage debt might make you lose your home just as probable as it can make you keep it.
When did home ownership become widespread?
A component of the American Dream is home ownership. In actuality, homeownership rates have dramatically increased since the 20th century. But in agricultural civilizations, where owning family farms was valued higher than renting property from capitalist landlords, the concept of home ownership emerged. Home ownership has its roots in settler civilizations, which were strengthened by post-conflict policy. Homeownership became not only a possibility but also a reality as a result of policies designed to assist individuals who return from conflict and integrate into society.
What Set Off Real Estate?
The late 19th century is when the real estate sector first emerged. But it wasn’t until the early 1900s that it started to take on its current form. In order to cover more real estate issues, the National Association of Real Estate Exchanges was founded in Chicago in 1908 as the National Association of Realtors. To include investment homes, flipping, and online sales, the business underwent a series of evolutionary adjustments.
What Steps Did Land Ownership Take?
Land ownership has a long history in human culture. Many tribal civilizations from the past, as well as now, utilized the land and its resources only when necessary for spiritual purposes rather than for economic gain. Land rights were passed down through the generations. Early agricultural societies were the first to colonize the area, nevertheless. Land ownership was seen by the ruling class as a means of preserving and enhancing its riches and power.
When did investing in real estate start?
Real estate has been a very attractive investment for many people due to fluctuating property values. However, the idea of investing in real estate is not new. In the early days of the United States, renting land to tenants became popular. This was followed by a boom in real estate following World War II and the Great Depression. In 1960, the federal government passed legislation allowing investors to benefit from real estate investment trusts, opening the door for people to purchase and resell homes for a profit. But real estate investing didn’t really take off until the 1980s crisis.
All of the financial opportunities we see today were founded on ownership, specifically the ownership of land. Trade and commerce between groups are restricted in the absence of a steady population and a fixed site. Instead of being established by force, ownership is now a commodity that may be bought, sold, traded, or rented.
Tenancy has always involved a cost that is paid to the owner in exchange for use of the land and protection of it. Tribal chiefs were given this duty initially, followed by kings, and later landowners. We now have the ability to own our homes, which has altered how people live.
In the 1980s, a successful real estate broker would be best described as “messy.” Because brokers used listings that were torn out of the newspaper and had all of the available listings printed up and posted on a wall, one would take delight in being disorderly. It was somewhat artistic. When the units were gone, the printed listings would (usually) be defaced with Post-its. An agent’s biggest friend was the landline phone, which came with an extension, and walk-in clients were common. Real estate agents (and their clientele) have mostly changed since then.
Being the first agent in the building is insufficient. Agents are now required to be skilled in technology, networking, real estate, and marketing. Lacking even one of these abilities risks lagging behind.
It is no longer necessary for all agents to operate from the office because consumers frequently prefer calling agents directly on their cellphones and many agents choose to work from home. Agents are occasionally urged to work from home and make use of the resources available to them due to the fact that brokerages nowadays frequently run on thin margins and have high expenses to pay.
But there is a cost associated with working from home. In order to attract new clients, agents must now handle the majority of their marketing expenses and up their game in terms of technology. Social media is now a part of advertising platforms, which makes it more difficult for agencies to develop a plan that is profitable for them.
Today, you need recommendations to be a successful agent, thus it is more crucial than ever to have a satisfied client who would gladly recommend you to their friends and family. Therefore, as an agent, you want to provide your customers a great apartment and give them a fun, satisfying experience as they look for a place in the city.
A career in real estate is not a vacation.
It might be a hard lesson to learn that real estate requires agents to work full-time in order to succeed. Have you ever wondered why brokerages don’t spend more on the education of their agents? Agent turnover is the stinging reality.
I can tell you that the most common reason for an agent to delete their account with us is because they’re no longer doing real estate, as the cofounder and CEO of a listings platform where agents market rental units in New York. I find this truth to be remarkable. The most common reason why agents leave their firms or brokerages is that they no longer want to work in real estate. Because the chances of keeping an agent around long enough for the training to pay off are very remote, managers can be reluctant to invest much in their agents’ education. Even worse, there’s always the chance that you’ll spend money on an agent’s schooling only to watch them sign on with a rival agency a few days later.
The Right Direction Is Being Moved
Not that long ago, one could work as a real estate agent for pay without having to obtain a license. Today, only in New York City, there are tens of thousands of real estate salespeople. Yes, by requiring special education to become an agency, we made progress, but there is still work to be done.
It would be intriguing to see more criteria and commitment needed to become a real estate agent in the future, so that clients may communicate with fewer, more experienced agents who are dedicated to helping them locate a place to call home. Though slowly, we are heading in the right path.
Real estate agents will still be there for a while, but their responsibilities are changing quickly to include things like knowing their markets, being digital savvy, and taking calculated risks. The risk to their life arises from lacking even one of these abilities. The industry will organically weed out those who don’t contribute consumer value, leaving fewer but more capable real estate agents, which is the silver lining for those active agents who can pick up a decent dosage of each skill.
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