A new study made for the National Association of Realtors by Arthur D. Little, Inc. predicts that within 10 or 15 years national franchises and large publicly owned companies will handle as much as 80 percent of residential property transactions in major markets.
For an industry that has traditionally been characterized by local ownership, the predictions are momentous. They suggest that the industry will be more concentrated and efficient.
Although local ownership will continue to be the predominant mode nationwide in the coming decade, corporately owned firms -- such as Coldwell Banker and Merrill Lynch -- will increase their market share from less than 1 percent now to between 5 and 10 percent, the researchers said.
They predicted expansion of the so-called guaranteed home sales programs. These are overwhelmingly the business of relocation services, firms paid by employers to facilitate the transfer of their workers by eliminating the necessity of having to wait to sell a house before buying one in a new area.
As for franchise operations such as Century 21, the trend is toward increased market penetration, the report noted. However, the survey warns that a "significant shakeout of weaker franchise firms may occur at the time of the next major market leveling (recession) since at least some franchises will no longer be able or willing to pay the required fee." There may also be a backlash from organized independent firms as they try to beat franchises at their own game by utilizing national television and mass media, the researchers said.
Increased computerization of the industry will lead to more single-stop selling, combining brokerage; mortgage, title, property, warranty and mortgage insurance; escrow, and home sale guarantee, the report said.
Arthur D. Little predicted that more than 200,000 computer terminals will be in operation in 15 years, compared with 22,000 today and only 1,000 five years ago. The primary use for the technology will be the establishment of central computers that offer multiple listing services, the report noted.
These information networks will require huge capital investment, something only large public companies, such as McGraw-Hill Inc. and American Broadcasting Co., are in a postion to make, the report said. The researchers said they view computerization as a convenience to the public.