Opinion: This market is full of opportunities for agents
As a real estate industry, we live in interesting times. We are forced to defend ourselves against three challenges, or what I call the three I’s — inventories, interest rates and inflation. It’s not all pessimistic; however, and there are opportunities for those who persevere.
I hear more and more agents across the country suggesting that we are now in a buyer’s market. While I agree we’re headed in that direction, we’re a long way from a real buyer’s market. Inventory is just two months away in the top 100 markets, which is well within the parameters of a seller’s market. Also, many agents have never witnessed a normal market where houses sit for 30 days without wondering what is wrong. It’s time to change your mindset.
Return to a healthy market
Inventory is a big issue, and while I don’t like seeing interest rates go up, some increases are needed to help us get back to a healthy market. I’m not sure it’s necessary to raise interest rates by 118% in the last 18 months. It’s more than stressful to see the price of silver increase so much. Worse still, it has made the dream of home ownership unreachable for so many people.
The key question people are asking now is whether interest rates have finished rising. My instincts and experience suggest we haven’t seen the end. Fighting inflation is a combination of art and science, and very few people agree on what the exact recipe entails.
For more than 40 years, until the housing recession of 2007, interest rates averaged over 7% and reached as high as 18%. Interest rates in the 5% to 6% range aren’t crazy, and while we would all prefer rates to still be around 2%, I don’t believe these rates are sustainable over the long term. It is important to help buyers understand that if they try to wait for these high rates in the hope that they will come back down, they may miss out.
Home prices will continue to rise as long as there is a shortage of inventory. Even if rates fell back to 3.5% and homes continued to appreciate by 5% per year, mortgage payments would end up being about the same. Plus, buyers will have lost their lives in that new home and the equity that would have increased every year. Even if rates go down, there is very little value to expect, if any. Again, it’s time to change your mindset.
Possible inventory issues
Rising interest rates have also had a negative impact on potential sellers who are now wondering if they ever want to move, causing more inventory issues. If skyrocketing interest rates weren’t enough, house prices have also risen at absurd rates. The combination of rising rates and rising house prices has made it harder to expand a home, and almost pointless to downsize if the payment is to stay the same. Plus, inflation doesn’t just affect house prices, it affects everything, costing the average family more than $3,000 a year, diminishing the average American’s purchasing power.
The good news about agent productivity
Now for a little history lesson. Between 2007 and 2011, the number of homes sold fell from 5.02M to 4.26M, a decrease of 15%. During this same period, agent membership of the National Association of REALTORS fell from 1.34M to 1.01M, a decrease of 25%. While the total number of sales has decreased, the number of sales per agent has increased.
The tough market got rid of agents who didn’t want it so much, and it could happen again. Agents with the persistence to stay strong and double down could find even greater success over the next few years.
how to thrive
As a real estate agent, there are several things you can do to thrive in these uncertain times. First, know the history of the market. Create scripts that help potential buyers and sellers make smart decisions. This alone will help generate more sales.
Second, invest more in marketing while other agents back down in their desire to weather the storm. Now is the time to gain market share so that when the market recovers, and it does, you will be better positioned to own your market.
Finally, the allocation you pay your broker is important. The more money you keep from each sale, the more money you have available to invest in marketing and growing your business. Be sure to invest in your business while having more money available for your family during these difficult times. Don’t wait until you feel like you’re drowning to do something about it. The next few years may be your best years yet!
Josh Harley is a serial entrepreneur, founder and CEO of Fathom Fund Inc.
This column does not necessarily reflect the opinion of the editorial department of RealTrends and its owners.
To contact the author of this story:
Josh Harley at [email protected]
To contact the editor responsible for this story:
Tracey Velt at [email protected]