Experts offer insights, advice to manage downturns
As mortgage rates skyrocket, reminiscent of market conditions not seen since Jimmy Carter lost the U.S. presidential election to President Ronald Regan in 1981, real estate deals are collapsing, and analysts are forecasting a 20% drop in home sales.
Despite, the doom and gloom, though, some analysts offer insights on how agents can manage market dynamics.
Mortgage rates hit 7.1% recently – not as high as the more than 18% seen in Carter’s days, but frighteningly on the same path. In the wake of this surge, Redfin Economic Research reported that 60,000 real estate deals fell through in September because of uncertainty and buyer reluctance.
Ian Shepherson, Patheon Macroeconomics chief economist, said there is “no floor in sight” for declining home sales because of the rate rises, fearing home prices will drop 15% to 20% next year. He thinks the only people moving will be those with no choice due to job or family circumstances.
However, Taylor Marr, Redfin deputy chief economist, points out that there is more to a purchase decision than mortgage rates and rising or falling home values. As most real estate agents recognize, concerns like how long a person plans to live in a home, life stage, and other broader economic factors are at play.
Shifting prices and rising and falling rates always create new and different opportunities for home and property purchases that agents can capitalize on and promote. The tensions between property prices and rates mean bargains for buyers, plus, compared to a year ago, buyers who can afford to purchase have less competition for the homes and properties they want.
North Carolina Redfin agent Jordan Hammond said buyers are excited that homes are staying on the market longer for more thoughtful consideration and that prices are easing. He says these factors are encouraging buyers to purchase.
James McGrath, co-founder of New York-based real estate brokerage Yoreevo, told the National Association of Realtors that the U.S. is facing a severe inventory shortage, not an overbuilt environment that drove the 2008 real estate bubble and collapse. He also said low rental vacancy rates are the consequence of many years of underproduction in housing development.
Pricing declines are following significant pricing gains in many markets, Lawrence Yun, NAR chief economist, noted. He said some buyers will simply view price declines as a second chance to get into the market after being outbid by others during the past two years.
Marketing in the New Reality
It’s not “much ado about nothing,” but for agents it means taking stock of your marketing and lead development and shifting gears to the new realities.
Dierk Herbermann, COO and general counsel for Kentwood Real Estate in Colorado, a Berkshire Hathaway Home Services of America affiliate, said the market isn’t made by the factors around you. “It’s what you make it.”
He encourages meaningful conversations with friends, allied professionals, past clients, expired listings, and for-sale-by-owner people to share knowledge and ask for business.
Agents must have and demonstrate knowledge to help buyers and sellers understand the new environment.
They must know the subject property to be able to counsel sellers and inform buyers. That makes it easier to address pricing questions that come up. In-depth mortgage knowledge also makes it easier to coach buyers on options that help them get into homes and properties they want.
“There’s always opportunity for agents who have the desire, ability and drive to succeed,” Realtor Julie Harris encouraged.
Follow a Prospecting Routine
Jared James, CEO of Jared James Enterprises, a real estate coaching firm, recommends agents establish and follow a prospecting routine. He said agents need to get back into the right patterns, not sit around hoping. “We tell people, consistency is undefeated.”
Marketing and advertising in this environment mean consistent and frequent messaging to those professionals, past clients, and people in neighborhoods where listings and sales are occurring.
Focus messaging on likely purchasers: those who can afford to purchase, those at life stages such as retirement or starting a family, and investors seeking opportunity in market dynamics.
This is a good time to develop personal branding and focus that brand in desired geographic areas or customer groups categorized by key identifiers, such as income, family status, life stage and more.
Messaging should reflect what the customers are going through. Sellers worried about declining pricing or buyers getting a second opportunity, for example. Messages should resonate with where your customers are geographically, what they're feeling emotionally, and the results they want to have. Understand the fears and uncertainties they’re facing and show how you can overcome them because of your knowledge and professionalism.
Each agency or agent has a particular audience or customer base they are trying to reach. Your messaging must reflect their situations and circumstances to be relevant, authentic, and meaningful.