Don’t let the talk of recession scare you or change your #growthmindset. The Fed and Chase’s Chief Economist do not see a recession on the horizon even for 2020, so don’t panic. I posted a graphic on my Facebook page showing that in the last 5 recessions, housing values appreciated in 3 of them. In the 4th, aggregate housing values dropped just 1.9 percent. And then of course there was 2008. Pricing dropped massively - 19.7 percent. The housing climate was completely different in 2008 than it is now. There was a decade of growth based on faulty mortgages and extreme oversupply. The bottom fell out, taking the US and world economy with it. In this market, lack of good inventory is the story, along with changes in consumer buying habits (more on that later). The point is that you should not stop being aggressive in your business-building and marketing approach. I am a personal testament to the fact that you can really grow your own personal market share during market shifts.
"Hobby agents" get out of the business and the true professionals grow their influence.
Our market is changing in part because consumers are changing their buying habits related to real estate. Before 2008 and the Great Recession, consumers spent a lot more of their gross pay on housing. Today, consumers are putting a higher value on experiences like travel, dining, et cetera. We don’t see the consumer looking at real estate as much as an investment, but rather for the “utility value” of the property (e.g. 'What does the property provide me?'). This shift in mentality has changed how consumers look at real estate, which leads us to the next topic…
“Right sizing” in real estate is the act of moving to a property that better fits someone's current lifestyle and needs. Essentially, it's a move to a more efficient use of space. Instead of “moving up” or “downsizing,” try using “right sizing” to describe your clients’ pursuit to find a space that is more efficient for their foreseeable future.
While you are describing “right sizing,” discuss the power of the 15-year fixed mortgage. If your clients want to see principal drop off their loan balance quickly, have them review with their lender the amortization chart for a 15-year fixed. Even at the beginning of the loan where the banks charge the most interest, up to 50 percent of the payment can be principal reduction. In a way, it’s almost like a “forced savings plan.” For your renters who are not yet sold on purchasing, show them that if they can stay in an owned property for 3 to 5 years instead of renting, just the principal reduction on a loan like this will put them much further ahead - even if the property does not appreciate. I’ve seen these impacts first-hand. My wife and I have both our mortgages on 15-year fixed and we’re watching our principal balance on our loans burn off at a really quick rate. On top of these benefits, rates for these instruments today are a low 3% for a conforming loan. Your renters probably have no idea what they could go buy if they just knew the financing facts. Part of being a broker is being an educator.
Pricing continues to be the name of the game. You need to explain to your clients that there are two real estate markets happening right now - those listings that are above the market and those that are in the market.
“Mr. and Mrs. Seller, if you are above the market, you will sit. If you are in the market, you’ve got a shot to sell if your property shows well.”
In the age of online search, your first showing is online. Consumers knows their budgets, what they want to purchase, and they will reach out to their broker when they see something that matches their interests. To make that cut, the seller’s property needs to be compelling. It needs to be marketed well, shown well, and priced well… end of story. Do not waste your time on homeowners that want to just test the market.
TIP: GO get your listing agreements for 2020 signed now and get that photography taken now while foliage is still green.
TIP: Less is More. You will hear me use this phrase a lot this fall as we do our 2020 Business Plans. In fact, my terminology has changed. We are in the real estate business to take care of others, so I am pivoting to the term “Customer Service Plan” instead of ‘business plan.’ If you are struggling to stay in touch with your database, I’d rather have you pare your Top 100 list down to 50 key contacts to manage your relationships attentively. Take your Silver clients and drop them into “Fringe” and work just your Platinum and Gold clients throughout the year. Your referrals will most likely come out of those top two groups. If you’re not familiar with this lingo, stay tuned as I discuss them a lot more over the next month.
Last, but not least, the best database on the market is the one that you will use. Some of our most successful agents are using a simple Excel spreadsheet or Google doc. Personally, I have committed to CLOZE as my database of choice and the one I will train on moving forward. After spending quite a bit of time in it over the last few weeks, I’m finding that it is much more robust and, once set up, much easier to use than Contactually. Thank goodness Compass bought Contactually so that I was compelled to make a change to a better system.
Today’s big takeaways are meant to motivate you to go out this fall and have conversations with your clients about the opportunities and characteristics of today’s market. Remember, you are not an order taker. You are a broker. Use these conversations to wrap up your 2019 in a big way and build that pipeline going into 2020.
