Shift Happens: How Top Agents Survive (and Thrive) in a Turning Real Estate Market
What's on the horizon for the real estate industry?
It’s been a whirlwind couple of decades in the real estate industry, with many agents experiencing both the peak highs and devastating lows. Defined by the crushing great recession of 2008 and the subsequent steady rise to a booming seller’s market (fueled by sky-high home prices and stalled inventory growth), it’s been a wild ride.
Moving into 2019 the #1 buzz in the biz is undeniably the shifting market. Let’s start by saying, the market isn’t falling apart. No reliable predictions show that the market shift will mirror anything close to the 2008 collapse, so most real estate professionals are adopting a healthy sense of caution, rather than urgency. But it is shifting.
So what does this mean for your business? It may be a period in time that separates the good from the great. The agents that adapt quickly and pivot strategically are the ones that will enter the next decade with a healthy, thriving business.
A Peek at the Data
Home Prices: Slight Deceleration
What we’re seeing is a lull in the annual increase of median home prices. Median home list price isn’t dropping, but it is decelerating from the monumental growth we’ve seen in recent years. In August 2018, the YoY increase in median home price dropped below 6% for the first time of the year, and rate-of-increase decelerated for the 5th month in a row.
In 2017, 16 out of the top 45 markets saw double-digit price gains and that number reduced to 5 out of the 45 markets this year.
Additionally, price cuts of homes on the market are rising (up to 19.1% from 17.6% last year), indicating that sellers are overconfident when putting their homes on the market and reduce the price due to lack of offers.
The question is, will we see the prices continue to stall and eventually start declining? Some sources are predicting that we’ve reached peak housing, and prices may begin to slump. (MarketWatch, Bloomberg Businessweek) However others emphasize that we’re simply seeing a minor deceleration, and overall the market is still in great shape.
“With rising home prices and more homeowners, the aggregate owners’ equity in real estate is projected to grow by $1.4 trillion this year. That gain would bring the net housing equity (home value minus mortgage outstanding) to over $15 trillion. Considering it had been only $6 trillion a decade ago at the depths of the housing market downturn, the overall picture of the housing market is quite impressive.” – Lawrence Yun, Forbes
Home Sales: Noticeable Dip
Meanwhile, we’ve yet to see a real increase in buyer demand, due to things like steadfast high mortgage rates and tenuous wage increases that aren’t enough to offset high home prices.
Existing home sales increased slightly in October 2018 after 6 months in a row of decreases. The increase was 1.4% month-over-month, however year-over-year it was a 5.1% decrease. New single-family home sales decreased 8.9% in October 2018, in direct contrast to market predictions of a 3.7% jump.
Realtor.com®’s 2019 Housing Forecast predicts that “home sales are on track to a mild year-over-year decline in 2018, which is likely to extend into 2019 with a 2.0 percent decline. Although long-term desire to own a home remains strong, especially among younger Gen-z and millennials, the market challenges that make owning a home difficult continue to keep out first-time buyers, locking them out not only of their home, but also of the wealth by equity generation that owning provides.”
Inventory and Listings: Modest Uptick
Towards the end of 2018, there was a slight uptick in inventory. In September 2018 inventory grew .4%, reaching about the same levels in 2017. This may not seem like anything to write home about, but there are some other slightly hopeful numbers worth noting. Condos and townhomes are accounting for a higher percentage of listings and saw even more inventory growth, raising about 3% YoY. Additionally, larger markets are seeing a more significant increase in inventory. In the 45 largest markets inventory is up 5.6% YoY, the highest jump since 2013.
Although we’ve seen a hopeful uptick in inventory and slowdown in home price increases, inventory is still well below what’s considered a healthy and balanced level (6 months), so the uptick isn’t earth-shattering. It’s certainly not enough to counter-balance high prices and cause a shift to price reductions.
New and existing home sales, paired with the tapering off of home price increases and lower than average inventory are all reasonably strong indicators of a lukewarm market in 2019. (To reiterate, predictions will vary substantially across markets)
Mortgage Interest Rates: Climbing
Mortgage interest rates climbed steadily in 2018 (contributing to a lack of affordability), however, it does appear that they’ve begun to level off a bit as we get closer to 2019. The federal reserve has raised interest rates three times in 2018, “as the central bank attempts to prevent a tight job market from causing inflation.”
CNN Business suggests that mortgage rates topping 5% is evidence of a booming economy. While 5% mortgage rates are a 7-year high, they are still lower than the 6.5% rates we saw in 2007 before the housing collapse. The federal reserve raised rates at a higher frequency this year in response to the economy performing so well.
High home prices and high interest rates mean fewer buyers in the market with enough motivation and liquidity to purchase.
Unpacking the Possibilities
We’ve been reviewing national data, so it’s important to note that there are different trajectories for different markets. Keep an eye on your localized data so you’re fully prepared for any shifts that are unique to your market. You’ll want to know month-to-month numbers for the following on both a local and a national scale: median sales price, average sale-to-list difference, percentage of homes that sold above list price, number of price drops, inventory, number of homes sold, and median days on the market.
While expert predictions are generally reliable, there are quite a few outlying elements in play and any of the numbers we’ve outlined could shift in any direction. Effects of these trends could come in pockets or it could be widespread. So let’s be smart and prepare for all scenarios.
What should I expect?
It’s wise to anticipate a shift towards a more “normalized” market, in contrast to the seller’s market we’ve seen in recent years. You may feel the effects of the dip in home sales and continued hesitance from buyers due to prices remaining high (even with the deceleration).
If the shift keeps up momentum, swinging the pendulum even further towards a definitive buyer’s market, this can be good for agents. In this situation you have clear stats on one side or the other, allowing you to approach a seller and say, “there is no black and white — your price needs to be in this range if you’re serious about selling.” This at least makes the lead education process a little simpler, as it removes the grey area that breeds hesitation.
Who will benefit?
A more normalized market (leaning towards a buyer’s market) can amount to a favorable environment for those who do want to buy. Buyer leads have more negotiating power, more properties to choose from (slightly), and the potential for more wiggle room if prices continue to decelerate.
Will there be a seller boom as homeowners become more aware of the market projections?
It’s possible that certain areas could see a rush to sell homes while prices remain high. The only concrete answer is that we just don’t know what the future holds for prices. This could be a small, temporary plateau that goes back on the upward slope, or it could be the beginning of a steady deceleration and eventual decline.
No need for the panic button!
A few reasons why this market shift is different from the Great Recession of 2008
- There is potential for inventory to rise, giving a little more flexibility to market and restoring the balance
- Unemployment remains low and wages are rising
- Most homebuyers are not overleveraged
- Mortgage standards are stable and consistent
Tactics for Agents & Brokers
So amidst this changing of tides (with no fortuneteller to guide us) how can you prepare for what’s to come?
First, get organized. Schedule some time to step back and get a birds-eye, 1,000 foot view of your business. Look at your goals and take inventory of your processes. If you want to understand where you need to adjust or change course, you first have to have a clear finger on the pulse of your business.
Get Creative Finding Leads
Leads, leads, leads. Nothing new here, as agents have been searching for better lead strategies for years. What’s different now is that you may have to get more creative if there’s a dip in seller or buyer leads in your market.
Tips for strategic and creative lead generation
- Diversify your efforts. You never know if you’re missing out on a gold mine until you try a new tactic.
- Direct mail isn’t dead! Send just listed/sold post cards.
- Educate your lead base. It’s your job to connect the dots for your clients.
- Get involved in your community. Reputation and name recognition are the keys here. Sponsor events, volunteer, be a guest speaker… anything to have your name be a part of the conversation.
- Spruce up that social media. Social media is a low-cost, medium-time investment, but it can yield great results.
- Boost your investment in expert digital advertising.
- Prepare a better listing presentation. Download our guide.
- Convert buyer leads into seller leads.
Be a Know-It-All
We mentioned before that during a market shift the good are separated from the great. A perfect example of how to land in the latter category is to know everything you can possibly know about your market. Front and back, left and right. You need to have every data point on the tip of your tongue, ready to use in conversations with potential sellers and homebuyers.
Remember: your leads likely aren’t paying attention to (or don’t care about) national market trends. So, while it’s important to know all of that data as well, it’s critical to have local market numbers on hand at all times.
Share your expertise via content marketing! Stick to your geographic farm, compile all of your knowledge and observations, and share them with your leads via blogs, Facebook, videos, and email newsletters.
Become a Data Scientist
Being strategic and numbers-driven is always good business practice. And it’s particularly critical during a market shift when transactions may slow a bit and budget becomes a top priority.
So what metrics should you be tracking? We like to break it into two groups: personal performance and return on investment (ROI).
The agents that thrive in any market are the agents that stay diligent and hold themselves accountable.
- Follow-Up & Response Time: Generating leads isn’t enough. It’s the follow-up and persistent communication that comes next that truly matters. Ask yourself, how is your follow-up? Track and measure your speed-to-lead as well as your response rates. If you’re using a CRM that tracks these things for you and schedules to-dos, be diligent with your system. Take advantage of accountability tools and dashboards that show you concrete numbers reflecting your follow-up habits.
- Lead Conversion & Close Rates: These numbers are critical to stay on top of because they directly tie to your transaction volume. When you’re crystal clear on how many leads you’re converting to opportunities and how many deals you’re closing, you can (A) pinpoint where you need to improve, and (B) estimate how many leads you need in order to reach your sales goals.
The Trick to Increasing Lead Conversion
Return on Investment
Times of uncertainty call for extra caution and precision with budget.
When you’re creating your business plan and setting goals for the upcoming year, spend some extra time working on your budget. Look closely at your finances from the past few years, and set specific goals for your revenue and profit (while trying to lower your expenses.)
The reason tracking and measuring your expenditures is important, is so that you can understand which efforts have a positive ROI. You may be spending a relatively high amount of money on lead generation or marketing efforts — however if those outputs lead to enough closings, it’s worth the investment.
Track all of your expenses as diligently as possible, (with as much detail as you can), and you’ll be able to boost the right investments and cut corners in the right places.
If you’re a broker or team leader, you need to measure the ROI of your agents. Here are a few questions to ask:
- Do they bring in sales that are equal to, or above their costs?
- Does your employee encourage customer retention?
- How does your employee affect team morale and production? Are they distracting? Motivating?
- What does this employee’s future look like within your business? How do they contribute to your business growth?
Focus on Relationships & Communication
One of the possible outcomes of a shifting market is a transition period defined by uncertainty and hesitation from both buyers and sellers. Sellers are anxious to sell but worried about getting low-end offers. Buyers may be concerned about high interest rates, high prices, and lack of options.
This means, the agents that thrive are the agents that develop specific skills for working with both buyer and seller leads.
It’s all about conveying the trends that are to come. Accepting an offer is a major decision, and there is even more on the line when the offers are lower than they were hoping for. Work on your “counseling” skills, which will come in handy when counseling anxious sellers to get off the fence and accept an offer. Be prepared with projections to show them that if they wait, more than likely the offers will go down.
Avoid preemptive and reluctant buyers and seek out the leads that are motivated to buy now. With the market shifting towards a more “normal” balance, buyer leads might want to hold off until the pendulum has swung even further in their favor. In this case, it’s helpful to convince them that they don’t want to bet on uncertainty. Prices could start increasing again, and the market “shift,” could just be a temporary lull. I.e. “Snap up a good deal while you can.”
Top Communication Tips:
- Share Facts – always have detailed and valuable market information at-the-ready
- Listen – learn your client’s needs and fears
- Avoid Pitfalls – be aware of common transaction pitfalls (inspections, appraisals, loan approval), and take extra precautions throughout the process to avoid them
- Be Honest – don’t manipulate data to push a seller or buyer in a particular direction if you don’t genuinely think it’s in their best interest. (Be encouraging without being pushy)
Appearance & Condition are Key
It may not be a buyer’s market quite yet, but agents are preparing for how to shift their strategies if the trends continue in that direction.
In a buyer’s market, staging and condition of homes for sale are more critical than ever. To thrive in this market, you need to learn how to coach your seller leads on getting their home in the best condition possible to sell. It’s useful to have materials on hand to educate them on how to make their home look more valuable, like step-by-step staging guides and checklists for home conditions.
The Scoop on Staging
Here are a few stats you can share with a seller that’s hesitant or indifferent about staging.
From the NAR 2017 Profile of Home Staging:
- 49% of buyer’s agents said that staging had a positive effect on most buyers’ outlook on the home
- 77% percent of buyer’s agents said that home staging helped buyers visualize themselves in the home
- 29% percent of sellers’ agents reported an increase of 1 percent to 5 percent of the dollar value offered by buyers when staging, in comparison to similar homes; 21 percent said that staging a home increased the home’s dollar value by 6 percent to 10 percent
- 39% percent of sellers’ agents stated that home staging greatly decreases the length of time a home is on the market
Streamline Your Business with a CRM
We all wish we could be the superhero that tackles all of the tough tasks on their own. But the truth is, achieving top-tier success in real estate is nearly impossible without technology in this day and age. By partnering with the right real estate technology, you can completely streamline your business, automate busy work, and develop a healthy pipeline of leads to drive your business even in the toughest of markets.
1. It’s Nearly a Virtual Assistant
Have you ever thought of a day where you don’t need to remember anything? There’s no to-do you forgot or lead you missed. A real estate CRM covers the bases of an assistant. When you generate leads, a CRM can automate the follow-up communication. It can set reminders on your calendar to call the homebuyer (or seller). And it can route incoming leads to agents, equally.
It may be a little work to set up a process in the CRM, but it’s the same as if you hired someone. Except without the extra costs. Plus, it acts like a storage device. You can keep notes on homebuyers and set follow-up actions for later in the year — which is helpful considering most leads are 6-8 months from buying.
2. Prioritize Who to Call
Real estate agents generate leads everyday. If you’ve been in the business for a few years, you probably have several hundred, if not thousands, of leads sitting in a spreadsheet. How do you know which ones are still active? Still searching?
A real estate CRM can tell you who is actively looking for a home and how often. You can even filter and segment your leads by who is active. Think about the time saved right there. Hours of prospecting reduced to a fraction of a second. Coupling this with a phone dialer, you can turn lead generation into one of real estate’s easiest exercises. No more time blocking hours for routine grunt work. You can focus on tasks that have a higher ROI, like showing houses for clients.
3. Better Lead Communication (that Drives Conversions)
Which statement do you think will have a longer, lasting impact?
1. Hi Jack, I saw you were looking to buy a house. How can I help you today?
2. Hi Jack, I noticed you were looking at homes in Lawton Harbor. It’s a beautiful neighborhood! Would you like to see some homes there today?
Number two sticks out, right? The best real estate CRMs — working with your website — will tell you what properties leads are looking at (and how many times). This allows you to send personalized communication bound to convert. BoomTown clients, for example, have seen a 450% increase in lead responses (based off our CRM tools). It works particularly well for leads who are 6-8 months out. If you notice them looking at one specific property over and over (recorded by the CRM), then you can send them a quick text, saying, “Want me to schedule a showing for 1234 Bend Street this Saturday?”
Good real estate CRMs will expand on this behavior. They will match new (or updated) properties to your leads, using the data behind their home searches. It’s similar to how Google will offer better websites based on how you search. Then all you have to do is send out a group text or email, asking if anyone wants to see these “new” properties. Lead insights allows personalized communication. That communication creates better conversions. More conversions equals more money.
4. Improve Agent Performance
Well-performing teams have a business process. It’s a workflow for handling new leads and existing clients. Example: Brokers often tell agents to respond to new leads within the hour. But how do you know if agents are actually contacting new leads within the hour?
Holding agents (or yourself) accountable to a process isn’t easy. But a real estate CRM makes it effortless. By asking your team to contact leads through your CRM, it’ll leave a record of their actions. You can then pull up reports and see what they’re doing. It’s a good base for one-on-one discussions. You can drill into how often they try to contact leads, when they contact them, and if there was a response. It allows you to improve agent performance, which creates better ROI for your business. Ultimately, it’ll allow you to recruit and retain the best agents.
Without a crystal ball, we just have to wait and see how things shake out for the real estate market. Some markets may stay the same, while some are flipped entirely on their head. In the meantime, do what you can to prepare for a shift. You’ve made it all the way through this article, so you already have a head start on the competition!
Frontload on business planning and strategy-building for the year ahead, so that if and when you start to feel the effects of the market shift, you’re fully prepared and ready to pivot. Be smarter with money and budget than you ever have before. Now is the time to stretch your dollars, maximize your ROI, and save as much money as you can.
Lastly, maintain your laser focus, continue to express gratitude, and remember why you love this business and what you do.
- August 2018 Data: Home Price Cuts Increase as Price Growth Eases. (2018, September 13). Retrieved from https://www.realtor.com/research/august-2018-data-home-price-cuts-increase-price-growth-eases//
- Riquier, A. (2018, June 30). We’re probably at peak housing. Here’s what that means. Retrieved from https://www.marketwatch.com/story/were-probably-at-peak-housing-heres-what-that-means-2018-06-27
- Gopal, P., & Chandra, S. (2018, July 26). The U.S. Housing Market Looks Headed for Its Worst Slowdown in Years. Retrieved from https://www.bloomberg.com/news/articles/2018-07-26/american-housing-market-is-showing-signs-of-running-out-of-steam
- “Existing-Home Sales.” www.nar.realtor, 21 Nov. 2018, www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales.
- “United States New Home Sales” TRADING ECONOMICS, https://tradingeconomics.com/united-states/new-home-sales
- Hale, D. (2018, December 28). Realtor.com® 2019 National Housing Forecast. Retrieved from https://www.realtor.com/research/2019-national-housing-forecast/
- “Existing-Home Sales.” www.nar.realtor, 21 Nov. 2018, www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales.
- “Existing Home Inventory Flattens.” Builderonline.com, Builder Economics, www.builderonline.com/money/economics/existing-home-inventory-flattens_o
- Lane, Sylvan. “Fed Raises Rates for Third Time in 2018.” TheHill, The Hill, 26 Sept. 2018, www.thehill.com/policy/finance/408552-fed-raises-rates-for-third-time-in-2018
- “Mortgage Rates Top 5%, Hitting a 7-Year High,” Paul R La Monica, October 2018. CNN Business. https://www.cnn.com/2018/10/11/homes/mortgage-rates-5-percent-housing/index.html
- “National Association of Realtors® 2017 Profile of Home Staging” National Association of Realtors® https://www.nar.realtor/sites/default/files/migration_files/reports/2017/2017-profile-of-home-staging-07-06-2017.pdf