Over the last three years the housing market has been described as frozen, gridlocked, challenging and even broken. Like many things the reality of today’s housing market is a matter of perspective and depends on your circumstances. If you are a first-time homebuyer facing the headwinds of higher interest rates, insurance, property taxes and overall cost-of-living increases the market can indeed feel broken. On the other hand if you are already a homeowner with a generous amount of equity, a low interest rate and a home that continues to gain value you probably feel pretty good. But you may also feel forced to stay put unless a life event requires you to move. Both of these realities mean a lower sales volume for the industry as a whole. So if you are a real estate professional facing increased competition and lower sales volume, it’s helpful to understand the best way to leverage the market dynamics at your disposal. Here’s how to succeed in a shifting housing market:
HOUSING MARKET PARTICIPANTS
First off it’s critical to understand who you’re dealing with and the role of buyers and sellers in today’s market. Inventory is rising as more sellers finally decide to put their property on the market, often due to necessity. Meanwhile rates continue to fall from a high of 8% in October of 2023 to the low 6s we are seeing today (in fact the rate as of March 3 is 5.86% according to Yahoo Finance). The prevailing hope is that these two factors might finally lure buyers off the sidelines and into the home buying market. As such it’s vital to understand who the majority of today’s likely homebuyers are. Prior to 2020 first-time homebuyers made up 30-45% of activity. Today that number has fallen to a record low of 21 percent due to affordability issues. Statistics indicate the majority of today’s homebuyers are veteran high-equity homeowners known as “repeat buyers.” Stats show these veteran buyers had an average down payment of 23% with 30% of them making all cash purchases. Fifty percent of these buyers preferred to buy newer homes with 34% also wanting larger homes. Today’s buyers are primarily made up of the most eligible repeat buyers. Meanwhile the generation driving the future of home buying the most are Millennials (30-45 yo), closely followed by Gen Zers (14-29 yo). Finally, Boomers and Gen Xers tend to be the population segment most likely to make up the selling market.
TODAY’S HOUSING MARKET DYNAMICS
After identifying your core housing participants (sellers who must sell, repeat buyers and first-time homebuyers) it’s important to understand the market dynamics currently affecting these groups. All will be affected by current overall economic conditions which include: The housing supply, interest rates, the stock market, an employment market made more uncertain by AI, inflation (made more uncertain by tariffs), global unrest, a shifting middle class, and the rental market. At the moment there is a plethora of uncertainties disrupting “business as usual.” And the effect of the rental market is notable as it is dominated by both institutional investors (who own roughly 1% of the single-family housing stock) and small investors who own about 11%. However, it’s the mom-and-pop investors that are far more often the ones bidding against first-time buyers for entry-level homes. Of primary importance overall is consumer confidence much of which is mostly shaped by what’s perceived as an “affordable” cost of living. Just six years ago the home price-to-income ratio was below 20%. Today it sits at an historically high ratio of over 30%. Rentals are more affordable but still see a rent-to-income ratio at its highest level since 1980. Many would-be first-time buyers are choosing to rent rather than buy until the market makes more sense. However, it’s difficult to find apartment rentals that fit the needs of families so those first-time buyers with families are more eager than most to enter the housing market sooner rather than later if at all possible.
HOW TO WORK WITH WHAT YOU HAVE
As they say “It is what it is.” The trick is to make lemonade from lemons. Whether you are working with buyers or sellers or (hopefully) both your goal is to know what they need and figure out how to help them get there. Your most important job as an agent is to be of service to your clients. We are in a challenging market which is characterized by low inventory (although that’s changing), higher interest rates, cost-of-living affordability constraints, and a large dose of general market uncertainty. This requires you to shift from a high-volume mindset to a high-value approach. Strategies include:
- Focus on must-sell leads (divorce, death, relocation, downsizing, job changes)
- Target shadow inventory
- Leverage the rental market
- Protect your deals from deal cancellation
- Be proactive about homeowner insurance
- Leverage home warranties to entice buyers and protect your sellers
- Provide hyper-local data
- Guide sellers to price correctly right out of the gate so no time is wasted
- Partner with lenders to learn creative financing
- Reframe the narrative as a “negotiation market”
- Hunt for coming soon, former FSBO or unlisted properties
- Make sure your listings are pristine and staged
- Learn how to best help downsizing seniors
- Use AI for lead nurturing and content creation
- Increase visibility with social media and digital marketing (your digital “handshake”)
- Strengthen partnerships with vendors, inspectors, contractors, lenders, attorneys, etc. (click here to find out who your local home warranty expert is)
- Build a referral network (make sure you’re part of the “vital few”)
- Do not skimp or cut on marketing and use FREE marketing tools whenever possible
- Invest in professional certifications
- Manage your personal finances and have a reserve account ready to go until sales improve
And last but not least: develop a gratitude practice so you can maintain a positive attitude. In sales, as in life, attitude is everything.