A Healthy Real Estate Market Disruption
“It's only when the tide goes out that you learn who has been swimming naked.” - Warren Buffett
Did you know that the current sales rate of residential properties is at the lows of March 2020 (COVID) and close to the lows of 2008-2009?
The number of sales have declined 36.9% compared to January 2022 and have fallen every month over the last twelve months. The reason sales have slowed is because 12 months ago the Federal Reserve started raising interest rates, and the years before that, the Federal Reserve lowered interest rates to boost economic activity through COVID.
So we are contrasting the greatest real estate boom ever with a rising interest rate environment back-to-back, creating a whip-saw effect in the marketplace. These higher interest rates greatly impacted affordability, putting homeownership out of the reach of many buyers. Demand from homebuyers is still very much there, especially first time home buyers — but for many buyers, they simply cannot afford to buy properties at record high prices plus 6-8% interest rates.
That’s why we are starting to see home prices come down from the peaks. While prices have already come down in many markets by 10-15%, they are likely to decline more, though it is highly dependent upon what the Federal Reserve chooses to do next (i.e. keep raising rates to fight inflation — or not).
The Positive for Top Producing Agents
For many top producers, the market decline in the number of sales is welcome news as it is an opportunity to pick up market share from those dropping out. It is a healthy cleansing of the market that was badly needed.
Here are some eye opening stats. The National Association of Realtors states that the average agent with 2 years or less experience had a median gross income of $8,800 in 2021. Note that the most common number of sales for a real estate agent is 0. No surprise there. Though, for every agent who no longer sells a home, whether it be a producer or low producer, it is an opportunity for another remaining top agent who remains in the market to pick up market share.
As of January 2023, there were 1,548,058 Realtors in the United States a near record high (down 2% from December 2022), which is expected, following one of the hottest real estate markets ever.
FYI - Florida specifically has more Realtors than any other state with 218,906 active Realtors. Due to the magnitude of sales decline in a relatively short period of time, it is anticipated that an additional 350,000 to 400,000 Realtors in the United States will leave the industry.
Where is the Opportunity in This?
This reset of the market is a huge opportunity for agents preparing for the next three to five years. If you are looking to build a real estate team, your labor supply has never been greater to pick up agents. If you are looking to systematically pick up market share, a great portion of the market will come to you as others drop out. If you are looking to build a showing agent model to serve more customers, you have more agents looking for work than ever before. The key is to think and act long-term.
Go get em! - JB
