We hit a milestone this week!

Today's Blueprint is extra special to us because it's our 100th edition! 

We want to take a moment to say THANK YOU to our readers because we're so grateful for the community that has developed here in the last year. We started The Blueprint as a passion project to help all agents understand this wild industry a little better. The support from our readers has been amazing, and it means the world to us! 

We are always looking for feedback, so feel free to hit the reply button and tell us what you think about the newsletter. We read all the responses.

- James and David

Nearly 3 in 10 homes for sale are new builds

The share of new construction homes for sale grew to a record-breaking 29% in Q3. There’s a good reason for this. During the pandemic, out-of-town buyer interest skyrocketed in several boomtowns, which led developers to flock there and start building. Now builders are incentivizing buyers to opt for new construction with mortgage rate buydowns, price reductions, and offering cash at closing. The stats show it’s working.

• In Q3 of 2022, more single-family home builds were completed than in any quarter since 2007

• New home builds rose 14% between August and September

Our take

The market has been on fire for the last three years, so it makes sense that there's a ton of new inventory. As an agent, you have to be the expert in helping your clients price their homes realistically. It's never good for a house to sit on the market. Every client wants top dollar for their property, but it’s your job as their agent to make sure their house is priced accurately for the current market. Come prepared with comps, know your numbers and square footages, and show your client that you know your stuff about pricing!

Redfin shuts down iBuying program

Redfin has laid off 13% of its staff and killed its iBuying home-flipping operation, RedfinNow. According to CEO Glenn Kelman, iBuying is “a staggering amount of money and risk for a now-uncertain benefit.” Here’s why Redfin is pulling back:

• Redfin forecasts a 30% smaller market in 2023

• RedfinNow is projected to lose between $22M and $26M in 2022 before its overhead expenses

• Buyers have been delaying home buying until the market stabilizes and interest rates fall

Our take

Redfin took on far too much risk with their iBuying operation and underestimated how much people need agents. We're heading into a slower market where the iBuying business model simply can't thrive. Your clients need your expertise to navigate today's market. No algorithm can provide the same insight and tailored approach to selling their property as you can.

Apartment conversions soar

The number of properties converted to apartments has jumped 25% since 2020. As housing demand has surged, developers have been converting empty offices, churches, and other buildings to meet the demand for housing. Developers like apartment conversions because they are faster and cheaper to build than ground-up construction. Also, cities have been offering tax breaks to developers to convert abandoned office buildings and churches.

The major hotbeds for conversions are Philadelphia, Cleveland, and Pittsburgh. Those cities account for 11% of the total conversions nationwide.

Our take

Affordability has been a massive problem in this market, so the clear solution is to provide different housing options. These options have shifted so much since the start of the pandemic, and now buyers need to keep open minds about the possibilities. As an agent, it’s your job to help them explore all these options. Know what is being built, understand what areas are up-and-coming, and be an expert in that area. You never know what will come of it!

Schematics

The news that just missed the cut

• See inside Dr. Dre's $20 million Malibu mansion

• What Tuesday's election results mean for real estate

• Forget the resume, this is what The Agency's Mauricio Umansky looks for in an agent

• Here's the inflation data for October

• Is winter coming to the real estate industry?

• How one investor earned $740k on Airbnb by avoiding these common mistakes

Foundation plans

Advice from James and David to win the day

We know that your clients might be nervous about buying while interest rates are high. Remind them that they aren't married to their rate. They can always refinance down the road when the rates level out.

Here are four ways that worried buyers can get a better deal when interest rates are high:

1. Make a larger down payment. This one is just simple math! If your buyer can put down 30% or 40% and mortgage a smaller amount, high mortgage rates won't hit their wallets as hard. If your client is in a financial position to increase their down payment, this is an excellent way to make their mortgage more affordable in an expensive market.

2. Pay off debt to raise their credit scores. This is easier said than done, but we all know that the higher the credit score, the better the interest rate. Let clients know that reducing their debt-to-income ratio will help them get better rates. Even if they can't cut their debts, tell them not to add any in the meantime. This is not the time to lease the sports car they've been eyeing! 

3. Buy down their interest rate. A lot of buyers don't know they can do this, so you definitely want to mention this one to your clients! Let them know that they can pay additional fees on their loan to lower their interest rate.

4. Shop around for the best loan type for them. Conventional loans come with the fewest contingencies, but other options like FHA loans or USDA loans might be better choices for your buyers because they require smaller down payments. The extra cash might help your buyer buy down their interest rate or pay off existing debt to make their mortgage more affordable.

Want more tips for helping worried buyers navigate this market? Check out this article.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

That's all for our 100th edition of The Blueprint! 

Have a great weekend, and we'll see you on Tuesday!

-James and David

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