Why patience is important in real estate

It’s arguably the most frustrating moment in our business–when a buyer pulls out of a deal at the very last-minute. It can really test one’s patience.

But here’s a good reason to stay on the long course and stay positive as it’s a marathon, not a sprint:

Last month, we found a buyer for one of our Beverly Hills listings that was on the market previously with another agent (who didn’t sell it) and who seemed eager to make a move. Within two days, the property was in escrow. But then right before closing, the buyer got cold feet and decided they wanted something else and pulled out.

We were disheartened, but didn’t give up. We knew another buyer had to be out there somewhere. Well, guess who that buyer eventually turned out to be?

Yup… the very same buyer who had pulled out a month earlier.

They didn’t find anything better, so they wanted back in on the deal, non contingent. Three days later, we closed!

The moral of the story: never ever give up on a buyer until they’ve ended their search. If they get cold feet, it’s still possible that they might eventually change their minds. It may take a lot of patience on your part, but sometimes, that patience can truly pay off.

- James & David

Investor activity is still strong 

Rising mortgage rates may have caused some homebuyers to pull back in Q2, but investors were out in full force. According to Realtor.com, these buyers continue to drive strong demand, especially in the South and West. 

• In April, investors purchased 9.5% of homes sold, up 2.8% compared to April 2021

• While that number was down from February's record-setting 9.7%, it’s still roughly double the activity seen in 2014 and 2015.

• Large investor activity accounted for 35% of those home sales, but smaller investors still purchase the greatest share of homes

• 72.2% of investors purchased with cash, and Realtor.com predicts this number will rise as mortgage rates continue to climb

Our take

We’re not surprised investors are still buying up homes. With all the volatility in the economy, real estate is the most stable investment you can make. We’ve known this for years, and agents and investors are allocating accordingly. We saw it in Austin during the pandemic, and we believe we will continue to see it moving forward. If you come across a buyer who’s interested in a short-term rental, or any other investment, be sure to understand what factors drive investment success in your local market (schools, travel destination, activities, etc). Be the expert and do your research. There’s no reason you shouldn't know the most up-and-coming place to live in your market, or adjacent market.

Why homebuilders are being squeezed right now

Homebuilders are facing an increasing number of contract cancellations due to rising construction costs, labor shortages, lumber tariffs and inflation. In July, a survey of the The National Association of Home Builders’ (NAHB) found that 13% of homebuilders were cutting prices to bolster sales. 

To help boil down the situation homebuilders are facing, the NAHB’s chief economist Robert Dietz shared a list of the “5 L’s” of the homebuilding:

1. Labor - The construction industry needs about 650,000 workers on top of the normal pace of hiring to meet demand this year.

2. Lumber (and other materials) - Since lumber prices remain elevated, an estimated $14,345 increase in building costs has been added to the average price of a home.

3. Lending - Higher mortgage rates are pushing potential homebuyers to wait. That affects demand, which in turn, slows homebuilders’ businesses and raises the cost of builder and developer loans.

4. Laws - The NAHB estimated that, in May, zoning approvals, fees and labor regulations added roughly $94,000 to the final price of a single-family home

5. Lots/Land - In a recent NAHB survey, an all-time record of 76% of builders reported that the overall supply of developed lots in their area was low to very low

Our take

Even though homebuilders are facing a rough stretch, prices are still pretty high because demand is up. People want these new homes, but it’s just becoming so expensive for builders to finish them. This is going to continue putting pressure on builders and, unfortunately, keep inventory low for a while longer. That’s why you’ve got to keep farming for new listings of existing homes, because there just won’t be as many new builds!

10 priciest rental markets

Check out the average rent in the top 10 cities as of June 2022, and their YoY increase:

1. Jersey City, NJ - $5,500 - 66.25%

2. Boston, MA - $4,878 - 17.14%

3. Palo Alto, CA - $4,672 - 31.34%

4. Glendale, CA - $4,472 - 36.32%

5. Santa Monica, CA - $4,357 - 15.07%

6. Coral Gables, FL - $4,310 - 43.34%

7. Hoboken, NJ - $4,264 - 21.46%

8. Redmond, WA - $4,222 - 86.11%

9. San Diego, CA - $4,202 - 25.85%

10. Newport Beach, CA - $4,178 - 26.79%

Our Take

From an investment perspective, this is a huge opportunity because of the significant income you can generate from your rental properties. Even here in LA, the returns are just unprecedented, for both long-term and short-term property investments. From a tenant's perspective, affordability is really tough right now and we recognize that. That’s why we always do our absolute best to help people find a home as soon as they can, because it’s such a smart choice long-term.

Schematics

• See inside Conan O'Briens $16.5M Cali beach house

• In this city, starter homes are 98% more costly than renting

• Take a deep dive into real estate investing with this NAR podcast

• Welcome to the priciest zip code in New York

• This agents passed $1B in real estate before he turned 30

• A twitter thread on your local markets home-flipping sentiment

• Think Warren Buffet doesn't invest in real estate? Think again

Foundation Plans

Advice from James and David to win the day

Leveraging video is a great way to grow your leads list, establish your reputation, and build a strong following. Here’s how to make video content that really stands out:

1. Start every video with a hook. You only have a few seconds to grab your viewer’s attention, so make them count. Pique their curiosity or tease a great tip you’ll talk about later. Anything you can do to keep them watching!

2. Front load your videos with great info. Use your best content and information at the beginning of the video. That way, if your viewers only watch for a minute or two, they walk away with the absolute best information… and the best impression of you!

3. Create a repeatable, professional process for your videos. If your video content focuses on showcasing your listings, make a list of great shots to grab at every home. Then use the same intro, ending graphics, and background music for every video. That makes content creation a breeze! And your videos will look uniform and even more professional. 

If you’re interested in creating high-impact video content, check out this podcast for more great tips and examples. 

 Just in Case

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

Today’s news makes it clear— this is a great time to invest in real estate. If you’ve got clients who are on the fence about investing, send them these stats. Rental rates are so strong right now and the opportunity is there. You just have to show them!

- James and David

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