Is the real estate market cooling off?

Plus, five job expenses that surprise new agents

Grace Townsley
April 08, 2022

Finding “the one”

The other day, I helped a seller list their property off-market for a pretty bullish price. When the first prospective buyer walked through the front door, I knew he was “the one.” When you’ve been doing real estate as long as I have, you get a sixth sense about these things, and my senses were telling me this was the buyer.

At first, the seller wasn’t convinced. Of course she’s thinking, “This is just the first person through the door! Who knows who else will come through?” I knew I had to convince her that this was the right buyer with the best offer. 

Long story short, that was the only offer we ended up getting, and we closed at a record price per-square-foot for that area. When you know, you know!

I wish I could tell you that buyers send signals which can tip us off, but really, it comes down to a gut instinct. The more you sell, the better you’ll get at recognizing that feeling. It’s purely based on experience, so keep keeping at it. 

- David

Mortgage rates hit a major threshold

Source: Unsplash

On Tuesday, the 30-year fixed mortgage rate passed 5%. Setting aside two painful days in 2018, we haven’t seen interest rates stay this high consistently since 2011. According to CNBC, this current rate spike was caused by two main factors: market volatility from the Russian-Ukrainian conflict and the Federal Reserve’s fight against inflation. 

Our take

Yes, 5% interest sounds high, but only because everyone has gotten used to rates being practically zero! We’re almost spoiled at this point. In reality, 5% is nothing. Back in 2010 and 2011, we were buying real estate at 5% or more, and we’re still here to tell the tale! In fact, those investments are paying off BIG TIME now. Remind your buyers that rates are still much lower than they’ve been in a decade, and that it’s still a strong time to buy.

Is the market starting to cool?

Source: Zillow

According to Redfin economists, home-price growth could start to slow in the coming months. These are a few of the key market signs

  • The average monthly mortgage payment is now up over $500 since the beginning of 2022
  • Requests for Redfin agents in markets like Seattle, San Diego, Boston, and Washington D.C. declined in March
  • The number of home tours booked through ShowingTime is down 16% YoY
  • The Google search “homes for sale” is down almost 10% Y

Our Take

If you compare March’s numbers to the fast pace of January and February, of course you’re going to see a decline. Lower numbers don’t necessarily mean we’re in a cool-off, especially with inventory nearly wiped out. Look at the big picture–we’re still in the strongest market we’ve seen in years. Like we said earlier this week, help your clients think logically, not emotionally. 

Social media matters to first-time sellers

Source: Unsplash

According to a poll by Coldwell Banker, 44% of Gen Zers and 35% of Millennials want to sell their home within the next year. The poll also found that these young sellers think more highly of agents that have a significant professional social media presence and expect their agents to use social media for real estate marketing purposes. With today’s extreme housing inventory shortage, these young sellers could unlock a significant amount of inventory, but reaching them will require new skills and techniques. 

Our take

It may seem daunting to build a social media presence, but remember, you’ve got some of the world’s best content right in front of you. People LOVE looking at houses! Don’t overthink it. You have an endless stream of content you can use and your following will never get bored with it. So make the most of every listing, showing, and open house by taking photos and posting them. Your followers will thank you, heart you, and thumbs-up you.

Schematics 

The news that just missed the cut

Source: AZ Big Media
  • Arizona homebuilders are fighting a housing shortage and a historic drought
  • Go through this helpful checklist with your buyers prior to closing
  • The NAR’s deep dive into the costs, profits, & joy of 19 common renovation projects
  • Now major banks are getting into metaverse real estate
  • How a freelancer makes $36K a year on just four high-yield rental units
  • Tell your sellers that this is the most profitable home improvement they can make

Foundation Plans

Advice from James and David to win the day

Our advice to all new agents: set a budget. You want to make sure that you are prepared for all the costs and expenses that will eat into your gross income. Once you’ve landed a spot with a brokerage, make sure you plan for these expenses:

  1. Taxes - You’ll want to set aside 25% to 35% of your commissions for your quarterly taxes. It sucks, but remember: the more taxes you pay, the more money you’ve earned! 
  2. Transportation - We’re talking gas and car washes. Your car is an extension of yourself, so keep it clean and tidy, especially if you’re driving clients around. 
  3. Business expenses - Plan for licensing fees, subscriptions to industry publications, professional clothing, and more. 
  4. Marketing - If you’re running social media ads, ordering print materials, making signs, or have a website, you’ve got to plan for marketing expenses up front. 
  5. Investments - As an agent, you’re probably on your own when it comes to saving for retirement. Be sure to set aside money every month for your retirement, investments, and your own real estate deals. 

Want more? We shared extra pro tips about managing each of these expenses in our Inman article here.

Q&A

You ask, James and David answer!

Q: Are there any specific books you recommend new agents read?

Kelvin, The Blueprint reader (California)

A: I love The Psychology of Money by Morgan Housel. Sometimes you close a big deal, or several big deals, and you start getting carried away. It happens to new agents all the time. They make a couple huge sales, they start spending more money, they get accustomed to a certain lifestyle full of champagne and caviar, and then they’re stuck chasing their tails for the rest of their careers. To be financially stable in a career like real estate, it all comes down to how you save and invest what you earn. You can’t sell houses your whole life! This book really shifted my perspective on future-planning, and I recommend that every new agent read it. The earlier, the better!

David

Want us to answer your own real estate questions? Submit them here!

Just in Case

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

Source: Rocket Mortgage

Thanks for reading today’s Blueprint. If you’ve got questions, feedback, or just want to say hi, reply to this email! We’d love to hear from you. 

Have a great weekend!

- James and David

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