“Risky” homebuying move surges in popularity
Plus, Top 10 cities at risk for price reductions
The logical choice
We all know that, for our clients, buying or selling a home can be a very emotional decision. But it’s more important that it’s a logical one.
This is where we come in. The current housing market is causing an unusual amount of anxiety for both buyers and sellers. That’s why it’s more important than ever to use your expertise to help guide your clients through this process.
Don’t let your clients get carried away about how prices used to be or how the market looked two or even five years ago. Get them to think about the best options available right now.
Homebuying will always be a deeply personal decision filled with a lot of emotions. Just make sure to balance it with knowledge and reason.
- James and David
Homes are selling for near-record highs
In June, the median sale price was just 1.5% below its all-time high. That’s according to Redfin’s latest market update. Here are other key takeaways from last month:
The average home sold for above its list price for the first time in roughly a year
The total number of homes for sale fell 15% YoY, hitting an all-time low and marking the biggest annual decline in two years
Demand is inching up as house hunters get used to high mortgage rates
Pending sales posted their biggest monthly increase since 2021
What struck us most about this update were the last two points–pending sales are up, and so is demand. This could mean that buyers are getting used to the elevated mortgage rates. While we believe those rates will drop to around 6% by the end of the year, they’re not going to drop to the levels we saw two years ago. So, the more buyers and sellers get used to these higher rates, the better.
Welcome to the 2023 HELOC boom!
U.S. homeowners are tapping $9 trillion in real estate wealth. According to Bloomberg, Americans are increasingly getting home equity lines of credit to borrow against the value of their properties, which skyrocketed over these past 3 years. Here are the main points to know:
Banks typically consider HELOCs (home equity lines of credit) risky because the credit line functions as a “second lien” that’s paid off AFTER primary mortgage obligations
As mortgage rates surged, the refinancing business has almost completely dried up, causings HELOCs to surge in popularity
In 2022, annual HELOC originations rose 34% from the prior year to 1.41 million individual loans, the highest total since 2008.
While 2023 figures aren’t yet in, the number of HELOC accounts have risen in each of the last three quarters for which data is available.
We love this story because it’s a concrete example of how homeownership is an excellent pathway for many hard-working people to build real wealth and gain some financial security through real estate. Not everyone is ready for the responsibility of homeownership, and we never encourage agents to push it on people who are unprepared. But you’ll never see us poo-pooing the business. We think it's great and can positively change the lives of many people.
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Where price reductions will and won’t happen
Morningstar, one of the leading investment research firms, recently published a paper identifying the riskiest and least riskiest markets for a price reduction. Here’s their list.
Most at Risk
Salt Lake City, UT
San Francisco, CA
Los Angeles, CA
San Jose, CA
Least at Risk
New Haven, CT
Little Rock, AK
Morningstar is an excellent firm, but that doesn’t mean they are infallible. Make sure you verify their forecast with your analysis of the relevant comps. That said, it’s a good list. Use the “most at risk” list to connect with agents in those markets. Many of their clients are actually moving to other markets. Establish relationships and use them as feeder sources to get some deals done.
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Advice from James and David to win the day
For most realtors, nearly a quarter of their business will come from referrals, both from clients and other agents. Here are three tips on how to broaden and deepen your referral network with agents:
Use the power of referral fees - This incentivizes agents from feeder markets to send you valuable referrals. Make sure you spread the word. Connect and communicate with agents in these markets and create mutually beneficial partnerships. Watch one of our colleagues as he expertly does this on IG.
Farm agents for referrals - Real estate is a people business. Strategically target and connect with agents who specialize in your market. Make sure you establish yourself as a resourceful referral partner among these agents, whether it’s through your marketing materials, the way you carry yourself, or your market knowledge. This will lead to a continuous influx of referrals.
Make sure you follow up - After receiving a referral, make sure to follow up with a phone call. Nurture these leads effectively and build strong relationships with referring agents. This will help guarantee that you’ll get more business from them in the long run.
If you want further advice on how to make referrals part of your toolkit, watch this to start upping your game.
You ask, James and David answer!
Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Rocket Mortgage
That’s a wrap on today’s Blueprint! Thanks for reading. The more you increase your market intel and hone your craft as an agent, the better your personal business will be. So get out there and make this a phenomenal week! We’ll see you on Friday!
- James and David