Troubling trend for home sellers
Plus, where owning costs the most
David here. James is on vacation, and I’m happy to know my best friend and business partner is spending time with his family and having a well-deserved break.
Having a partner you can rely on and trust is key to any successful partnership. When James is away, I work even harder to make sure he can relax and enjoy because I know he will have my back when I leave for vacation next month.
Truth is… even though James will never completely switch off, he can rest assured we are all here for him.
And James if you’re reading this, you shouldn’t be! And if you are, I love you man! Congrats on a record first half of the year!
Between increasing interest rates and historic prices, many of today’s homebuyers are feeling a heavy dose of buyer’s remorse. Contract cancellations jumped at the fastest rate since the beginning of the pandemic.
In June, almost 15% of contracts on existing homes were canceled, up from 11% at the same time last year
In the new construction market, cancellations jumped to 9.3% in May, up from just 6.6% in May 2021
If you’re working with a seller, remind them that they have to be adaptable and ready to adjust the price if needed. This is just a part of the process. If you’re working with a buyer, help them understand how to amend their budget accordingly, especially if they lost their earnest money.
Counting the cost of homeownership
For the majority of the past two decades, owning a home has been more expensive than renting, and that difference has never been as dramatic as we’re seeing now. Recent data from John Burns Real Estate Consulting shows where homeowners are paying the biggest, and smallest, premiums to own rather than rent.
Top 5 major metros with the highest homeownership premium:
San Francisco - $5,506
San Jose - $4,742
East Bay Area - $2,670
Orange County - $2,664
Seattle - $1,984
Bottom 5 major metros with the lowest homeownership premium:
Chicago - $105
Philadelphia - $112
Atlanta - $112
Tampa - $126
Jacksonville - $240
It’s all about supply and demand. In the hottest cities, everyone wants to own a piece there. But in some lower demand cities, even if it’s expensive, that’s even more reason to buy. We suggest buying where there’s high rent and high prices. You’ll likely wind up with one of two results: a) a highly-valuable home that’s likely to continue appreciating or b) a great rental investment that will drive a really strong return and prevent you from having to worry about keeping renters there.
Where homeowners are going big AND going home
In the largest 50 metros, the share of homes valued at $1,000,000 is fairly small, just 4.71%, according to a recent report by LendingTree. Most of these luxury properties are concentrated in California cities and coastal areas where average property values are among the highest in the nation.
Here the top 5 metros with the largest share of million-dollar homes:
San Jose, CA: 52.89%
San Francisco, CA: 40.37%
Los Angeles, CA: 18.55%
San Diego, CA: 13.52%
New York, NY: 10.53%
There’s opportunity for agents to get into the luxury space in just about any city in the nation. No matter where you are, there’s a pocket of high-end homes you can focus on. If you want to break into your local luxury market, start by door-knocking the areas you want to farm. Pass out fliers, attend open houses, and start getting your name out. With focused marketing and a bit of time, you can become the go-to high-end agent.
The news that just missed the cut
Source: LA Times
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How Fundrise is making real estate investing more accessible
Advice from James and David to win the day
What’s the best way to share real estate data, insights, and news with your clients?
Always frame the information around your clients’ goals. You don’t have to share every data point you read with every client. Personalize what you share! If you’re working with an investor, talk about skyrocketing rental rates. Single-family home buyers and sellers? Warn them of softening demand and set healthy expectations based on current market data.
Put things into perspective. If your clients are worried about rising rates, use the data you’ve read to remind them that rates are still historically low and that prices will likely continue rising. Sometimes clients just need a bit of well-researched perspective to put their minds at ease.
Communicate! When the market shifts, we see so many agents either shut down or completely ignore changing trends. They become paralyzed and quit the business, or they act like it’s just business as usual. But smart agents take in the information and constantly share the latest updates with their clients in simple, bite-sized pieces.
For a deep dive into addressing the most common buyer and seller questions with researched responses, check out this in-depth training here.
You ask, James and David answer!
We’ll be back next week with another answer to a real reader question. Submit yours here!
Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Rocket Mortgage
Anytime the market shifts it becomes somewhat of a proving ground for agents. Some quit, and some excel. We hope you’re the excelling type 🚀🚀🚀
Have a great weekend!
- James and David
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