💼 Resolutions for Agents

briefcase | invest smarter | issue #107

🏘️ Agents Update

Over the last two years, the number of U.S. real estate agents jumped from 1.3 million to 1.56 million, according to the National Association of Realtors (NAR). This increase was 3x that of the previous two years, and there are now 13% more agents than in 2006 when the housing bubble peaked.

With the housing market cryogenically frozen for at least the next 12 months (NAR predicts 4.7M home sales in 2023, down 7% from 2022), oversupplied realtors could feel a bit of frostbite.

As it stands 7% of all real estate agents account for 93% of all sales. Further, according to NAR, only 16% of agent business was from repeat clients, and 20% was through referrals.

The icing on the cake...Only 68% of agents report having even a website for business use 🤯.

But, never bet against the realtor; just ask the iBuyers like Zillow and Compass who have claimed for years to be disrupting this profession.

If you haven't done your homework on how iBuyers turned into iSellers, please ketch-up.

Zillow and others, so far, have failed, and they did so during the biggest housing boom market of our generation. The reality is, a professional realtor who is customer-oriented and a local market expert cannot be replaced.

Like an untapped frozen underground reservoir of natural resources, the iBuyer platforms and other technologies are digging furiously to get a piece of the commission pie. 

If agents are to protect their precious resources, their value proposition has to evolve. Especially in the previous two years, most real estate agents have had a transactional business. Buyers buy, sellers sell, and not much effort is needed to go into client relationships or marketing because we had a screaming hot market.

That has changed. The average real estate agent sold only 10 homes throughout the past year, with a median gross income of $54,300. As we enter a low transactions scenario into 2023, this could spell trouble for the long tail of agents.

According to a recent survey, rent delinquency rates among real estate businesses (mostly real estate brokerages) surged from 27% in September, to 37% in October. 

The agents who will stand out in the coming few years will avoid thinking transactionally, shifting to a more advisor mindset. Some of the conversation shifts should include...

What neighborhood do you want to live in? ➡️ What are your desired amenities, and we can look at the sub-markets with the greatest upside potential. 

What does your mortgage pre-approval look like? ➡️ Let's take a look at your household budget, and see what is financially feasible.

Have you considered upgrades? ➡️ How can additions like a tiny home, solar panels, or an ADU to my property improve my equity and ROI?

Now isn't the time for your to buy ➡️ Let's look at financial planning services and a rental option while we figure out how to get you into your first home.

Let me send you a blog I read about saving for a down payment ➡️ Check out my website, I've written extensively about saving for a down payment and have some calculators to help us plan for your home purchase.

Finally, more than ever before, agents will need to become rental market experts to help build those initial relationships with future buyers who are currently priced out of the market due to high debt costs.

While rental-only agents are common in major metros like NYC, they're almost non-existent in the remainder of the country.

So What? Relationships and trust enabled for scale through innovative technology will win the day in the coming housing winter. 

Weekly Real Estate Stories

❌ Layoffs: Compass executes third layoffs in one year — TRD

🚧 Construction Jobs: Job openings have likely peaked, giving builders some increased confidence — NAHB

📉 Housing Prices: Declined 0.2% MoM, but still rose 8.6% in November YoY — CoreLogic

🏠 Pending Sales: Fell 4% in December to its lowest level since April 2020 (mid-pandemic lockdowns) — Realtor

😦 Interest Rates: Federal Reserve Bank of Kansas City President Esther George says the bank should raise rates above 5% and hold it until 2024 — NMN

🏦 Commercial Lending: Total commercial mortgage borrowing is expected to fall to $700B in 2023, a 5% decline from 2022 — MBA

🎁 Sales Concession: Buyers received concessions—such as money for repairs and mortgage-rate buydowns—in a record 42% of home sales in Q4 — Redfin

Up next, on briefcase...

...My kids share their new years resolutions…
 

“Eat more butter”
“Try my hardest at everything but not maths”
“Make a new language”
“Invent Google”

The most-shared newsletters:

• 💰 4,300,000 Reasons to Invest in Real Estate
• 🦹 Have We Seen Peak Agent?
• 🤑 Regulation Inflation Makes Up 40% of Build Costs
• 🏡 Missing Middle Housing
• 👮‍♂️Yes, Affordable Housing is Illegal

Written By Brad Cartier