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Why it's never been more important to stand out

Written by Team BizGift | Aug 9, 2022 10:06:27 AM

It’s never been more important to be remembered by your clients and stand out from among your peers. Here’s Why.

The market is slowing down, but buying isn’t getting easier. Frustrated buyers may have hoped during the scalding hot market of the past two years for there to please, pretty please, be less competition. They’ve gotten their wish, but it doesn’t mean those homes on the market are any easier to afford. In fact, that part has gotten worse.

Here’s what that slowdown means for you and your clients.

How the Housing Market Is Slowing Down
To understand how the market is slowing down, it’s first important to understand why it was so hot in the first place. Research by Freddie Mac, a government-sponsored entity that buys mortgages on the secondary market, pointed to four key factors:

  1. Record-low mortgage rates in 2020 and 2021;
  2. Limited supply from underbuilding;
  3. An increase in first-time homebuyers because of age demographics; and
  4. Migration from high-cost cities to areas that already had a housing shortage.

Those record mortgage rates are gone, replaced by the highest rates since 2008, but issues with the supply of homes remain, as do demographic shifts in terms of age and location.

Rising mortgage rates and the affordability issues they bring to an environment with high prices are the key factors behind the slowdown, Hale says. “We’re seeing fewer sales happen,” she says. “That’s generally because buyers are grappling with higher costs today from higher mortgage rates and higher home prices. They’re just less able or willing to find a home that’s in the right price range.”

The big issue at the moment is that while demand may soften, supply isn’t improving fast enough to make a big difference. “The reason why this particular housing market is somewhat unique is that it’s not only that there’s such strong demand that created the spike in prices but there is less supply than there needed to be,” says Isabel Barrow, director of financial planning at Edelman Financial Engines, a national financial planning firm.

That’s particularly the case in the hottest markets. In Atlanta, the inventory of available homes at the end of May was enough to last about 1.2 months, says Karen Hatcher, CEO of Sovereign Realty and Management and president of the Atlanta REALTORS Association. A healthy inventory is closer to four to six months.

“That’s not enough to move the needle on prices because of demand,” she says. “At 1.2 you’re still in a sellers market.”

 

Current Mortgage Rates Are Making Things Worse
If you’re clients are trying to buy a house and they don’t have cash – such as from selling their old home – they’re going to have to get a mortgage. And that’s where the biggest change in expenses for today’s homebuyers is coming from. At the start of the year, the average interest rate on a 30-year fixed-rate mortgage was about 3.3%. In June, it was closer to 6%. That’s a huge jump in a short period of time, and it means it’s harder for folks to qualify for a loan, and higher payments for those who do.

“When rates were at record lows, people often could afford more expensive homes because the low rates offset the increase in asking price,” Channel says. “However, as rates continue to rise, because a higher rate means your monthly payment is going to be more expensive, you’re going to find yourself with much less wiggle room.”

There isn’t much comfort to find in high home prices; you don’t really have much of a choice there. With mortgage rates there is at least a chance of solace in the future, even if they buy now. That’s because they have the opportunity to refinance a loan in the future to get a better interest rate if those rates come down, which might happen.

Experts also point out that, if you look back more than a few years, a 6% mortgage rate isn’t all that bad. Rates of 7% were seen as pretty good back in the 2000s, Barrow says. “Everyone is really sensitive right now to these interest rate increases and watching them closely,” she says. “Historically speaking, we are still on the lower end of the interest rate environment.”

 

The Homebuying Experience Is Changing
High prices and mortgage rates are pushing a lot of buyers out of the market, which can present opportunities for your clients who are staying in. Depending on the market – even the neighborhood – buyers might even have time to take it a little easier now, compared to the chaotic rush of the past two years.

“They’re likely experiencing a market that’s still relatively competitive,” Hale says. “The data suggest that homes that are priced well still sell quickly, in part because shoppers in today’s market are still expecting mortgage rates to go up.”

Experts say the less-competitive market doesn’t mean it’s not competitive at all, and it depends on your strategy and timeline. Hale says those with some flexibility are able to put in offers on more homes over time, potentially snagging one for below list price. Buyers who are in a rush to move, however, are still facing headwinds.

It also means some of the buyer behaviors we’ve seen lately might fade just a bit. Things like waiving an inspection or appraisal might not be as necessary if buyers are competing with fewer bids. “That doesn’t mean things are suddenly going to become super easy for buyers,” Channel says.

 

How to Navigate the Changing Housing Market
The slowdown means fewer shoppers to compete with, but the reason for that is that homes are less affordable, which might change how you approach your process.

1. Clients Need To Be Financially Ready to Buy
Getting ready to buy a home is more complicated than pulling up listings and figuring out whether you like the location of this one more than the deck on that one. It starts with assessing if your client is in the right financial position to buy, and how much they can afford.

Barrow suggests your first steps should be ensuring they have an emergency fund before they start thinking about how much house you can afford, and that you allow them some cushion in their homebuying budget for things like unexpected maintenance. “Especially in an environment where the economy is not quite as sure-footed as it felt like it was maybe a year ago, it’s really important to look at that affordability first,” she says.

Getting your clients preapproved for a mortgage is essential, as is their shopping around for a loan. When you do so, Hale suggests making sure they ask their lender what happens if mortgage rates move even higher. Then help them resist the temptation to go over what you plan to spend. “Really pin down how much they want to spend on housing and stick to that budget,” she says.

2. Think Smaller
People like to think of their homes as their castles, but especially when a house is tough to afford, help your clients resist the temptation of going for the full palace when they’ve got a bungalow budget. The home you find might not be perfect for them, but it might be something they can improve over time, as their finances allow.

“It’s OK to have them look at homes that they can make upgrades on over time,” Hatcher says. “It may not have everything they want but it might have everything they need.”

 

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You work hard to acquire prospects, earn their trust, and their business. You need to meet people, build qualified contacts, develop relationships, acquire customers, and be remembered by them. An easy way is to give them a gift that won’t get thrown away and helps you stay remembered.
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*Quotes and figures provided by Time Magazine’s Next Advisor. Story provided by Next Advisor’s Jon Reed.