Back to Blog

Four Solutions to Overcome a Short Inventory Market

Welcome and good morning to Mike Ferry TV. It’s the week of April 1st. Question for everybody… How many listings are you planning on taking in the months of April, May and June? Or in essence, we know what you’ve done in the first quarter, which is probably not take as many listings as you would like, but now we have a chance of the experience of the first quarter to take advantage of the second quarter of 2024. So how many listings will you take? The inventory shortage is still the biggest challenge the industry faces today. I think most of us thought that it would have been solved by now. But the truth is, it’s a combination of different things that have taken place that have caused the problem to continue. So what has caused the shortage, not only to begin, but what has caused the shortage of inventory to remain as it has now for virtually two and a half years?

And I think one of the first causes took really place during our unfortunate Covid era. A lot of the best listing agents, they said to me, point blank, Mike sellers just don’t want us coming into their home. And if you’re doing a zoom presentation, it’s real hard to get a contract signed. So the number of presentations declined dramatically for about six months during that Covid era, and that is certainly understandable. But at the same time, buyers didn’t want to get in a car with an agent for fear that the agent had the virus and would spread it. So we had a big shortage begin, and that shortage has continued.

There was a limited inventory because of Covid

But then I wrote down post-Covid in that six months to a year after Covid was supposedly solved, the buyers came out of nowhere. And there was a limited inventory because of Covid, and the buyers forced agents to write offers at a much higher price than probably most agents thought they would sell for, and properties were selling for higher prices. So with the prices rising as quickly as they did and the emergence of so many buyers in the market, the inventory shortage continued to decrease. But then, of course, we had the interest rate change take place, started about June a couple of years ago, and I kiddingly say we went from 2.8% interest to 8.2% interest virtually in about 90 days.

Sellers who wanted to buy could not sell because of interest rates, and a buyer that wanted to buy could not buy a seller’s home because of interest rates. Because buyers no longer qualified, because the amount of income that a buyer was earning was not keeping pace with the inflation of the properties and the interest rates that were taking place. So we had three things in play at one time. And then we add to that a fourth thought, which is new home construction was on the decline. You know, it was a very difficult time for a new home construction builder to commit to building 10, 20, 50, 100, 200 properties at a time, which is what they so often did. And we always have to understand when there’s new home construction taking place in a community, there’s buyers coming out of the homes that are already living there to buy these new homes.

Interest rates remained much higher than we thought they would be

So what happens is the residential resale market increases when new home construction increases simultaneously. But at the same time, when new home construction decreases, it is very common to see a decrease in, of course, the resale properties. But then another factor that really has been a major effect. And a couple of days ago, I had a great conversation with one of our clients down in Florida. And this is part of this whole shortage of inventory that we’re experiencing today. The average price increased dramatically, we know that. Interest rates remained much higher than we thought they would be. Here we are the 1st of March, 1st of April, excuse me. And we thought rates would be down into the 5% plus range instead of still at the 6% plus range. But what happened? The commission checks continued to get bigger for the agents, and you know this because you’re experiencing it. So like 2023, you know, we have thousands of clients. The amount of money our clients made went up between 22 and 23 and the number of transactions. Went down. And that’s because the prices continued to rise because of the shortage of inventory. People were and, you know, this took place there were 20, 30, 40, 50 offers on a listing, very common. And as a result, prices went up. The demands agent makes on brokers continued to rise. So the brokers were paying a little bit higher commission to agents. Agents were earning bigger checks and as a result they took the next problem, which has really been a problem.

Agents took the path of least resistance. Selling a home to a buyer has always been a much more fun experience than going in and competing on taking a listing. So if you take the path of least resistance, which means I’m not spending the time trying to work with sellers, and I take the time to work with buyers, which quite honestly was even more difficult than taking a listing. Because buyers were in the market, interest rates were too high, and of course, new construction didn’t exist and the commission checks were getting bigger. And as a result, here we are today, April 1st, thinking inventory would be increasing by dramatic numbers and it’s minute at best.

We’ve got to commit 100% to talking to our past clients and Centers of Influence

So I wrote down what’s the solution? I wrote down four thoughts. We’ve got to commit 100% to talking to our past clients and Centers of Influence at least four to five times per year, and not only suggesting that they consider selling, but who do they know that would consider selling?

The second, and this is probably the most difficult thing for most agents to accept. We got to commit to three to four other types of prospecting that we can use. The number of contacts we make each day relates exactly to the number of listings we’ll take in the course of a year.

We’ve got to get stronger at our ability to stand out above the crowd.

And then third, I wrote down, we’ve got to perfect our listing presentation. We’ve got to get stronger at our ability to stand out above the crowd. You know, the age of going in and mumbling and fumbling and bumbling around and, you know, hoping that they pick you. You have to walk into the house with the confidence level, that they’re lucky that you are coming in to talk to them about listing their home for sale. So that is a third solution.

And the fourth solution is know your market stats. Know your market stats, understand how many listings are coming on the market each month. How many are being sold, how many are being closed? And then you can sit down with a listing prospect and you can say, now is the time to sell. There’s never been a time when there’s more buyers waiting to buy a home like the one you have. So if we get it on the market, we’re pretty much guaranteed a sale, as long as we keep it priced within reason.

Go out … start talking to people

So this problem is universal, the solution is individual. If you and I go to work, do our job every day to try to take listings, we will take listings. There are listings to be taken every day in the market that you’re living in at this moment. Go out … start talking to people. Perfect your presentation, know your market stats, and when I talk to you again in another week, you’ll have a much more positive outlook about listing property because you’ll have done something to solve the problem. Thanks for watching Mike Ferry TV. See you in a week.

Share this post

Back to Blog