The Factors that Create a Normal Market – Part 1
Welcome and good morning to Mike Ferry TV. It is the week of October 10th and boy did this year go by quickly. And we’ve also seen some pretty big changes in the Real Estate industry over the last eight or nine months.
Starting with January, February, we were off to a hot start as we completed in 2021. March, April, things started to change and they’ve been changing ever since.
And of course, what we’ve done and this is not meant to be scary, but we’ve returned to what we would consider to be a normal market. The market we had, starting with the pandemic in June of 2020 was really quite abnormal.
The rate at which a listing would sell the prices they were selling for the number of offers being submitted on every listing taken, interest rates being as low as they were. That was really quite abnormal.
For those of you that are newer to the business, we are returning to what all the veterans in your company and probably including your Broker would say was a much more normal Real Estate market.
So what we’re going to look at today and we’ll do it again for next week is we’re going to look at some of the factors that really do create a normal market.
Now, if you pay attention to some of the data that comes out and there is a lot of data in our business all the time back the first part of this year, various federal reports… NAR reports came out that we would probably do someplace around 6.2 to 6.3 million Real Estate transactions this year.
And then, of course, around March or April, they drop that down to about 5.7, 5.8. The most recent report I saw two weeks ago when I was traveling overseas, that they were reporting now 4.7 to 4.8 million transactions.
Which does tell all of us, that have been around a while, that is much more normal than going for 6 million. Which we’ve accomplished that in the past, but it’s not going to happen this year and probably certainly not going to happen next year.
So my question then for each of you, if you’re a new licensee or you’re an inexperienced agent or you’re an agent that has been hit by this market and not accomplishing what you may have accomplished last year in transactions sold is to understand that the competition, the people that you’re competing against probably don’t understand the things that I’m going to share with you today.
So the better you understand them, the better you can adapt to the market that we are in and it’s going to continue.
I was asked last week when I was doing a program in Rome, Italy, how long will this market last? I said at least until mid next year, probably into the third quarter.
But you know, 4.7, 4.8 million sales. And your goal is to do 10, 20, 30, 50, whatever that number is. The percentage of the market you’re trying to attain is so minute it almost cannot be calculated. So let’s not worry about how many transactions are taking place.
Let’s make sure we are only concerned about the work effort, the energy, the schedule that you are following in terms of building your business as this year continues.
I just did a three-day event in Toronto for 750 agents and the event was titled Finishing the Year Strong. And I gave them a lot of ideas and I started with what I’m going to share with you next in terms of understanding the market, because you see, we have two choices.
We can live in fear or we can live with the excitement of accomplishing what it is we’re trying to accomplish.
And good agents like yourself are so often hearing about all these crazy things taking place in the market. And as a result, some fear is let in. And as soon as fear lets in, productivity has a tendency to decline.
So by having a strong knowledge of what is taking place, it removes the fear and gives us the confidence which makes you a stronger agent, whether working with a Buyer or working with the Seller.
So here’s some of the thoughts that I have given to our Coaching clients over the last six months, and some of them are advantageous to keeping the market the way it is.
Some are a little not so advantageous, but it’s the reality of the market. Just remember, there is a lot of business being done.
Yes, maybe it is less than last year at this time transaction wise, but there’s still a lot of business to be done and don’t allow into your head under any circumstance that because we’re in the fourth quarter, that your business should drop down.
Don’t let, under any circumstance, the idea that because we’re in the fourth quarter, there’s less transactions to be done. There will be transactions done every day in multiples in your community, your town.
The question is, do you understand your market well enough to get them? Many of these ideas I’m going to give you this week and next week could be used on a listing presentation to just show how much smarter you are about the market than your competitors.
And they also might be used in a Buyer situation to help the Buyer understand what’s going on with the market. So they’re not necessarily in order of importance.
But here’s the first thing I want all of us to understand. The days on market is continuing to extend.
Ok. Mid 2021 days on market, depending on what city, what county, what state, what province you’re in. Could have been three, five, maybe eight, ten days on market and bang, it was sold. It was really what I call a no brainer market.
If you showed up for work on a somewhat regular basis, if you dressed reasonably well and didn’t say anything real dumb to Buyers and Sellers, transactions were taking place and they were taking place like that.
It’s like somebody lit a match. Bang, they were gone. Today, days on market have extended. Now there’s many reasons why. For example, the number of COVID Buyers in the marketplace have all bought or they’ve decided not to buy.
Interest rates have gone from 3%, depending on what market you’re in to 6.5 To 7%. There’s a lot of factors like that that will cause listings not to sell.
How about the overpricing of listings in your market? And we know that. Well, here’s an example. Three months ago, I said to my Coaching clients, get out your price reduction script. And most of them went like this.
What’s that? Never heard of it. Price reduction script? Where do I get it? And of course, we’ve had that around for probably 50 years.
So there’s some changes that take place when the number of days on market extends. And one of the changes is the price reductions that need to be addressed.
So I’m putting out a report. In fact, I’m republishing this week, a report that I wrote in 2007 on how to get your listings sold and we’ll have it available to you. We can email it to you as of next week, not this week, next week.
So don’t ask for it this week. And I know people get excited about the fact that this report could be helpful, which it will be very helpful. I’m updating it because it was written in 2007 and really preparing the market for 2009. And here we are now, what, 13, 14 years later … and the same ideas apply.
So the first thing I want you to understand, days on market is extending and we are sitting with a Seller and you’re discussing the motivation to get that home sold and the pricing involved.
If you can take the stats from your local board of Realtors, which might show five months ago, days on market was six and today it could be 46. That means their marketplace is slowing down in terms of the speed of a transaction.
And it also means that there are going to probably not be as excited about the opportunity.
Why are they getting upset with us when the days on market is extending and we’re looking for price reductions because most Buyers and Sellers still believe that it’s January, February, March of this year.
And here we are now in October, and it’s a different world. The second thought I want to share with you today, and we’ll look at a lot of these over the next couple of weeks. The inventory is growing in almost every segment of the market nationwide.
We live in Las Vegas, Nevada, during the heat of the market in 2021 our inventory homes on market for sale was the lowest most of us that are veterans had ever seen.
That’s changed. Now, why the change? Because prices kept escalating. Sellers … some got a little greedy and that slowed the market down.
So if there’s normally X number of listings being taken and only this percentage is selling, inventory is continuing to grow. And the advantage of that and it’s a good advantage and I wrote this down.
Buyers now have more choices, which makes working with a Buyer a little more enjoyable than it has been in the past.
Because there wasn’t a lot of fun working with a Buyer during 2021, but it also wasn’t a lot of fun. If you were getting 20, 30, 40 offers on a listing, which so often happened during 2021.
So the Buyers and Sellers had a difficult time … Listing and showing agents had a difficult time. So the fact that we now are seeing inventory grow is really an advantage for those of you that work with Buyers.
So let’s just think about the days on market as extending using that as part of your presentation to Buyers and Sellers. Inventory is growing, which it is growing as we speak. And if you’re representing Buyers, third thought, they finally have a few choices in terms of what they could buy.
I keep saying to all of our Coaching clients, Keep going. Keep going. Because there’s a lot of business to be done. Keep going. There’s a lot of business to be done. The only question is, are you going to keep going?
Because if you had a real job and you stopped working in mid October, you wouldn’t have a job in November. They would fire, terminate, ask you to leave the company.
In Real Estate as independent contractors, we can do pretty much what we want. The good agents are going stronger than ever because so many agents are stopping working.
Don’t be one of the ones that stop. Keep going. There’s a lot of business to be done. Talk to you next week. Thanks for today.