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Shifting Winds are Changing Housing Markets

Real estate coaches Tim and Julie Harris make predictions on the impending real estate market cycle. Learn what you can expect in order to prepare your company.

September 20, 2018

Change is a funny thing. Sometimes it’s so gradual we barely notice it, and other times change happens so fast that it flashes before our eyes. Whether slow, abrupt, or some combination of the two, winds are changing your local real housing markets.

Like the weather, these winds will come at different times to different markets in the approaching months and years, if they haven’t already arrived to alter your status quo. However, it’s no time to put heads in the sand or wish for the good old days of 2016 and 2017 when houses seemingly sold themselves. Though it likely won’t be as extreme as our last cycle that resulted in the Great Recession, here is an overview of what to look for in your area.

Phase One

Your market is likely already experiencing phase one winds: a robust, almost manic sellers’ markets in which prices rise, buyers buy in frenzied multiple-offer situations, and new construction is happening at rates not seen since before the recession. Brokers might be seeing their agents expand into teams or bring more people onto their teams. Additionally, numbers of social media followers are increasing at staggering rates—but these followers are just that, followers. They’re not being converted to clients primarily because agents are too busy to follow up.

Phase Two

These winds are either on the way to your market or have already begun to blow some leaves off the trees, with the whisperings of “Is the party over?” In some markets, prices continue to hold on, while in others, prices start to fall. Buyers now have another option at their disposal—they can and do walk away from a house when they don’t like the price, terms, or necessary repairs. Houses will remain on the market for months instead of days or weeks, and inventories will begin to rise. Offers on listings begin to drop from multiple to perhaps just one, and that offer will rarely come in with premiums. Inspection issues that were ignored in phase one become negotiated again. New construction begins to taper, and unsold homes translate into a surge of expired listings. Sellers become more selective about the agent they choose to represent their property. They’ll be looking more closely at agents’ sales records and the information agents provide in content marketing for signs of a salesperson’s overall effectiveness. You could say phase two is a reality check.

Phase Three

Shifting winds begin a cycle of rising inventories, sellers lowering their listing prices, and buyers waiting to get what they want in their chosen house without concessions. This cycle becomes increasingly tight the longer phase three lingers. Appraisal and repair issues will return to the negotiating table. Buyers are in solid driver’s seat mode. However, banks may tighten their lending standards in an effort to stave off future foreclosures, and as a result, it becomes more difficult for buyers to obtain a mortgage loan. Upper-tier sellers lease their properties instead of selling them at prices they consider to be too low. Homeowners’ equity in mid- to lower-tier markets slows and short sales return.

Phase Four

Winds begin the slow recovery process. Markets eventually become balanced with buyers and sellers having a fairly equal say in sales definitions. Eventually, winds shift and return again to a seller’s market.

Often because of hardships experienced by natural real estate cycles and housing market “corrections,” the shifting winds also help usher in the next generation of business models.

Pay attention, brokers. Your leadership, open-mindedness, and willingness to adapt and be proactive will set the stage for your firm and agents to thrive during all phases of shifting winds and changing market conditions.


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