Record low interest rates of 2020 and 2021 followed by the steady, rapid increases of 2022 have some agents and brokers fearing the worst for 2023.
However, real estate pros are now reporting signs of stability as potential buyers and sellers settle into a market many are characterizing as the new normal.
While buyers and sellers continue to adjust to a 6-7% interest rate, compared to the 2-3% they were shopping for in 2021, top agents and sellers only need to point to the historical lineage of interest rates from decades past.
“It may take us a little longer as a market to adjust to where interest rates are today,” says Peter Chabris, a Keller Williams MAPS Mastery Coach, Group Coach and owner of The Chabris Group, “but we have centuries of history to demonstrate that humans adjust to whatever the new normal is. Today’s interest rates are historically average. Still, most of today’s buyers have never seen anything over a 4% interest rate, so it’s a little jarring for them.”
Whether real estate has reached the full extent of this “new normal,” no one can say for sure; but, we did consult a few experts about how they’re pivoting with success in today’s challenging market and turning the challenge of the new normal into new opportunities. Here are their top 10 tips to help agents not only survive – but thrive – in today’s market.
Agents and brokers express optimism for the future, like Lisa Chinatti, Team Lead for Chinatti Realty Group, Massachusetts and New Hampshire, who sees no time like the present for agents to keep their spheres informed about the changing metrics in their local markets.
“We’re looking at the specific supply of inventory and the level of buyer demand – not just for New Hampshire and Massachusetts or even just for Boston – but we’re getting super granular with specific zip codes and property types in those zip codes to give buyers and sellers the information they need about their specific markets in order to make the best decisions for their situation,” she says.
The suburbs of Boston, for instance, are “still heavily in a sellers market with newly listed properties receiving five or 10 offers the first weekend,” she says. “Whereas, in the city, we’re not seeing demand quite that dramatic.”
As a result, Chinatti and her agents make sure to educate potential sellers on the current market metrics, like days on market, number of homes sold and home sale prices.
During these challenging times, Chabris makes a point of talking to his lender regularly to better understand how many mortgage applications they’re receiving. “We do a great deal of transactions and have a finger on the pulse of the market, but our lender will have an even better feel of what’s going on in the front end of the pipeline,” he notes.
Specific to sellers, The Chabris Group looks at absorption rates and days on market for pending sales. “With the rapid increase in interest rates, you can’t look at past sales data because interest rates have gone up every 45 days so data from 90 to 180 days ago is from a completely different market. So you can’t look as much at closings as you have to look at pending sales,” says Chabris.
While we saw many institutional investors in the white-hot market of the pandemic, most brokers and agents foresee 2023 attracting more independent investors lured by anticipated profit margins and higher rental incomes.
In Boston, where rents continue to run historically high, Chinatti believes there will be fewer “fix and flip” investors in 2023 as they take a more “wait and see” approach.
Chabris in Cincinnati agrees, noting his group closed two deals last month and two the month before on single-family properties in which the investors planned to rent to the elderly in a shared care setup.
Joe Gaeta, Showingtime+ Director of Broker Development, also foresees more investors viewing 2023 as a possible “opportunity to buy.” “For smaller investment groups and mom and pops, I think 2023 is the year they will carefully watch what happens to the market. I think we’ll see more of them looking to ‘buy and hold’ versus ‘buy and flip’ and possibly looking for more rural opportunities than in the past,” he says.
In addition to investors, both Chinatti and Chabris have witnessed an increase in interest among friends and family members who are purchasing properties together due to the market’s overall decrease in affordability. These buyer groups may purchase single- or multi-family properties, offering separate living space but at a reduced cost than if the occupants were to purchase solo.
“We’re starting to see a pattern among millennials buying with friends – like a boyfriend and girlfriend or two friends going in together to buy a property – as well as the multi-generational buyers,” says Chinatti.
Gaeta agrees, predicting more creative approaches to home purchasing among millennials and grandparents, siblings, friends and even grown children investing with their parents to start a family in a shared housing situation.
In 2020, when leads were pouring into real estate offices, many buyers expressed their need to move for upcoming life changes; but, not every lead converted into a sale. Now, agents and brokers say, is the time to revive those leads and check in with past prospects.
Angie Schmidt, Zillow Partner Strategies and Operations Manager, conducted a survey and focus groups with a Zillow Agent Advisory Board and Premier Agent Partners in Seattle, Atlanta, Denver and Southern California in Q3 2022 to better understand the process successful agents take to improve their offer process in both hot and cold markets.
From the 316 survey responses and focus group research she analyzed, she found that many of the top agents placed critical weight on building rapport and making sure to ask specific questions during the initial connection with the client to uncover their reasons for wanting to make a move.
“During the sellers market, when it was crazy hot, they received tons of connections and so it really came down to who’s best at organizing those particular buyers and getting as many buyers into homes,” says Schmidt. “Now that it’s slowing down, it comes down to the same thing – how well were you at organizing when you were getting those connections into the pipeline and where are they now?”
“Our top partners are incredible at this because they have top communication and people skills and the tech to keep tabs so when the market slows down, they can focus on their pipelines,” says Schmidt.
According to Anytime Estimate’s American Home Buyer Survey, September 2022, nearly three-quarters of U.S. home buyers have regrets over their home purchases made in 2021 and 2022.
Chinatti uses dotloop to help identify and stay in touch with repeat and referral customers. By referencing closed loops from 2022, the group is now sending all buyers and sellers their closing docs for the tax year.
“Being able to share those documents through dotloop creates a touchpoint where we can ask if they’re still happy with the home they purchased. We’re giving them something of value while engaging them in a conversation,” she says.
Rather than stop or slow marketing efforts, as some new agents tend to do during the slow months, Chinatti and team say a better strategy is to “double-down on the plays that work,” like good old fashioned farming and phone calls to past clients.
“Calling folks and having conversations about the opportunity that still exists in the market is still a viable approach,” she says.
Gaeta agrees. “We need to stop referring to them as past clients. We are probably one of the only industries that does that, but when did they become past clients? They should always be our clients, top of mind, to help ensure your buyers and sellers haven’t forgotten you eight weeks after buying or selling a house.”
In a challenging market, successful agents learn to set expectations with buyers and sellers early in the process, says Schmidt.
Successful agents can set expectations upfront with buyers by listing the facts about interest rates and giving them a historical flow chart of where interest rates charted 10 years ago so they head into a transaction with more realistic expectations.
By setting expectations, agents can also help to establish trust with their customers. “By breaking down the financials and helping them separate the money from the emotion, buyers are more likely to feel comfortable with their purchase,” Schmidt says.
Interest rates may have suppressed buyer demand, but the truth is, people still have to move due to life changes, including births, deaths, divorce and retirement. In Boston, where the winters are harsh and not as conducive to retirement as some warmer climates, relocation of aging baby boomers offers a viable segment in a challenging market, according to Chinatti.
“Our baby boomers typically have lots of equity and can afford to sell,” she says. “Also, our home values are higher than average throughout the country, and our housing tends to be older with lots of two-story houses. So one of the things we’re focusing on is those folks who have been in their multi-story homes for 30 or 40 years and have a good amount of equity in them so they can cash out by buying a less expensive home in one of the warmer states and capitalize on that nest egg they’ve created.”
“While the media is putting out messaging about how the market is soft or crashing and that values are falling,” she says, “we’ve got to undo that messaging and let them know that they’re not losing value.”
Chabris predicts open houses will come back in a big way this spring. “Open houses, especially for newer agents, cost next to nothing and we’re coming up on the season,” he notes.
Depending on the climate in your market, mid-February to the end of March is “go-time” for open houses, says Chabris. He recommends this strategy particularly if days on market are increasing and the market is under-supplied.
“The average agent sticks their head in a hole and hides when things go bad, but if you double-down on open houses, the breadth of your sphere and the depth of your relationships should expand,” he says.
Real estate tech can also help agents as they pivot in a challenging economy. For example, Pricing Benchmark Report by ShowingTime as part of the ShowingTime+ brand, offers an ideal resource for agents who have sellers “who want to keep their home priced at a certain price point, but the market is telling us something different,” says Gaeta.
He likens Pricing Benchmark Report to helping “keep the business, while Target Market Analysis helps get the business.” Target Market Analysis reports allow listing agents to share the optimal pricing range for a certain zip code while having the data to determine how many showings they’re likely to receive.
“It’s about having the right data to win the business. You can ask, ‘How quickly do you want to sell your home? Within 14 days?’ Here’s the sweet spot pricing for this neighborhood for 30-60-90 days. It helps agents guide the conversation to not provide an unexpected sale of a home that’s not worth what it was 15 minutes ago,” he says. “It gives agents the right information to have a dialogue and the right numbers so they can win that listing.”
Chabris also favors Target Market Analysis for its ability to report on how many showings per listing, per week, in different market segments by price and by location. “It’s a phenomenal way to educate sellers on the reality of what homes are selling for,” he says. “You can look at all active listings for 3-bedroom houses, for example, in different price segments and show the average number of showings per listing in each one of those segments. This helps sellers understand that if they haven’t received as many showings as the average listing in their segment, that they have a value issue. And if they’ve had as many showings but haven’t received as many offers in their segment, they have a value issue. It’s a great way for buyers to understand that they’re not the only shoppers shopping in this market relative to the amount of inventory available. That gives us a real time pulse on what’s going on in the market.”
Once the deal moves into a transaction, dotloop helps by handling all signatures electronically and more “so you won’t be at the closing table and have a document missing,” says Gaeta. “I’ve been there. My wife and I had our four kids with us as we closed on a house and the title rep tells us we’re missing a termite voucher. That won’t happen with dotloop because everything is in the loop, which can’t advance until all the documents are captured.”
Listing agents who want to differentiate themselves from the competition now have a new resource to help their listing stand out. Listing Media Services’ high-res photography, virtual tours and all-in-one interactive floor plans helps turn ordinary listings into fully immersive rich media viewing experiences.
Consider homes on Zillow with a virtual tour and/or interactive floor plan were saved by users 78% more often than homes without a virtual tour, according to Zillow Group internal 2022 research.
While rich media won’t replace the physical experience of touring a home, Chinatti says, “it can help market a home, create interest that regular 2D photos cannot, and serve as an effective tool for getting people who are on the fence about potentially looking at a home to go see it in person.”
ShowingTime+ Listing Media Services can help by enabling agents to schedule high-resolution photography, interactive floor plans, virtual tours, aerial photography and more as soon as the next day to complete a rich media experience and help your listings stand out in any market. Click here to learn more about new Listing Media Services.