CEO Newsletter June 1 2022
Some secrets aren’t secrets at all if you keep your head up. And for those with their heads up, of which I’m including the agents of Keller Williams Arizona Realty, we know that we are in a market shift.
Pay careful attention: It’s not that a market shift is coming–it’s already here. Sure, you may not have already felt it yet but I can tell you that you will. And when it affects you personally I want you to be prepared. Over the next two weeks I’m going to attempt to persuade you on two matters:
1. The shift is here and will be here for a long time
and
2. Your business will thrive even more in the shift if you commit to the fundamentals
We will take these one at a time and when we conclude I look forward to announcing something special for our company that kicks off June 14th at our 20th Anniversary All Partners Meeting.
The Shift is Here and is Here to Stay
By now you’ve been in this business long enough (or at least on this planet long enough) to recognize there are cycles. Real estate, like most things in the world, is cyclical.
Gary Keller tells us in Shift that these cycles occur naturally every year on a small scale, and globally they seem to happen every decade or so.
What is a Shift?
Before I get too far it would probably be wise to define what I mean when I use the word “shift.”
Put simply, a shift is an adjustment that takes place that moves the balance of supply and demand. When buyer demand exceeds seller supply we’re in a seller’s market. And that is certainly where we’ve been in Phoenix (and most places nationally) for the better part of the last decade.
Just 3 months ago in fact Maricopa County saw the lowest inventory amount when active listings dropped all the way to 8,492.
Last year, in 2021, average monthly available listings hovered around 10,000 while total sales for the year topped out at 104,850 units.
Couple these facts with a huge deficit in the new home construction market and you and I understand why our buyers have had to endure a lot to get to their next home. Thankfully they have you standing by their side.
What is Happening Now?
You might be thinking that if a shift is defined as a movement in supply and demand, then it is a movement from a buyer’s market to a seller’s market or back again and that we can’t possibly be in a shift.
You may be firmly committed to the fact that we are still in a seller’s and that nothing is happening that could steer you, or your clients, off course into different waters.
But I’d caution you to dig a little deeper even beyond this CEO Newsletter June 1 2022, and here’s why.
There are several factors that contribute to a shift in markets, and many are in play right now:
- Interest Rates
- Politics
- Inflation
- Market Sentiment
Factors in Detail
First, interest rates and consumer lending are moving up. While still at historic lows as I write this–5%–this is nearly double what some of your buyers are experiencing less than a year ago. And at the moment it’s not the rates that are that convincing. It’s the buying power. And how it relates to #4, market sentiment. I’ll comment on that in a moment.
Second, politics. It’s important to recognize that yes, political unrest does not just impact the stock market but also the real estate industry as well. The war in Ukraine among other less-documented conflicts has aggravated the market and put pressure in several sectors.
Impact of Inflation
Third, inflation has caused the average American household to at least examine their spending. The VP of Industry at kwri has gone on record saying that “nothing threatens democracy like inflation” and so we must get it under control. How does inflation contribute to a market shift?
Consider purchase power alone. Inflation puts pressure on households to spend more on basic necessities and while shelter is one of those, move up buyers now have less buying power with more on their weekly and monthly expense line. This causes a pause, evaluation, or outright withdrawal from the buying market.
And finally, market sentiment. Quite likely this factor is ultimately responsible for every shift, for it is the psychology of the consumer that ultimately decides whether they buy or sell. When all the other things described start to occur and sentiment shifts, the market is the lagging indicator. And we are already there. Consumers have begun to listen too intently to the pundits about interest rates and inflation and a “housing bubble” that we’ve seen inventory double as sellers finally look to cash in on the peak and overall offer numbers per property decline. Days on market has slightly increased. Even as I write CEO Newsletter June 1 2022, the market is changing.
We’re in a Shift Indeed
But here’s the thing. This shift should not paralyze the top real estate agents in the valley and across Arizona. While I want to convince you we are in a shift, what you must also realize is that at this point we are still in a seller’s market. Instead of 1 month’s supply perhaps we have 2-3, still a far cry from a balanced market (defined as 5-7 months of inventory). So why focus on the shift at all? If we’re still in a seller’s market has anything really changed?
Here’s the thing. Gary Keller reminds us that shifts usually pick up speed–like a golf swing–and a balanced market is typically only a blip on the way to one direction or another.
Recognize Where we Are
And so, wise agents should recognize where we are in the shift cycle. We are still in a heavy seller’s market picking up speed as we head in a buyer’s market direction. What this means for you and your business is multi-faceted and I’ll address it in next week’s letter. For now, I want you to pay attention to what’s happening around you, and ask yourself this question:
How’s your mindset in the midst of this shift?
Because if you expect your clients to get it then you had best be prepared yourself.
And then I want you to click this link for Shift: How Top Real Estate Agents Tackle Tough Times and save these dates for “Beat the Shift,” a 5-part learning series happening at KW Arizona beginning June 21:
Upcoming Training
Thursdays June 23, 30, July 7, 14, + Bonus Panel at July APM July 19th
1-2:30pm
Raintree Training Room
There will be contests with prizes including an in-person, private session for the top 10 people in our contest with Tina Tamboer and so much more. Thanks to Magnus Asset Title for sponsoring.
……
This year I’ll be sharing more about how Together we all Achieve More and how understanding our culture and models help everyone surpass our goals together in a monthly newsletter and sometimes even more frequent blog posts.
I will answer questions I’ve received repeatedly about kw and specifically kw Arizona.
What questions about kw do you have after reading CEO Newsletter June 1 2022?
I’d love to answer them. Feel free to contact me directly at any time.