We recently spoke with Joe Quattrucci about the shifting real estate market and what it means for an agent’s business. Both Joe and Jacqie Stone have been teaching a series of classes around the shifting market to agents in the brokerage. Joe has agreed to collaborate on a series of blog posts to discuss the shift. As a result, Joe hopes to provide helpful information for agents as they prepare for this new phase of the market. In this introductory blog post, Joe shares information about what a real estate market shift is. He also discusses how the dynamic between buyers and sellers changes, and how the shift affects agents’ business strategies.
Three Types of Real Estate Markets
There are three types of real estate markets, and they are defined by the number of months remaining in inventory, referred to as the absorption rate. The absorption rate compares the rate at which buyers are buying, to the rate at which sellers are listing, and is expressed as a number of months. In other words, if no new homes became available for sale, how long would it take for the existing inventory to be purchased based on current demand? Factors that effect supply and demand include employment rates, interest rates, the cost of raw materials, the number of new homes being built, and other local, national, and global factors.
Buyer’s Market: Supply exceeds demand, and there are 7+ months of inventory available.
Balanced Market: Supply and demand are approximately equal, and the absorption rate is between 5 to 7 months.
Seller’s Market: Demand exceeds supply, and there are less than 5 months of inventory available.
Seasonal Real Estate Market Shift
Most real estate markets experience seasonality in their number of home sales. Seasonality is attributable to various factors, including weather, school year schedules, and holidays. Spring and summer are traditionally noted as the best times of the year for home sales, while winter tends to have less home buyers. Those buyers still on the market tend to have a lot of motivation to buy, likewise, home sellers during winter tend to have a very high level of motivation to sell.
It’s important to be aware of seasonal shifts in the real estate market. However this blog series will be focusing on the other type of shifting market, which happens over a much longer period of time…
National Shifts in the Real Estate Market
At the national level, real estate market shifts usually happen much more gradually. As a result, it may take several years for a seller’s market to shift to a buyer’s market. Also, the number of home sales may decrease, so successful agents must compete more effectively to gain clients and earn income. This blog series will deep dive into these long-term market shifts and discuss a variety of tactics and strategies to deploy, starting with your ability to read and interpret market data.
Indicators to Watch For
A lagging indicator is the final result or outcome that is already too late to change. These data points are a look in the rearview mirror. They allow you to examine previous weeks, months, and years, to assess trends in the market’s movement. Most buyer and seller clients are looking at lagging indicators (“my neighbor sold their house last month for…”). Although this is useful information to consider, it’s not always a reflection of what’s happening today. It also does not help you predict what is going to happen tomorrow. Lagging indicators include:
- Number of Homes Sold
- Sales Price
- Sale to List Price Ratio
- Annual Appreciation
- Price per Square Foot
A leading indicator is a specific data point used to predict potential changes coming in the market. Leading indicators are the activities and metrics that will ultimately impact the lagging indicators, but happen first, allowing you to more accurately anticipate what’s coming next. Leading indicators include:
- Active Listings
- New Pending Listings
- Days on the Market
- Interest Rates
- Mortgage Applications
It’s important to understand that market shifts happen, both seasonally and nationally. They will continue to happen as various factors affect both supply and demand.
According to Joe Quattrucci, “In any real estate market, our job as licensed real estate consultants is to interpret the relationship between supply and demand, and decide what that means as it pertains to bridging the gap between buyer and seller expectations.”
Agent success will come to those who are resilient and who practice consistency in their business. Agents who maintain their activities during a shift actually have potential to grow their “market share.” At the next shift, their share of market will increase dramatically.
Hold Your Numbers Steady During a Real Estate Market Shift
This graphic represents an individual agent’s market share. In this example, an agent consistently closes 20 deals per year in their hyper-local market that has 100 total annual home sales. This means the agent’s market share is 20%. As the number of home sales decreases during the real estate market shift, as long as the agent continues to close 20 annual home sales, their percentage of market share increases. So if now there are only 40 total sales available all year, and this agent closes 20 of them, they have acquired 50% of the total market share. (Graphic courtesy of Beat the Shift by Gary Keller.)
At the Next Real Estate Market Shift Your Market Share Will Increase
Say the market begins to shift back the other direction. Now, there are more home sales available in a given hyper-local market. Therefore, the agent has the opportunity to hold onto their market share and increase their total number of homes sales. Using the same example, an agent is at 50% market share by closing 20 units annually. As a result, they will retain their 50% market share over the now available 100 units. This means the agent is now closing 50 units per year. That’s a 150% increase in closed units! (Graphic courtesy of Beat the Shift by Gary Keller.)
Four Steps to Success
Regardless of the real estate market you’re working on, these four steps will lead any agent to success:
- Remove limiting beliefs and negative emotions
- Create a compelling future and set goals
- Take action
Take note of #3, “Take action” and be sure that is what you are doing. However, if you don’t take action, you can be sure that others are taking action. Therefore, it is those agents who will find the success that is eluding you!
Shift Your Reality
What is one thing you can do today to move toward success during the real estate market shift? Shift the thoughts, beliefs, and decisions in your mind. Think of it this way:
Our Perception of Reality Shapes Our World
As such, if your mind is full of limiting thoughts, your mind will limit your reality. So change what is in your mind! The following examples may be helpful.
Instead of saying…
“I can’t” say “I can”
“It won’t work” say “I will find a way”
“I’m too _____” say “I am proud” or “I am worthy”
“I can’t believe _____ happened to me” say “I’m grateful _____ happened to me”
The Real Estate Market Shift Series with Joe Quattrucci
Joe promises to share each of the 12 tactics going forward. As a result, everyone can quickly learn how to adjust to a real estate market shift. By learning and talking about the shift now, Keller Williams Arizona Realty agents will be well positioned to hold their activity steady and grow their share of the market during the shift.
The 12 Tactics
Contact us today to learn more about our market center. Keller Williams Arizona Realty is known as the best Scottsdale real estate brokerage, and for good reason: We excel at providing our agents with all of the training, tools, and support they need to reach the highest levels of career success. Listen to what our agents have to say in their testimonials, then decide for yourself. Are you ready to join the brokerage that will lead you to success? Or are you struggling with limiting beliefs?
Feel free to call us right now: 480-767-3000