By Jessica Escamilla, president of the Houston Women’s Council of Realtors
How can you, as an agent, increase your business during this period of low inventory? For the 10th consecutive month, the Houston housing market has recorded positive sales despite the record-low inventory.
Single-family homes escalated to 24.4% year over year as reported by the Houston Association of Realtors. As sales continue to see a dramatic increase, high-end homes dominate the market. The luxury sector, which includes homes above the $750,000 mark, saw a sales increase of almost 90%. Homes priced between $500,000 and $749,999 also had an increase of 96%, while homes priced at $250,000 to $499,999 saw a 50.7% sales increase, according to the Houston Association of Realtors.
As most Realtors know, the market supply did not keep up with the demand. As is the case around the country, months of inventory estimates have dramatically decreased in Houston from 3.4-months’ supply in March 2020 to 1.4-months’ supply in March 2021. Nationally, inventory currently stands at a two months’ supply. Add that with the fact that current homeowners are staying in place longer, and that means there is less turnover of existing homes. Although the reason isn’t completely clear, most sellers did not want buyers coming through their home during a pandemic.
Typically, buyers live in their home from seven to 10 years. This inventory shortage is causing stress for many homebuyers. Factor in that interest rates are historically low and the cost of building materials has doubled during the pandemic, and you can bet buyers are stressing.
Now that we know some of the reasons for the shortage, what can homebuyers and their agents do? How can we, as Realtors, navigate this market? Obviously, buyers have several things stacked against them. With the lower mortgage rates, the average buyer can afford a larger loan, which is driving prices up, and the supply shortage is increasing the competition. It’s currently a seller’s world.
As Realtors, we have many roles. I work with my sellers to price their home effectively, and I work with my buyers trying to find a home with this fierce competition. As a buyer’s agent, I continually educate my clients on the current condition of the market. All buyers want an agent that will fight for them. However, the role of an agent is changing from, “How can you get me the best price and the most money towards repairs?” to “How can you use your experience to win a bid in a multiple-offer situation?”
I think as Realtors we must be ever-changing. We must be able to adapt and utilize market conditions to help our clients and our business. The key to helping your buyers and sellers is to educate them about the changing market. You can’t do things like you did last year or the year before if it’s a totally different market out there.
Obviously, there are steps that a buyer can take to prepare themselves to purchase a home, and it’s up to their agent to explain the process to them and encourage them to be prepared for this market. Mortgage qualification and preapproval are extremely necessary with the current market. Although it’s always been important to get prequalification and preapproval, in a low inventory market it’s even more important to have a relationship with a mortgage broker. The prequalification letter can include additional information about the buyer, which would help in creating your buyer’s package.
There are some things that a buyer can do to be more competitive in the current market. They should definitely get to know the neighborhoods where they are thinking of buying. They should make themselves aware of possible offer concessions. I know we’ve all heard of seller concessions. What about a buyer concession? Consider offering to pay the title policy, a short option period with a higher option fee or no option, a quick closing with a lease back, no appraisal contingency and a shorter loan approval date. For some buyers, not all of these items are options. Not every buyer has the extra money to make up for an appraisal shortage. This is why buyers need to be educated by their agent to set expectations. It should not be a surprise to your buyer that the house may sell for over list price.
If you’re like me and work with buyers and sellers, you need to educate your seller, as well. Sellers should know that to get the optimum sales price, they need to prepare the home for sale and present the home in the best light possible. This has not changed. In order to encourage multiple offers, the price should be set with the expectation that there will be many interested parties. The creation of urgency has never been more real than now. When I am working with the seller, my goal is to set the price reasonably but with the expectation that there will be many interested parties and we may end up in a “highest and best” situation. Taking care of any minor repairs on the home is going to work toward the advantage of the seller. Your goal as a selling agent is always to obtain the best price possible for your seller with a minimum number of concessions, but also to protect their legal liabilities.
Most consumers are aware that the pricing of homes takes place at the intersection of supply and demand. With the shortage of housing, the National Association of Homebuilders has indicated that the new-home construction rate of 1.42 million per year is not going to be sufficient to address the current shortage. They are predicting at least three to five years of tight housing supplies.
Listing agents control the market. During a shortage, it is important to prospect both passive and actively. Most sellers have plenty of questions. A few ideas to increase your prospects: Publish videos on hot topics; you can send that via email, as well as posting on social media. You definitely need to be filling your feed on social media with market reports and insights or quotes from experts. Include local and hyperlocal hashtags. This will increase your audience. Reorganize to fine-tune your follow-up. To have a successful lead-generation strategy, you should have the ability to offer a little something for everyone.
During any discussion regarding selling a home or buying a home, you need to show value. Value isn’t the commission you charge. You need to show what you bring to the table. Instead of sending out a typical message regarding selling their home, pack an email or blog with newsworthy downloadable guides. Or provide a helpful market forecast video.
A few questions that could be answered are why I need a Realtor or why you are better than any other local agent. Take it a step further to what value you can provide by anticipating and meeting their needs, as well as working for their interest.
It is a great time to strengthen your listing presentation. Recapping your sales and career accomplishments is not going to create a competitive market presentation. Focus on the sellers’ unique needs. Explain your company’s value. Explain your value and establish trust. Market insights and data from reliable sources help support your opinion about what’s happening in the housing market. Confidence is the key when it comes to creating trust. All of the news media headlines are creating confusion regarding the economy and the housing market. Using graphs, charts and reports, help prospective clients and earn trust and build confidence.
Overall, your buyers and sellers need to know the value of hiring you as their Realtor: professional assistance to find a home; creating a strategy for competing, identifying and selecting a reasonable price and terms; assistance with presenting a competitive offer; explaining the inspections; assisting with information on financing and appraisals and walking through the process with the buyer or seller all the way to closing. These are all advantages of working with you!