The real estate market correction is coming. In fact, in some markets we can see signs of it already, and not just because we are heading towards the holidays. There are many signs that correction is on the horizon, and that isn’t necessarily a bad thing. Interest rates at 3.5% is not sustainable or good for the economy long-term. If it was, that’s where rates would always be, or maybe lower. There are many factors that go into a real estate market correction, and I’m not going to get too detailed. I will however talk about some of the major factors, and how a Realtor and Lender can leverage this an opportunity to win clients and business.
Bull Market and Rising Rates
We have been riding a nine year bull market (positive growth) where we have seen the market steadily rise after the great recession. Many of us bought a property at a low price with even lower interest rate. The rates were set artificially low to get the economy moving after a horrible recession. It worked. Now that the stock market is at an all-time high, and unemployment is very low, it is time to correct things and increase rates so the government and banks can make more profit on the money they are lending.
Rates will not go too high to hurt the market badly, but 5%-5.5% on a 30yr fixed rate shouldn’t surprise anyone. Historically, those are very affordable rates but in many markets the rise in-house payments could cause a stagnation of sorts for certain buyers. It can also soften the market for sellers, especially in the higher home prices.
This is the large elephant in the room. Seems that no administration really wants to tackle this issue. Democrats and Republicans continue to spend money we don’t have. Last year we added $779 Billion to the National Debt (17% increase in fiscal year), and we spent $522 Billion just on interest alone! In comparison, we spend around $636 Billion for our entire National defense budget. This is a big National issue. As the interest on the debt continues to rise it will consume more of our GDP causing even more issues. This added with higher interest rates will cause it to grow quicker unless something is done. This could affect the stock market and overall housing market. My personal belief on correcting this is to set term limits on Congress and pass an Amendment to ensure a balanced budget annually.
The tax cut passed last year had many good things in it, but also some bad ones. It got small business a break and helped to create even more jobs. The bad, is it created far less revenues (for now) coming into the Government. For instance, corporate tax collections fell $76 Billion in the last 12 months alone. The tax cut benefits long-term are too early to tell. Will the extra monies companies have create large expansion, profits, and money back to the Government or not? Time will tell.
Overcoming the Real Estate Market Correction
If you were in the business during 2008 we know that was terrible. In no way am I stating that this market correction will be close to that, but we all had to adapt to survive. We all have it easy when rates are super low and homes sell in 24 hours. What about when that isn’t the case? That is when we ALL become super valuable to our clients. They NEED us more than ever!
Reaching out to past clients, SOI, and doing client appreciation events to strengthen our warm relationships is key. Lead generating for NEW clients to fill the pipeline and learning how to use the internet/video to portray your value. You will see Realtors, Lenders, and Title professionals leave the industry creating a vacuum that we all can fill.
Take the time to create a business plan and follow it. When we know a shift is coming in the next 12-18 months, preparing for it ahead of time will give you the advantage to gain clients and market share in your area. Plant the seeds now and grow your relationships and develop new ones.
If you have marketing dollars saved up…spend them wisely to gain clients. Don’t hoard them away for a rainy day. Invest in yourself and business so regardless if a real estate market correction is mild or severe, your business will take the hit and keep expanding.
Let’s Grow Together!
At Stewart Title, our job is educate and support our clients. We don’t truly know the extent of a real estate market correction, but either way, we are here to grow together and get more qualified eyes to your real estate business. Take a moment and fill out the form below and tell me how I can best help you!