How to Advise Clients in Today’s Shifting Housing Market – Provide insights and tips for guiding clients on buying/selling homes in the current environment of rising rates, prices, and low inventory.
Introduction
The real estate market is always moving, but the past couple of years have seen some major shifts. With mortgage rates rising, home prices still climbing, and inventory staying low, many clients are unsure about whether it’s wise to buy or sell right now. As an agent, it’s your job to keep your finger on the pulse of the market and provide sound guidance during uncertain times. This article explores the current housing environment and equips you with actionable tips for advising both buyer and seller clients.
Current State of the Housing Market
Mortgage rates have leveled off but are still elevated. According to the podcast, rates are hovering around 7.3% nationally and are expected to remain in the 7-8% range absent an economic downturn. While rising interest rates have cooled demand, supply is lagging even further behind. Home listings are down 43% since 2019 while prospective buyers have declined 30%. This dynamic of low supply and relatively stronger demand is why home prices continue climbing even with higher mortgage rates.
The good news is that the market is showing signs of slowing as we enter the fall and winter months. Homebuying activity usually declines moving into the holidays due to typical seasonality. With demand moderating, buyers are likely to see less fierce competition and more room for negotiation. Sellers may need to adjust pricing expectations accordingly.
Overcoming Client Objections:
In any shifting market, clients will naturally have concerns and reservations about buying or selling. As their trusted advisor, it’s essential you address objections head-on and provide reassurance.
For buyer objections, point to data, set expectations, and reframe their mindset. Some examples:
Objection: “I’m waiting for mortgage rates to come down before buying.”
Response: “Historically, significant drops in rates have coincided with economic downturns that no one wants. Today’s rates in the 7% range may be a new normal we have to adjust to. Rather than trying to time rates, let’s focus on whether you can afford the monthly payments.”
- If rates do happen to fall later, you can always refinance. But waiting carries the risk of being priced out if home prices keep rising.
Objection: “Home prices seem too high right now.”
Response: “While prices have risen due to limited supply, your monthly payment is what really impacts affordability. Let’s look at what loan amount aligns with your budget, and we can seek builder incentives to lower total costs.”
- While prices are high, they are continuing to rise due to low supply. Waiting may mean paying even more later.
- Focus on monthly payments rather than just sticker price. Higher rates offset some of the price gains.
- Builder incentives like covering closing costs can help reduce total out-of-pocket costs.
Objection: “I’m worried the housing market might crash.”
Response: “There will always be some uncertainty, but data suggests we’re heading into a more balanced market, not a crash. Buying puts you on the housing ladder so you can take advantage of appreciation over the long-term.”
For “I’m not sure if it’s the right time”:
- The last quarter of the year is seasonally a good time to buy as demand falls. More builder incentives also help.
- Getting on the housing ladder now allows you to start building equity. That equity can help you move up later.
- While timing the housing market is difficult, current data suggests supply/demand favor buyers acting soon.
The key is focusing on monthly affordability rather than trying to time rates or prices perfectly. Acting soon can make sense for many buyers.
For sellers reluctant to list, emphasize preparation, pricing right, and leveraging market highs:
Objection: “Maybe I should wait until the spring to sell.”
Response: “Homes that hit the spring market prepared and priced accurately tend to sell fastest and for the most money. Let’s get ahead of the game by acting now.”
Objection: “Won’t I have to lower my price a lot?”
Response: “Pricing right from the start for today’s buyers is crucial. This may mean adjusting below what neighbors sold for last year, but it sets you up for offers.”
Objection: “Is now really the best time with rates up?”
Response: “Even with higher rates, values are still near record highs. Acting now lets us take advantage of low supply before more inventory potentially comes on the market.”
The key is relating directly to each client’s concerns with empathy and logic. Arm them with facts and perspectives to overcome hesitations.
For buyers – assess true monthly costs
When working with buyers in the current market, it’s essential to emphasize monthly carrying costs rather than fixating on home prices or interest rates in isolation. Consider these tips:
- Utilize mortgage affordability calculators to estimate monthly payments across a range of home prices and interest rate scenarios. Focus the search on homes that align with the client’s budget.
- Compare estimated monthly costs of owning versus renting. Owning often makes more financial sense in the long run despite higher upfront costs now.
- Have clients get pre-approved at today’s rates. This indicates how much they can realistically borrow and spend.
- Be upfront about the unlikelihood of rates dropping substantially anytime soon barring an economic crisis.
- Note that while prices are high, waiting may mean paying even more later as values rise. Getting on the ladder now starts building equity.
- Highlight builder incentives – like covering closing costs or buying down rates – that reduce out-of-pocket expenditures.
With buyers, it’s about setting proper expectations around rates and prices while demonstrating how monthly ownership costs can still align with their budget and goals.
For sellers – price accurately from the start
Sellers need straightforward advice around pricing, preparing their home, and expecting slightly longer timelines. Use these tips for setting sellers up for success:
- Have sellers get an upfront appraisal to benchmark against comparable sales and help price accurately from the outset.
- Be clear that buyers have less purchasing power now with higher rates. Price drops may be needed to attract interest.
- Advise staging, cosmetic upgrades, and decluttering to maximize the home’s appeal.
- Manage seller expectations that homes are taking longer to sell in the cooler market. Patience will pay off.
- Discuss potential use of escalation clauses to extract highest offers during negotiations.
- Consider open houses later in the process to reach new audiences after initial buyer interest.
The key with sellers is aligning expectations around lower buyer demand, the need for more marketing time, and pricing right from the start. Patience and preparation are required.
Leverage the fall slowdown
The anticipated cooling of demand entering the final quarter of 2022 provides opportunities for both buyers and sellers. For buyers, less competition means more negotiation power and potential incentives from sellers who want to close deals. Sellers may need to offer stronger incentives to secure offers during a typically slower season.
Specific tips include:
For buyers:
- Search for motivated sellers more open to closing costs assistance or price drops to sell sooner.
- Negotiate with builders who may offer bigger rate buydowns and other incentives on finished inventory.
- Ask sellers to include warranties on home fixtures and appliances as part of the deal.
For sellers:
- Consider offering closing cost assistance or other price reductions before holidays lull activity further.
- Promote open houses heavily on social media and invite agents to drive additional exposure.
- Get the home in top shape heading into fall when buyers have less selection to consider.
The expected fall slowdown gives both buyers and sellers added leverage if played correctly.
Conclusion:
Today’s shifting real estate landscape requires advising clients based on market data, not emotions or assumptions. Set proper expectations around prices, rates, timelines, and competition. Leverage tools to demonstrate monthly costs and help clients make informed decisions aligned with their budgets and goals. While navigating change requires patience for all parties, opportunity exists for agents who understand the dynamics and can guide their buyers and sellers accordingly.
Real estate agents can face difficulties in a low inventory market, but there are strategies they can employ to succeed. It’s important to stay up-to-date on the market, prioritize listings, work with buyers, build relationships with other agents, be innovative with financing options and use cutting-edge technologies to stand out during the listing presentation, and focus on cultivating long-term relationships with clients. By implementing these tactics, agents can thrive even in challenging market conditions. Overwhelmed and looking for some help? Listing3D has got you covered. Schedule a demo with us.
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