When it comes to planning for the future, it helps to know what hurdles are waiting along the way.
While some challenges have been brewing for the past couple of years, others have sprouted more recently, bringing uncertainty surrounding how long they will last and what impacts they will have on consumers and agents alike.
The factors that will impact the trajectory of the housing market and how agents and brokers conduct business should be top of mind for everyone.
The next 12 to 24 months will bring a mixed bag of challenges that real estate professionals will need to navigate. Here are some of the top issues facing the industry in the near and medium term:
Ongoing Legal Issues
The real estate industry has several antitrust lawsuits going to trial in 2023 that could yield severe consequences should the courts rule in favor of the plaintiffs. From alleged anti-competitive practices to buyers and sellers taking issue with longstanding commission-structure policies, industry leaders have their hands full with several courtroom battles that could significantly impact how agents get paid.
Up until recent weeks, the National Association of REALTORS® (NAR) had also been dealing with a looming investigation headed by the U.S. Department of Justice (DOJ), which had reopened an investigation into several NAR policies. While a U.S. District Court Judge ruled that the DOJ needed to set its probe aside, there is nothing keeping the agency from opening new investigations in the future.
Inventory Strain
The supply-demand unbalance helped push home values—and equity—through the roof in 2021; it also created a growing challenge for buyers. While reports have indicated that inventory has grown slightly as the housing market cooled in 2022, it’s still not growing at a pace that will address the demand that’s currently in the market.
Recent forecasts from NAR suggest that housing inventory will remain tight over the next 12 months, with the number of housing starts expected to hit 1.44 million—below the average of 1.5 million. At the same time, projections indicate that fewer homeowners are likely to sell their homes as mortgage rates surge from their 2021 lows.
Affordability Crunch
Affordability challenges aren’t a new phenomenon in the housing market, but developments over the past couple of years have exacerbated the situation for consumers.
Lagging inventory and surging demand pushed home prices through the roof in 2021. Then mortgage rates, which hit record lows during the pandemic, surged in 2022—surpassing 7% at several points in the fall. Tack on elevated inflation and the Federal Reserve’s response of hiking interest rates, and you have cooling demand and prospective buyers—particularly first-timers and millennials—likely postponing their plans for homeownership.
Inflation and Interest Rate Hikes
This past year, inflation and the Fed’s response have left the U.S. economy in flux as CPI hit 40-year highs and the Fed spiked rates by more than 3%, adding to the burden on consumers and agents.
Dana Louis, an agent team leader with Sacramento-based HomeSmart ICARE Realty, put it best as she stresses the significance of the past year’s ripple effects of elevated inflation in the housing market.
A Looming Recession
The dreaded “r” word has been on people’s minds for months now. From the looks of elevated inflation and the Fed’s aggressive interest rate hikes, experts agree that a recession is likely in the near term—while others would argue it’s already here—although there are mixed reviews regarding how severe it will be.
While the term carries emotional baggage for folks who remember 2008 and 2009, it also means that real estate agents will need to rethink their gameplans to keep the ball rolling in the right direction as the market shifts.
Despite the hurdles and uncertainty facing the market’s trajectory and the impacts on business, Nick Bailey, president and CEO of RE/MAX, urges agents, brokers and industry stakeholders to “take a deep breath.”
“It happens yearly regardless of the economy and interest rates,” he continues. “Homes will get sold. The question is which agents and brokerages will be involved in selling them because there are too many business models in the last 12 months of a run-up in prices that have been based on something other than selling many houses.”
What’s the Gameplan?
So the housing market is going through some changes…again. Most would say that’s par for the course when you look at the big picture of the housing market’s cycles over the years.
A solid gameplan is a critical component of future-proofing your business and ensuring that you and your agents can thrive regardless of the market.
Coming off some of the best times many real estate professionals have ever seen, the uninitiated may look at current market shifts with panicked eyes. But those looking to thrive as we head toward the future will need to have a solid strategy to capitalize on the new normal.
The folks at Buffini & Company understand all too well the benefits of having a solid plan to guide your business no matter what direction the market is moving.
“We’re telling the agents, you don’t need to wonder what’s going to happen when you know what to do, and what we need to do is focus on our customers, get back to work and get busy,” said CEO Dermot Buffini as he addressed the crowd during RISMedia’s 2022 CEO & Leadership Exchange.
Buffini explained that the industry was still reeling from the impacts of the pandemic—the good and the bad—before things started shifting in 2022. He stressed that leaders are faced with a mixed bag of factors they’ll need to address in the coming market. Those include:
- Agent fatigue after years of burning the candle at both ends
- Uncertainty because things are changing in the market
- Excitement from folks who have seen these times before
“As leaders, I think the No. 1 thing we’ve got to lead with is clarity,” Buffini urged attendees. “When there is uncertainty, the best cure for uncertainty is clarity.
“Don’t focus on the headlines,” he continued. “The headlines are going to change every nine seconds. The headlines are not designed to help you. They’re going to drain your day.”
Instead, Buffini and his team stress the importance of answering the following questions as you plan for the future:
- What headline do you want to create in the next 90 days?
- What is the headline you want to create for your brokerage?
- What is the headline you want your agents to create?
“Our own headline at Buffini & Company is ‘we’ve heard about the recession, we just decided not to participate,’ and that’s what we did; we’re going to put our head down and go to work,” he said.
Amy Somerville, vice president of Professional Development and Industry Engagement at Buffini & Company, says that the company has encouraged clients to return to the basics.
“Anytime there is a change in the marketplace, whether it’s as scary as a global pandemic or a change to the economic forecast, it’s a great opportunity just to take a beat and go back to the fundamentals that are successful in any market conditions,” Somerville says.
According to Somerville, an agent’s gameplan should focus on the following:
Prioritizing lead generation. Building up your business pipeline is critical for new and experienced agents. It’s great when the market is hot and buzzing, but when things slow down—as they are today—agents have to ensure that their pipeline is solid every month of the year.
Rather than being reactive, your lead generation gameplan needs to be intentional, proactive and systematic. It should prioritize:
- Connecting with your sphere
- Connecting with your database
- Reconnecting with people you haven’t spoken to in months or years
Learning/relearning skills to increase sales. Whether you’re a newer agent or you let some of your skills atrophy over the past few years, a strong gameplan for the changing market will set you up to thrive. Some of the skills you’ll need to bring back to your arsenal—or refine in the coming months—include:
Improving your net income and auditing your expenses. When the market is hot, not only are people spending like crazy, but they’re also more willing to be innovative and try things out. When the market shifts, it’s about looking for the biggest bang for your buck and where you’ll get the most significant return on your investment.
Prioritizing some time off. Take a minute to fall back in love with the business. This begins with business planning, putting together marketing plans, and all the things you enjoy. Plug in time off to work on your business, not just in your business.
When it comes to planning for the future, it helps to know what hurdles are waiting along the way.
While some challenges have been brewing for the past couple of years, others have sprouted more recently, bringing uncertainty surrounding how long they will last and what impacts they will have on consumers and agents alike.
The factors that will impact the trajectory of the housing market and how agents and brokers conduct business should be top of mind for everyone.
The next 12 to 24 months will bring a mixed bag of challenges that real estate professionals will need to navigate. Here are some of the top issues facing the industry in the near and medium term:
Ongoing Legal Issues
The real estate industry has several antitrust lawsuits going to trial in 2023 that could yield severe consequences should the courts rule in favor of the plaintiffs. From alleged anti-competitive practices to buyers and sellers taking issue with longstanding commission-structure policies, industry leaders have their hands full with several courtroom battles that could significantly impact how agents get paid.
Up until recent weeks, the National Association of REALTORS® (NAR) had also been dealing with a looming investigation headed by the U.S. Department of Justice (DOJ), which had reopened an investigation into several NAR policies. While a U.S. District Court Judge ruled that the DOJ needed to set its probe aside, there is nothing keeping the agency from opening new investigations in the future.
Inventory Strain
The supply-demand unbalance helped push home values—and equity—through the roof in 2021; it also created a growing challenge for buyers. While reports have indicated that inventory has grown slightly as the housing market cooled in 2022, it’s still not growing at a pace that will address the demand that’s currently in the market.
Recent forecasts from NAR suggest that housing inventory will remain tight over the next 12 months, with the number of housing starts expected to hit 1.44 million—below the average of 1.5 million. At the same time, projections indicate that fewer homeowners are likely to sell their homes as mortgage rates surge from their 2021 lows.
Affordability Crunch
Affordability challenges aren’t a new phenomenon in the housing market, but developments over the past couple of years have exacerbated the situation for consumers.
Lagging inventory and surging demand pushed home prices through the roof in 2021. Then mortgage rates, which hit record lows during the pandemic, surged in 2022—surpassing 7% at several points in the fall. Tack on elevated inflation and the Federal Reserve’s response of hiking interest rates, and you have cooling demand and prospective buyers—particularly first-timers and millennials—likely postponing their plans for homeownership.
Inflation and Interest Rate Hikes
This past year, inflation and the Fed’s response have left the U.S. economy in flux as CPI hit 40-year highs and the Fed spiked rates by more than 3%, adding to the burden on consumers and agents.
Dana Louis, an agent team leader with Sacramento-based HomeSmart ICARE Realty, put it best as she stresses the significance of the past year’s ripple effects of elevated inflation in the housing market.
A Looming Recession
The dreaded “r” word has been on people’s minds for months now. From the looks of elevated inflation and the Fed’s aggressive interest rate hikes, experts agree that a recession is likely in the near term—while others would argue it’s already here—although there are mixed reviews regarding how severe it will be.
While the term carries emotional baggage for folks who remember 2008 and 2009, it also means that real estate agents will need to rethink their gameplans to keep the ball rolling in the right direction as the market shifts.
Despite the hurdles and uncertainty facing the market’s trajectory and the impacts on business, Nick Bailey, president and CEO of RE/MAX, urges agents, brokers and industry stakeholders to “take a deep breath.”
“It happens yearly regardless of the economy and interest rates,” he continues. “Homes will get sold. The question is which agents and brokerages will be involved in selling them because there are too many business models in the last 12 months of a run-up in prices that have been based on something other than selling many houses.”
What’s the Gameplan?
So the housing market is going through some changes…again. Most would say that’s par for the course when you look at the big picture of the housing market’s cycles over the years.
A solid gameplan is a critical component of future-proofing your business and ensuring that you and your agents can thrive regardless of the market.
Coming off some of the best times many real estate professionals have ever seen, the uninitiated may look at current market shifts with panicked eyes. But those looking to thrive as we head toward the future will need to have a solid strategy to capitalize on the new normal.
The folks at Buffini & Company understand all too well the benefits of having a solid plan to guide your business no matter what direction the market is moving.
“We’re telling the agents, you don’t need to wonder what’s going to happen when you know what to do, and what we need to do is focus on our customers, get back to work and get busy,” said CEO Dermot Buffini as he addressed the crowd during RISMedia’s 2022 CEO & Leadership Exchange.
Buffini explained that the industry was still reeling from the impacts of the pandemic—the good and the bad—before things started shifting in 2022. He stressed that leaders are faced with a mixed bag of factors they’ll need to address in the coming market. Those include:
- Agent fatigue after years of burning the candle at both ends
- Uncertainty because things are changing in the market
- Excitement from folks who have seen these times before
“As leaders, I think the No. 1 thing we’ve got to lead with is clarity,” Buffini urged attendees. “When there is uncertainty, the best cure for uncertainty is clarity.
“Don’t focus on the headlines,” he continued. “The headlines are going to change every nine seconds. The headlines are not designed to help you. They’re going to drain your day.”
Instead, Buffini and his team stress the importance of answering the following questions as you plan for the future:
- What headline do you want to create in the next 90 days?
- What is the headline you want to create for your brokerage?
- What is the headline you want your agents to create?
“Our own headline at Buffini & Company is ‘we’ve heard about the recession, we just decided not to participate,’ and that’s what we did; we’re going to put our head down and go to work,” he said.
Amy Somerville, vice president of Professional Development and Industry Engagement at Buffini & Company, says that the company has encouraged clients to return to the basics.
“Anytime there is a change in the marketplace, whether it’s as scary as a global pandemic or a change to the economic forecast, it’s a great opportunity just to take a beat and go back to the fundamentals that are successful in any market conditions,” Somerville says.
According to Somerville, an agent’s gameplan should focus on the following:
Prioritizing lead generation. Building up your business pipeline is critical for new and experienced agents. It’s great when the market is hot and buzzing, but when things slow down—as they are today—agents have to ensure that their pipeline is solid every month of the year.
Rather than being reactive, your lead generation gameplan needs to be intentional, proactive and systematic. It should prioritize:
- Connecting with your sphere
- Connecting with your database
- Reconnecting with people you haven’t spoken to in months or years
Learning/relearning skills to increase sales. Whether you’re a newer agent or you let some of your skills atrophy over the past few years, a strong gameplan for the changing market will set you up to thrive. Some of the skills you’ll need to bring back to your arsenal—or refine in the coming months—include:
Improving your net income and auditing your expenses. When the market is hot, not only are people spending like crazy, but they’re also more willing to be innovative and try things out. When the market shifts, it’s about looking for the biggest bang for your buck and where you’ll get the most significant return on your investment.
Prioritizing some time off. Take a minute to fall back in love with the business. This begins with business planning, putting together marketing plans, and all the things you enjoy. Plug in time off to work on your business, not just in your business.
