Uncertainty in the Real Estate Market

Harry S. Truman once said “America was not built on fear. America was built on Courage, on Imagination, and Unbeatable Determination to do the job at hand.” That statement rings true for all of us once again. We all know, that the current situation makes it extremely difficult to project the future of the economy. Sam Khater, Chief Economist at Freddie Mac, says: “The uncertainty of the crisis means forecasts of economic activity are more unclear than usual.” Analysts normally look at economic data and compare it to previous slowdowns to create their projections. This situation, as we know, is anything but normal.

Analysts must incorporate data from three different sciences into their recovery equation:

  1. Business Science– How has the economy rebounded from similar slowdowns in the past?
  2. Health Science– When will COVID-19 be under control? Will there be another flareup of the virus this fall?
  3. Social Science– After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery. Quarterly growth contracted significantly in the world’s second-biggest economy – China – for the first time in 28 years, skyrocketing jobless numbers in the U.S., and warnings from OPEC that demand for oil will fall to a 30-year low, have many wondering if it really will be business as usual once the coronavirus pandemic is over. Sam Khater, Chief Economist at Freddie Mac still has hope stating, “We expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020.”

Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.  A recent global poll shows that people have some serious doubts despite reassurances from many governments that we will see a quick recovery in the economy once the outbreak is under control. The majority of people in 10 out of the 15 countries surveyed say a quick economic recovery is unlikely once the lockdown from the pandemic is lifted, with this sentiment highest in hard-hit European countries.

The fear and uncertainty we feel right now are very real, and this is not going to be easy. We can, however, see strength in our current market through homeowner equity that has not been there in the past. That may be a bright spark to help us make it through. While some have expected more people to find themselves underwater, new research from Atom Data Solutions suggests U.S. homeowners are still four times more likely to be equity rich, than seriously underwater.

Many companies will be able to bounce back nicely. But yes, there will be some businesses that don’t survive the shutdowns. Other businesses might be operating at severely reduced capacity or will have taken on additional debt burdens and, therefore, won’t be able to bring back all of their prior workforces. Experts agree the pace of recovery, likely in the second half of the year, is uncertain because it depends on the extent of the damage in the first half such as the permanent loss of industry.

Bottom Line

“It is better to plan for the worst and be pleasantly surprised than to be caught unprepared.”

 


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High Tech Housing Discrimination

The landmark 1968 Fair Housing law that sought to ban housing discrimination has uncovered a modern threat: the rapid adoption of new technologies for selling and renting homes. Despite decades of progress, there is still much work to be done. As the NFHA noted in its 2019 Fair Housing Trends Report, new ways of advertising homes and apartments using AI and advertising that uses demographic microtargeting to zero in on a certain audience, threaten to continue discrimination of the past by modern means.

The home ownership rate for black Americans stood at 42.3 percent last year, just marginally better than 1970, when it was 41.6! Clearly there is a problem in the system. A report by the National Fair Housing Alliance (NFHA) last month found that housing discrimination cases were on the rise across the nation. Algorithms aren’t just impartial, unbiased systems that fairly sort through data. Rather, they tend to manifest the biases of their creators, and of that society at large.

For instance, when looking at tenant applications, an automated system may reject applicants based on unintended connections between data sets; living in a low-income neighborhood may be correlated with an inability to pay rent, for instance. And since modern algorithms compile and sort among myriad data sets, it can be hard for designers and programmers to understand exactly which data point may have caused the system to reject an applicant. Research from a team of Berkeley researchers released last month found that lenders using algorithms to generate decisions on loan pricing have discriminated against borrowers of color, resulting in a collective overcharge of $765 million each year for home and refinance loans. The analysis of roughly 7 million 30-year mortgages also found that both in-person and online lenders rejected a total of 1.3 million creditworthy applicants of color between 2008 and 2015.

Employing new methods like machine learning and artificial intelligence can make processes such as sorting through tenant applications faster, more efficient, and cheaper. The problem is that when you try to build an automated system that solves social problems, you end up creating something that looks at the data of the past and learns the sins of the past.

Targeting some, excluding others

One of the more high-profile examples of technology creating new types of housing discrimination arose from online advertising. Facebook has been cited numerous times by the ACLU and other advocacy groups for its microtargeting feature, which lets advertisers send ads to specific groups via a drop-down menu of categories, including age, race, marital status, and disability status. Real Estate professionals could purchase and publish ads on Facebook that discriminated against different racial groups and other categories protected by the Fair Housing Act. Facebook has since apologized and restricted targeting capabilities for housing ads. Earlier this month, as part of a settlement with the ACLU and other groups who had filed a lawsuit, Facebook said that housing, employment, and credit card ads can no longer be targeted based on age, gender, ZIP code, or multicultural affinity. The social network will also maintain a searchable ad library so civil rights groups and journalists could keep tabs on future housing advertisements.

Other tech giants, including Google and Twitter, have been investigated by the Department of Housing and Urban Development (HUD) for similar issues. The nature of these social network ads can also lead to unintentional targeting. For example, many of these systems allow for lookalike audience targeting, a feature that can for example, help a clothing company target consumers similar to those who already like or follow a brand. Carry that over to the housing world, and it could help a high-end apartment developer target potential renters who are similar to existing tenants—in effect concentrating on the same kinds of renters who already live in the building, and potentially excluding others.

Making Changes

Many advocates believe the answer to this unconscious bias is to change the way these new systems are designed in the first place. One step toward changing how these algorithms work could be by changing who designs them. Advocates within fair housing and technology need to educate programmers and others about how bias manifests itself in these systems, while also designing technology that includes discriminatory flares or bias signals: built-in checks that can evaluate how systems are performing and whether or not they may be creating biased outcomes.

Larger legal remedies may also be afoot. The House Financial Services committee has been looking into the issue and held a hearing in July, and some advocates have raised the idea of revamping the Communications Decency Act, which governs the behavior of tech firms and social networks, to create more specific rules around this type of bias and discrimination.

A big part of the solution should be keeping humans within the system. Housing can be so foundational to achievement, household wealth, and equality that some things shouldn’t be left to machines. The idea that math is better than humans may be true in some instances but not all. There’s a difference between mathematical fairness and social fairness. We should design for justice instead.

 


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Getting and Keeping Real Estate Clients in 2020

Learning how to get and keep clients in real estate is a never-ending battle. With technology moving at lightening speed, getting and keeping your clients is tough! Understanding how to find qualified clients is more than just getting the phone to ring, it’s knowing how to keep it ringing consistently that will help your business grow.

 Follow Up is Everything

Most salespeople only reach out once or twice and then give up. Knowing your market, understanding your clients dreams and goals, and connecting them is hands down the most important characteristic in a salesperson. Following up, showing them that they are important, and a top priority will take time. Often it is a six-month, year or two-year long process of keeping in touch and providing them value. If you have amazing luck and someone calls you to set up their listing immediately, the rest of us are jealous! Typically it is a drawn out dance between the agent and the buyer/seller. Keeping track of where you are at with each client and every possible client can be exhausting. If you struggle to keep track adding a service to do that for you can save you hours of time. Customer Relationship Management (CRM) software is build to help you keep track of new and existing clients. Having a CRM that takes care of remembering who, what and when to send calls or emails so you don’t have to remember is a life saver that will pay for itself.

 Relationship Referrals

To get the highest closing ratio, relationship referrals are crucial. If you build strong relationships with current clients, they can expand your network like nothing else can. By using the referrals and relationships where trust has already been established, your business will gain momentum.

 Build a Personal Brand

Your personal brand is the overall impression that your audience gets from your social media posts, marketing, lead generation, and pretty much everything else you put out into the world as a real estate agent. Doing a personal brand audit and deciding on some branding basics will absolutely help you get clients. Come up with a logo, slogan, website, and general aesthetic that you can keep consistent across all your real estate marketing and social media channels. If you’re somewhat tech savvy or at least willing to learn,  a course on real estate social media marketing is a great way to up your skills. Plenty of agents are getting a decent ROI with Facebook and Instagram ads but another great way to get clients is to try to integrate your hobbies into your personal branding. The idea here is to appeal to your audience’s fun side by highlighting hobbies or interests you might have in common. For example, if you’re a baker, you might want to consider making a cute Instagram post with you baking at your new listing, or maybe go out and rate the local bakeries and post the videos on YouTube. Then you won’t just be another real estate agent. Clients who are also amazing in the kitchen will be far more likely to choose you over someone with similar skills who isn’t a baker. Of course, that other agent may have a culinary degree and volunteer at the soup kitchen, but their audience will never know. So, don’t be a secret agent when it comes to your hobbies and interests!

Educate with Insider Knowledge

Educate potential and existing clients. For potential clients, create a blog full of helpful hints and tricks to aide in their real estate search. For existing clients, point out a feature in an apartment or something about a building that a client wouldn’t know by looking at the listing online. People appreciate learning something from their real estate broker. Teaching someone something they didn’t previously know helps to build trust and a feeling for them that you are adding real value to the buying or selling experience.

Fake It Until You Make It

Luck can change your real estate career. We’ve all heard stories about agents who stumble their way into seven-figure listings their first week on the job. For the most part, those stories are true. But luck isn’t everything. Even if a local millionaire takes a liking to you, you still have to prove to them that the risk of hiring you is worth their time. If you are just starting out, you likely don’t have many accomplishments to point to so your personality is going to have to work overtime to seal the deal. Work on yourself and develop the confidence and knowledge that every good agent needs. Read everything you can about real estate and business and face your fears BEFORE you get lucky enough to book that listing presentation.

 

 


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What the USMCA Trade Agreement Means to Real Estate

Real Estate professionals across the U.S. are excited to finally see progress with the House approval of the USMCA. The USMCA (United States-Mexico-Canada Trade Agreement) will replace the current trade policy NAFTA (North American Free Trade Agreement). The House of Representatives passed the revised trade agreement after last month when for the first time, the Canadian, Mexican and U.S Realtor Associations expressed joint, public support for specific policy. The associations represent more than 1.5 million Realtors throughout North America.

Canada and Mexico are our two largest trading partners, millions of American jobs rely on goods and services that go back and forth between the three countries. President Trump said that this will be the most important trade deal ever made by the U.S.A. This deal will re-enforce cross-border investment opportunities for each of the respective real estate industries. It may not get mentioned often, but the trade that happens between these three countries has a large impact on the commercial real estate sector. The construction industry in Texas alone generates more than 400,000 jobs and $62.2 billion to the state's economy.

Expanding jobs means a growing need for more space—particularly, more industrial spaces. Industrial space in Mexico and Canada is growing exponentially. To put it simply, the USMCA eliminates unfair trade practices and is very good for our country’s workforce, which will lead to more consumer spending, including purchase of real estate with new home buyers. The updated USMCA will boost trade on everything from cars to dairy products. Tariff agreements make Mexico an ideal place for manufacturers and auto parts makers to set up shop. It will also offer worker protections and labor fairness and lead to bigger paychecks. These tariffs, combined with other factors like the labor and materials cost and close location, make Mexico a less expensive option than anywhere else in the world.

The U.S. housing market is struggling with an inventory shortage that has depressed sales in nearly all 50 states. The so-called “months supply” number that measures how long it would take to sell off the existing stock of homes fell to 3.7 in November, according to the National Association of Realtors. Most economists consider a six-month supply to be a balanced market. The U.S.-Mexico-Canada Agreement will help to ease the nation’s housing shortage by stabilizing the prices of materials used in construction, according to the National Association of Home Builders.

 


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Get Ready for a New Year and New Career!

How exciting! You’ve decided to take the leap and you are ready to start your new career in 2020. There are a million questions you must have. There are a few things you need to know to get started on the licensing process and start your journey to becoming a stellar real estate salesperson. The time it takes to go from nothing to fully licensed will depend largely on the state you’re trying to get licensed in. Although that may seem daunting imagine working for yourself in a flexible career where you can set your own schedule with annual earning potential of $100,000 or more. There are so many reasons to choose real estate as your career.

1. Know your Application Requirements

There are some legal requirements that all applicants must fulfill. These requirements will change slightly depending on the state you’re in, so make sure to double-check with your state’s licensing commission to make sure you know every requirement.

Generally, the legal requirements for real estate licensure are as follows:

  • Be 18 years of age or older
  • Be legally allowed to work in the United States
  • No pending criminal indictments against you
  • No criminal convictions for violent or home invasion-related offenses

The last two criteria, related to an applicant’s criminal background, are determined in most states on a case-by-case basis. A conviction doesn’t necessarily disqualify an applicant but trying to hide something in the application process almost certainly will.

2. Take a Pre-licensure Course

Nearly every state requires at least 30 hours of pre-licensure study before an applicant is eligible to sit for the state real estate licensing exam. There are two major reasons for this. First, real estate is a relatively complex business and in order to get started in the business, there’s a minimum knowledge base you’ll need to properly operate. As a real estate agent, you’ll be tasked with caring for the needs of your clients, a task that would be reckless to take on if you didn’t know the best ways to help them.

3. Pass Your State’s Real Estate Exam

Once you’ve completed your real estate pre-licensing course, you’re free to take the actual exam whenever you’d like, but we suggest you spend some time taking some practice exams. As many as you can find. Really. As MANY as you can find. Once you’ve completed your state’s pre-licensure requirements and prepped with some practice tests, it’s time to take your licensing exam. So what’s on the Real Estate License Exam?

Each state administers multiple versions of the test, and each state is different, it’s impossible to say exactly what you’ll see, but there are a few topics that real estate agents consistently see on the test.

  • Fair housing law: This topic is one that you’ll spend a good chunk of time on in your pre-licensing class, so pay attention. Knowing these facts is important if you want to adhere to state and federal guidelines on discrimination and equal housing opportunities, so the test will hammer them.
  • Basic contracts: Contracts are a critical component to using a real estate license, so the basic rules for contracts and negotiations appear regularly.
  • Real estate math: You won’t be asked to do anything more than arithmetic, but you’ll definitely be asked to do a lot of it. Understanding interest rates, percentages, and prorations will be put to the test in a number of questions.

4. Choose Your Brokerage

Once you’ve completed your pre-licensure requirements and passed your state exam, it’s time to start thinking about where you want to work. Even though you’ve demonstrated to the state that you have the knowledge required to practice real estate, you still need a brokerage to sponsor you. In order to buy and sell real estate, every real estate agent requires a broker to sponsor them. A broker is a real estate agent who has demonstrated that they not only have advanced knowledge of the industry, but that they also have a track record of success.

5. Register with the State You’re Practicing In

Once you’ve made a decision on a brokerage, the next step is to formalize your licensure with the state you’ll be operating in. It will involve submitting your personal and brokerage information and, in many states, completing forms for a basic background check. Real estate is a field that requires constant learning in order to maintain success. Find a mentor or a set of mentors who you can ask questions of, bounce ideas off of, and get advice from.

Finally, remember that this business is all about servicing our clients, not ourselves. When you accept your Realtor designation from the National Association of Realtors, you agree to always place your client’s fiduciary best interests over all others, including your own. If you are ever faced with a tough decision in a transaction, stop and ask yourself if your choices are in the best interest of your clients.

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A Home for the Holidays

Nothing says holidays like having your family gathered in your home while you celebrate what’s important. Around this time each year, many homeowners decide to wait until after the holidays to list their houses. Similarly, others who already have their homes on the market remove their listings until the spring. Many sellers believe spring is the best time to put their home on the market because buyer demand traditionally increases at that time of year. What they don’t know is if every homeowner believes the same thing, everyone will list and buy at the same time and therefore encounter far more competition. According to NAR, the sweet spot for selling is November through January. Here are the top reasons why listing your clients house now (or keeping it on the market) may be the best choice they can make.

5 great reasons to tell your clients not to wait:

  1. Buyers at this time of year are serious. Purchasers who are looking for homes during the holidays are serious buyers and are ready to buy now. At this time of year, purchasers who are serious about buying a home will be in the marketplace. Your client and their family will not be bothered and inconvenienced by mere lookers. The lookers are at the mall or online doing their holiday shopping.
  2. The stage is set. Homes show better when decorated for the holidays. There is something about lights, bulbs and ornaments that make you want to cozy up and stay awhile.
  3. Prices are at a sweet spot. Over the past few months we’ve seen the supply of homes for sale decreasing year-over-year. Prices are projected to appreciate by 4.8% over the next year according to Corelogic. If your clients are moving to a higher priced home, it will wind up costing them more in both down payment and mortgage payment if they wait.
  4. The desire to own a home doesn’t stop during the holidays. Buyers who were unable to find their dream homes during the busy spring and summer months are still searching, and your client's home may be the answer. According to NAR, the median days on the market for a listing was only 33 days last month!
  5. Competition is low. The supply of listings increases substantially after the holidays. Also, in many parts of the country, new construction will continue to surge and reach new heights in 2020, which will lessen the demand for their house next year. Temperatures aren’t the only thing that heats up in the spring – so do listings! In 2018, listings increased from December to May. Don’t wait for these listings and the competition that comes with them to come to the market before your clients decide to list their house.

Freddie MacFannie Mae, and the Mortgage Bankers Association all believe homes sales will increase steadily over the next year. Real estate is impacted by the economy (and the consumer’s belief in the strength of the economy). The fact that most economic experts are calling for the recovery to continue through 2020 means the housing market will also remain strong for the foreseeable future. If you have a homeowner who has considered selling their house recently, let them know that now may be the best time to put it on the market.

 


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Colder Temperatures Cool Down the Colorado Real Estate Market

Over the past year or so, the media has deceivingly discussed the decline in the real estate market across the U.S. Will there be another 2008? Is another recession around the corner? While these words may instill some fear, that’s where the tall tale ends. Real estate projections in most of the nation all show steady continual opportunities. Most states, Colorado included, are seeing continued above average home sales for this chilly time of year.

After a 6 year long hot real estate market, it is to be expected that the market will cool down. The residential and commercial markets in general remain strong and agents are just now seeing properties remain on the market for longer. Coloradans have seen inventory increases and that’s resulted in increased price reductions and concessions. To put it simply, sellers can’t be as aggressive in their pricing strategy because the market is going from one (sometimes even less) homes per buyer to three or four. This increase gives buyers more options to choose from and less competition when putting in offers. After a heavy multiple offer scenario market, a cool down is a good thing.

Today, nine out of ten home buyers require financing to purchase property. Fortunately, interest rates are lower than this time last year. This dip in interest rates means that buyers shouldn’t just look at the sales price, but also factor in the cost of the loan. Buyers purchasing homes under $500,000 have some big advantages this time of year. Typically, November through February is a great time for buyers to purchase a home and more people should take advantage. Moving expenses are far lower and the power of negotiation and available choices have multiplied.

For agents, buyers and sellers, winter isn’t the easiest time for home showings because of the weather. For agents, this is a great occasion to spend time with family for the holidays and to complete your required continuing education.

This time of year can be stressful enough, completing your continuing education doesn’t have to be! With Real Estate Training Institute, you can stay in and use any internet enabled device to complete your courses.


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