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Sometimes producing a title for a column is difficult. This week it was easy as there were way too many too choose from. “The Pause” although I already used that. “Be Kind to Your Local Realtor”, was another. “My Precious”, won out though. I talked about much of this on the News. I was on Fox News and Fox Business twice. Both live and very quick hits as you have to sum up quickly. The last was a on NBC WPTV, locally. Here is what I talked about and what is occurring in the market now. But first a little context….
Poor Max Bruno let out a solid shriek. Like a pull your hair out stressed out of your mind yell that he couldn’t take it anymore. By the way, Max Bruno was my college Fake ID name. I got it in one of those seedy places in West Cicero, Chicago. A story for another day. I am using it here to protect the identity of the real bellowing individual. So, Max has a 1 ½ year old and 3 ½ year old. They are living in a 1250 sqft small home. They can’t afford to buy the dream home despite prices dropping when reindexed to inflation, because of higher interest rates. So, Max has been stuck looking all over town. Should they stay in Jupiter? Maybe Stuart or Hobe Sound. Nah, that’s too far from family and work. Should they stick it out in the tiny place?
And then there is “My Precious.” The Precious is not the 1250 square foot home but it’s the 2.5% interest rate on the 1250 small home. But like Gollum in Lord of the Rings, My Precious here is slowly withering away people. After a year of pend up demand, the want of a new home was becoming a need. Finally, Max called Uncle and found a solution!
Just like that, Max bought a medium sized home instead of the forever home and is going to rent out the 1250 My Precious home. Once/if interest rates fall, they will go for the dream home and sell the My Precious property. But for now, it’s time to move on with their lives.
That sums up much of the marketplace. I wrote about what I call, “The Pause” , at the beginning of the year. The end of stimulus money, pandemic buys, and sharp rises in rates stopped the market cold last April. Prices, while stagnant, have really lost value because of year over year 8% rates. The big story though is transactions are down significantly to the tune of 37% year on year in Palm Beach County from last December. Would be sellers don’t want to give up their precious rates, new construction starts are extremely low, and buyers (many of them also sellers) don’t want to hear that prices have dropped because they haven’t kept up with inflation and don’t want to accept the low inventory.
What has been happening though is a slow rise in inventory because there are more “must” sellers than “must” buyers. Inventory though is still at historic lows both here and nationwide. Locally we are at 3.2 months of supply. Equilibrium is 5-6 months. The difference is that pent up demand both from would be buyers and sellers is rising. We are now a year into the slowdown and at some point, it’s going to boil over. Max Bruno was evidence of that. Creative solutions with buydowns or purchasing a compromise home are going to have to be considered as want becomes need. Expect this to boil over by the end of the year.
The other part of the story is the mass exodus of Realtors. Realtors flooded into the industry when there were mass layoffs during the pandemic. Everyone wanted to be a “Luxury Realtor”. The public looked at us with scorn. Look at them Yo Yo’s. Money for nothing and checks for free. But now Realtors are leaving the industry. It’s estimated 100,000 of the 1.6 million Realtors have already left and we think another 200,000 will leave over the next 2 years. Some quietly leave and just don’t renew their license or drop out when Realtor dues or local MLS Board dues are up at various times of the year. The reason is transactions. Transactions in December 2022 versus December 2021 were down 37%. A Realtor not involved in a transaction at all during that same time period was off 31%.
Most affected are new Realtors who have no income pipeline, no training, no product knowledge, no contract knowledge, no lead generation knowledge, no branding, no 401k, pay their own health insurance, and thus have no money to market your home. ECHO Fine Properties has been bucking that trend because we provide buyer inquires, support, and the company pays for all the marketing rather than the agent having to bear that expense. Our Home ECHOnomics Guarantee takes the pressure off the agent to outlay money on a listing that many don’t have. One of our new agents, Avivia Wittenberg already has 3 under contract, 2 solds, 2 listings, 10 active buyers and 90 buyer leads in her database. Our model is attracting better talented hardworking agents like Aviva. Our industry has historically had an 87% dropout rate after 2 years, so this market makes it even harder.
So, if you see a Realtor, please be nice. Those easy checks are long gone. Perhaps open the door for them. Maybe even buy them a cup a coffee. I take mine black if you see me around town. With the number of dropouts, that waiter and waitress problem might be solved awfully fast. Who knows? We might be serving you that cup of coffee soon.
Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today he is the owner and broker of Echo Fine Properties, a luxury residential brokerage voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 80 agents, an average of one million dollars per transaction and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and 2 now adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you’ll ever meet. Some publications he has been quoted in.
Feel free to ask him a question directly at jeff@EchoFineProperties.com including a complimentary real valuation of your home.
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