What are the latest trends in today’s volatile real estate market? More importantly, how can you capitalize on these trends in your real estate business?

At last month’s National Association of Realtors Midyear meeting in Washington, D.C., Lawrence Yun, NAR’s chief economist, discussed the latest economic trends. Here are five key trends that can influence your business.

What are the latest trends in today’s volatile real estate market? More importantly, how can you capitalize on these trends in your real estate business?

At last month’s National Association of Realtors Midyear meeting in Washington, D.C., Lawrence Yun, NAR’s chief economist, discussed the latest economic trends. Here are five key trends that can influence your business. 

1. The good news: Pending home sales are up
According to Yun’s report, January 2009 was the bottom of the market for pending sales. Even though the economy shed 3.4 million jobs, the first-time homebuyer tax credit resulted in the highest number of pending sales in mid-2009. Other than this one uptick, we are currently experiencing the best pending sales rate in more than three years.

Opportunity: If the market is improving in your area, now can be an excellent time to start building your listing inventory. A great place to start is in prospecting for owners who purchased prior to 2005 or who own their property free and clear. You can usually obtain a list of when people purchased from your local title company.

Print marketing by using postcards and/or letters is still a viable way of generating leads from this highly targeted group.

2. Embrace first-time buyers
In 2001, 42 percent of homebuyers were first-timers. That number dropped to 36 percent at the peak of the seller’s market in 2006. Today, first-time buyers represent 47 percent of all buyers, the highest percentage in this century.

Opportunity: To take advantage of this trend, actively prospect for listings in first-time-buyer areas. To determine which areas are the best to prospect, watch the sales board in your office or the sales report from your local multiple listing service.

Concentrate your efforts in the areas that have the most activity. You can also prospect for first-time buyers by sending mailers to high-end apartment rentals, holding first-time-buyer seminars, or contacting older past clients who may have children who are ready to buy their first home.

3. Distressed property sales: a shrinking niche?
Short sales and foreclosures continue to be an important part of the market. The percentage of distressed property sales peaked in the first quarter of 2009. Approximately 30 percent of total sales were foreclosures and another 20 percent were short sales.

A whopping 50 percent of all sales were comprised of distressed properties! That number has declined dramatically with the current numbers, hovering in the 33 to 35 percent range.

Opportunity: If you specialize in working with distressed properties, now may be an excellent time to add more traditional buyers and sellers to your client mix. If this trend continues, distressed properties may represent a smaller portion of the real estate pie. Again, it makes sense to focus your efforts where your chances of success are greatest.

4. Fewer new households, fewer people moving
The number of new households formed can be a powerful predictor of real estate sales. At its peak in 1981, the number of new households formed was close to 4.5 million. In 2009, that number was less than 1 million. This is very surprising given that there are more members of Gen Y than there are baby boomers. They are also at the peak time to buy their first home.

Equally surprising is how much longer people are staying in their homes. At its peak in 1984, one out of five homeowners moved. In 2009, that number dropped to about one out of nine (11 percent). This is the lowest rate in 30 years.

Opportunity: These numbers indicate that most people are not moving unless there is a compelling reason to do so. The high-probability buyers and sellers in 2010 are those who have to move due to a job transfer, change in family or health status, or who are facing a financial crisis due to job loss or foreclosure.

Specializing in relocation or in serving people who may have special requirements due to health or mobility issues can be two great ways to reach these types of clients.

5. The next real estate boom
Like any other market, the real estate market is cyclical. We will have another real estate boom. In fact, it may be sooner than you might anticipate.

There still is a huge surplus of inventory that will take several years to totally move through the pipeline. Inventory peaked at well over 4 million homes from January 2007 to January 2009. Since that time, the current estimates put the available inventory at approximately 3.5 million homes.

What may drive the next boom is the low rate of new housing starts. The 10-year historical demand is 1.6 million new homes per year. NAR is predicting that between 2009-11, the cumulative deficit will be -2.3 million homes. In other words, by the end of 2011, there will not be enough supply to meet the demand.

Opportunity: Remember, all real estate is local. To determine which parts of your market will experience an inventory shortage and eventually an increase in prices, track the number of months of inventory.

More than eight months can translate to downward pressure on prices, while six or seven months of inventory can mean that prices are flat or transitioning. At five months or less, prices could be rising.

Regardless of what your market is doing, here’s one strategy that applies in any market: Focus your listing efforts in the areas that have the greatest demand and the fewest number of listings. That’s always where the opportunity is greatest.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.

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