The back end of the COVID-19 pandemic has been marked by soaring home sales, rapid price appreciation, a shortage of inventory and historically low mortgage rates.
Things are starting to shift, Nick Bailey, the chief customer officer at RE/MAX revealed Thursday during a two-hour version of his Good Morning RE/MAX show at RE/MAX’s hybrid in-person and virtual R4 event.
Specifically, right now, the market is starting to see rates rise and house appreciation cooling off will soon follow.
“We’re already seeing the very front side of your markets moving a little,” Bailey said. “It’s coming. We’re going to feel pieces of it a little at the end of this year.”
Prior to this year, the two previous lowest inventory years were 1995 and 2000, according to Bailey, and the market is currently at half the amount of available inventory than those two years.
Low inventory, however, is only a problem when you’re not the company or the agent holding that inventory Bailey said, before challenging every RE/MAX agent to go out and try and manufacture more inventory.
Even with inventory low, household formation is at an all-time high, which means things won’t get too tough in the market, even as the winds begin to shift, because demand is at such a high level.
“For 2022 and 2023, we’re still going to have a strong market based on this type of demand, but have a savings account,” Bailey said.
The number of Realtors is at an all-time high, according to Bailey, which makes competition within the industry fierce. The National Association of Realtors’ total membership is currently north of 1.4 million.
But 87 percent of agents in real estate fail, simply because they aren’t selling enough houses, Bailey noted, citing a commonly shared stat. Bailey warned agents against going out and looking for companies promising “get rich downlines,” stock grants or ones who will write you a check for $25,000.
“There is no get rich quick scheme in this business,” Bailey said. “The 13 percent of agents that stay in this business — most of them are RE/MAX agents — they stay in this business because they sell a lot of houses.”
Bailey, a former Zillow executive, also spoke to the amount of innovation that’s happening in the real estate industry, telling agents not to worry about Zillow, CoStar or any other perceived “boogeymen,” at a time when a record amount of capital is flowing into the real estate industry.
It was 50 years ago that RE/MAX itself was considered a boogeyman, but the company’s approach to real estate franchising actually helped level everybody up, leading to real estate agents taking in more money.
“Zillow might be the boogeyman now, but in 1973 it was RE/MAX,” Bailey said.
The industry was scared of Move when it became the operator of realtor.com and even recently, there was fear holding back the adoption of e-signature technology that’s become an essential part of how real estate is transacted.
Zillow’s acquisition of ShowingTime, was just the latest thing over which real estate agents are fretting, but in actuality, it’s leading to more research and development and more entrants into the showing services space.
“They aren’t taking away your children,” Bailey said. “They’re not the boogeyman.”