Housing Transactions Decline in Washington. Agents Seek New Ways to Generate Income
January 28, 2019
Home sales fell sharply across the country in December putting real estate agents and brokers on notice that they will be dealing with a difficult market in 2019. Existing home sales declined by 6.4% in December from the previous month. This is the largest decline in three years, according the National Association of Realtors® (NAR).
Home price growth has slowed as well. December saw the smallest price increase since 2012. Home owners will most likely begin to cut the asking price of their homes.
Washington Real Estate Gets Wacked
In Washington there are double digit declines in home sales, according to local multiple-listing service (MLS) data compiled by Lawler Economic and Housing Consulting.
Home inventories skyrocketed in November of last year while both sales and prices declined in the North West according to the North West MLS (NWMLS).
The Puget Sound area (King County, Snohomish, Pierce, Kitsap and Thurston) saw the biggest gain in inventories in December of 2018, while in Skagit, Whatcom and Island were flat, according to the NWMLS.
However, home prices in the Seattle area remain high, especially compared to the rest of the country. The median price of a home in the Seattle metro area is $702,000, almost three-times the national median price.
What’s driving the Slowdown
After years of rip-roaring price increases in Washington, prices and sales volume have hit the wall, due, in part, to the current unease surrounding the economy. Trade wars with China, a government shutdown, high prices and mortgage rate increases have all contributed to the state’s slowing real estate market. But perhaps the single most important factor is affordability. Prices have simply outpaced people’s ability to pay for them. Home price percentage increases have outstripped consumer wage growth. Until either prices come down, or incomes go up, the residential real estate market in Washington will remain sluggish for some time to come.
Agents Look for New Revenue Streams
This new reality has many in the real estate business searching for new ways to generate commission income. If agents are selling fewer homes – and it seems that they will - that’s going to greatly impact their incomes.
So what’s an agent to do?
The obvious answer is to find a new market segment to go after, one that hasn’t been locked down by competitors and one which can help replace lost income due to lower transaction volume. The answer for some agents is to become “experts” on first time home buyers and Millennials, the new generation that is entering the housing market in greater numbers. However, so many agents are targeting this group these days that’s it’s getting crowded. Another problem with this market segment is that it is the very sensitive to price, and with high prices in the state, this spells bad news.
Targeting a New Market Segment: Real Estate Investors
An often-overlooked group of property buyers are real estate investors. Specifically, those who buy houses or apartments for their rental income. These investors are very different than home “flippers” who buy an underpriced property, fix it up, and sell it immediately.
These long-term real estate investors offer agents an active, affluent and large market, one that, surprisingly, is seldom tapped by the real estate community. The reason for this is that many agents feel that they are not sufficiently knowledgeable about rental property real estate investing. As a consequence, they ignore this group. This is a mistake. Over 48 million people in the U.S. invest in some form of real estate. Most importantly, there are relatively simple ways for agents to obtain the knowledge necessary to “add value” to the investment transaction. With a little work, agents can attract this promising group of property buyers.
More Americans Become Renters and Investors Know That
Because homes are too expensive for many, millions of household have no choice but to rent. A recent consumer sentiment survey by the University of Michigan noted that consumer attitudes towards home buying fell to a 10-year low in 2018. Furthermore, the government backed mortgage company Freddie Mac recently released a survey on Oct. 16, 2018 that noted over three-quarters of Americans say renting is more affordable than owning a home. It seems for the foreseeable future, the number of renters will increase, attracting more real estate investors to the rental property market.
How Agents Can Capture the Rental Investment Market
There are a number of ways agents can quickly gain the knowledge to successfully capture a large segment of this rental investor group. For example, a new company called RealPeek www.realpeek.com provides the tools and services so brokers and agents can help investors with real time search and advanced AI analytics. Moreover, they have unique filters that search based on cash flow, cap rate and rent-to-value projections, all data points important to investors. This saves time and provides the analytics every investor needs, but often find difficult to get.
Surprisingly, few agents and brokers use these tools when pitching the investor market. Those who do, find a receptive audience. And coming to the table with search and analytical tools like these, help agents differentiate their “brand” from the pack.
With home sales declining in Washington, brokers and agents need a new way to generate commission income. Targeting rental investors is a very promising proposition.