Summary

The next perfect storm in the real estate market is here. 

These are the 6 ingredients that have created this perfect storm:

1. Soaring Interest Rates. Interest rates have risen dramatically and have decreased the buying power of buyers.  Interest rates & demand are high, while inventory is low.
2. Inflation. Consumers are cautious about making purchases. 
3. Bearish Stock Market. People’s net worth dropping with the downward trend in the stock market.
4. Supply Chain Shortage. Food shortage is at its worst ever. 
5. Contracting Economy. Even as we’re bouncing back from the COVID pandemic, the Gross Domestic Product has surprisingly gone down. This is one key indicator of a recession.
6. Russia’s Invasion of Ukraine. This has created international tension and economic instability. 

All these factors have made the average consumer scared of making financial decisions such as buying or selling real estate.

4 Strategies To Win in the Perfect Storm

1. Focus on Getting Listings. Focus all your lead generation on getting listings. When you find sellers, you get listings, you own the market.
2. Get Your Pricing Right. Master the skill of pricing properties right because with buyers getting more cautious, overpriced listings will not sell. 
3. Build Relationships. Nurture your relationships with the people you know. They’re the ones who trust you enough to give you business. 
4. Get a Good Coach. Find a coach that has been through a market downturn before, so he can help you prepare for what’s coming.

If you want to get more winning strategies for adding 2-3 more deals every month (no matter what storm comes your way), I’d like to invite you to join me for a FREE live webclass called, More Leads, More Listings, More Life. Get more details HERE. 

Full Transcript

The next perfect storm for real estate is here. 

Hey there, it’s Kevin Ward, the founder of YesMaster’s Real Estate Success Training, helping you get more yeses and more successes in your business and in your life. 

And all the ingredients, they’re all here. All the ingredients are in place for the next perfect storm in the real estate market. And I’m going to talk about in this video, the six ingredients that are happening right now. The things that have come together right now to create this perfect storm and what you need to do about it, to prepare and to prosper during this time. 

Now I just need to let you guys know, I train real estate agents. So this is primarily addressed to real estate agents who list and sell residential real estate. Now, if you’re somebody who is looking at buying or selling your home or looking at real estate investing, this is going to still have some benefit for you. If you’re in other industries, it’ll still have some benefit for you, because I’m going to talk about what’s happening right now that is dramatically impacting and is going to dramatically impact the housing market and the real estate market primarily in America.

The 6 Ingredients for the Perfect Storm

So here are the six ingredients. The six things that are happening and then we’ll talk about the four things for you to do about it as real estate agents. 

1. Soaring Interest Rates. 

So number one is interest rates. Interest rates, woo, they just took off. When you go back in January of 2022 interest rates were at record lows, 2.9%. That kind of 30-year fixed rate mortgage, you can get all day. 

Today, just a few months later, literally in the last four or five months, we’ve seen interest rates go up from the twos to the fives. Okay? They haven’t doubled yet, but this is a dramatic increase. It is the greatest increase in interest rates in well over a decade and interest rates are not going to come down. They’re going to continue to go up. So number one, that is happening. It’s dramatically decreasing buyers buying power and it’s got people kind of freaking out. 

So what’s going to happen and the implications of that? Well, we don’t know yet because we still have a shortage of housing supply. So it is the shortage of housing inventory, of homes on the market, that has kept demand so high. So even though interest rates have gone up, demand has not started going down yet. Why? There’s no inventory. There’s so few houses on the market. And even in the studies that we’re seeing across the country, the statistic we’re seeing is inventory today is even lower than it was this time 12 months ago. Year over year, it is still going down. Now month over month, it’s starting to increase as we are in from April to May, moving into June, simply because we’re in the selling season. So it’s normal for housing inventory to go up. But rising interest rates put pressure on everything.

2. Inflation

The second thing, right along with that number two factor is inflation. And inflation’s through the roof. Okay? You go back to the very beginning of 2021, just less than a year and a half ago, less than 18 months ago, and interest inflation rates were under 2%. Today, they’re hovering in the mid eights. And they say that is the highest inflation we’ve had since back in the early 1980s. So literally in a generation, since back when I was a kid, this is the highest inflation rate we have had. And if you compare it to the same consumer price index that they had back in the 1980s, we’re actually well into the double digits on inflation. Fuel prices, food prices, construction costs, automobiles, everything is just going up and up and through the roof.

Well this dramatically affects every industry. It affects every consumer and it makes people cautious. So what we’re seeing is all these things happening that cause people to get cautious and to get fearful. And when people are uncertain, when they don’t have confidence in what’s happening going forward, people get more conservative. They get more cautious in terms of making financial decisions. And selling a house and buying a house are some of the biggest financial decisions that most people make. So these are the first two factors.

3.Bearish Stock Market

Number three is the stock market. While interest rates are going up, inflation is going up, stock market has been going down dramatically. We’ve been hearing that we’ve had eight weeks in a row of the stock market going down, which is the biggest, longest downward trend in decades. And a 20% drop in the stock market puts us in what they now officially consider a bear market. 

What does that happen? Well, it’s costing people their retirement. People that have 401ks or retirement funds or the stock market, they’re losing those people. A lot of people that have high net worth, a lot of their money has been in the stock market, so all of a sudden their net worth is dropping. 

And again, people get scared. People get uncertain. What do they do? They freeze. They say, well, we were going to buy, we’re not going to buy now. We were going to sell, we’re going to upsize, we just we’re going to wait. And so people go into a holding pattern.

4.Supply Chain Shortage

Number four, our supply chain shortage which has been going on for the last two years. Right? This is not something that’s new, but it’s been around and it’s continuing to be here. And it’s actually getting worse in some areas. 

So the White House started saying a couple of months ago that food shortages in America were imminent. Now food shortage is something that we have not experienced in nearly a hundred years. And so what that does in civilization, what that does in a country is it can have a massively destabilizing effect.

You’ve got right now going on the baby formula shortages. Well, this causes consumers to go like, I don’t know what’s going to happen next, but I’m not feeling good about it.

5.Contracting Economy

Number five is the economy is actually contracting. Economists were surprised and shocked to find out that in the first quarter of 2022, the USGDP, the Gross Domestic Product actually contracted. It went down. It declined by 1.4%. Now we’re still recovering and coming out of the COVID pandemic, all the government shutdowns and all the stuff that came as a result of that put this artificial cap and squished down the economy. 

When you open all that back up, your economy should take off. It should continue to grow. Everything looked like, okay, things should be going. Things should be growing. Things should be opening up. And all of a sudden we look and we look at the first quarter of 2022 and the GDP actually went in the wrong direction.

Now, when that happens two quarters in a row, that is one of the key indicators, as economists say, of a recession. Now you have other economists saying we’re already in a recession. And some say, well, it’s coming, but not till 2023, whatever, wherever it is, it is another ingredient that is going into the pot for the perfect storm of real estate.

6.Russia’s Invasion of Ukraine

And then number six is Russia’s invasion of Ukraine. Now you may be going, like, what does the world have to do with us here in America? And especially what does that have to do with the real estate market? 

Well, it has a lot of things to do with it, but one, you’ve got international tension. So you’ve got a country with the largest nuclear arsenal in the world that is invading another country. And they’re pushing all the buttons to potentially expand and escalate that conflict. And so it’s just, it is a destabilizing effect in the economies plus Russia and the Ukraine are two of the largest suppliers of food products, primarily grains and fertilizer, in the world. 

So all of a sudden this comes another ingredient coming into the perfect storm because now you have a lot of instability. You have concerns about international tensions, how this is going to be affected and what China’s going to do in reaction to this, what other countries are doing.

All of this just creates this sense of chaos, turmoil, uncertainty. And when all of that happens, the average consumer’s mind goes like, okay, I’m uncertain. I’m scared. I’m nervous. And those are the kind of things that create economic downshifts. 

Now I am not a pessimist. I am an optimist by nature, but I also look at this and go like, okay, I remember well, what happened in 2007, 2008, when everything started tumbling. Now we didn’t know what was happening. I was like, I’d never been through something like this before. I’m like, I don’t know what’s going on. We just kept on grinding away, grinding away. And we thought everything was going to be fine and things weren’t fine. Now this is a very different scenario than what we saw back in the housing bubble collapse back in 2007 and 2008. It’s a totally different set of ingredients.

So you’ve had all of the Fed stimulus, manipulation of the financial markets. You’ve got all the stuff. I mean, you’ve got stuff going on with stuff like Elon Musk and Twitter and Tesla and all that. All of those things are just coming into play. They’ll affect all of this picture.

What do you do about it as a real estate agent? 

Well, first this is not a “sky-is-falling” conversation. The sky is not falling. But what it says is people are going to be looking at the game differently. When they think about selling their house, when they think about buying a house, they’re looking at things differently. They’re getting more cautious. 

One of the things that you may have noticed that is happening around the country is there are more and more real estate transactions that are actually coming to the closing table and they’re not closing. They’re falling through. Why? There’s actually been some rumors of layoffs coming. There’s people that just get scared. There are people that literally couldn’t buy because interest rates have gone up and they’re like, I can’t buy the house I want, so I’m not going to go through with it. Or we just don’t know what’s going to happen right now, so we’ve decided we’re going to take a step back and we’re not going to sell, or we’re not going to buy.

And so transactions are getting harder to close. And when that happens, this is what was happening back in the beginnings of 2007, 2008…was that you started seeing more deals falling apart. The primary reason is that people are uncertain. They’re scared. 

So what can you do as a real estate agent when this sense of uneasiness begins to creep across the real estate landscape? So the big question is what do I do about it as a real estate agent? How do you prepare for all this? 

So first the sky is not falling. Don’t freak out. Don’t fall apart. The key is to prepare, but the main thing is you don’t have time to mess around right now. Everything is changing, everything is going to be changing. With more and more uncertainty, what buyers and sellers are going to have to see from you is certainty. When you’re scared, they’re scared. If you’re uncertain, you’re fearful, they’re fearful. So they need somebody to help navigate and guide them through this.

4 Strategies To Win in the Perfect Storm

So here are four things that I want you to do strategically as we move into this new world of the perfect storm happening in our real estate market, in our economy and all of that. 

1. Focus on Getting Listings.

So number one is listings. Your focus should be on getting listings. How do you do that? Focus all your lead generation on finding motivated sellers. That’s it. Now I’ve said this for years in any market, if you want to grow your business and have stability, you want to control the inventory which means you want to have set listings. How do you get that? You find motivated sellers. Okay? But today it’s even more critical because inventory is so low, the moment you take a listing, you’ve got business, you are going to get paid. Okay?

Now the shift that’s happening is as the market slows down, your pricing becomes more critical. So this is number two. So number one is listings. You’ve got to focus all your lead generation. Marketing, prospecting, everything should be focused on seller lead generation. I’m not saying don’t work with buyers. You’ve got a good qualified, motivated buyer, go. But all your lead generation, your focus on generating new business should be focused on getting listings. When you find sellers, you get listings, you own the market. You’re going to get paid.

2. Get Your Pricing Right

So number two with that is pricing. And that is that the time of being able to be sloppy on your pricing as a real estate agent, when you price a listing, is gone. Because as the market begins to slow down and people start getting nervous and interest rates push people’s buying power down and as buyers get more cautious, overpriced listings are not going to sell. 

Now, we’ve been able to get away with this over the last couple of years, because of such low inventory in such higher demand and interest rates so low that people could overprice listings and still sell it. That an agent could come in, the seller says, well, I want this price. And you know, it’s overpriced. And they would still sell pretty easily even if you had to do a price reduction, there was just not anything to worry about. 

But in a time when the market starts slowing down. Days on the market start going up. Buyers get more cautious and overpriced listings will sit. And in some of our markets, and we’re seeing this, there’s regional shifts here that are happening, that are going to continue to happen. And that is in some markets, prices are going to start coming down.

So when prices start coming down, an overpriced listing not only keeps it from selling now, but it will cost the seller money in the future because the value of the property’s dropping. So now you’re chasing the market down. And so at this moment you’ve got to become very disciplined and very powerful in leading sellers to price the home right. 

Now, this is a skillset. This is what I teach my coaching members, is how do you not just tell them. You tell them and they don’t agree with you and they don’t believe you, then they’re still going to fight you on it. But you’ve got to be able to lead them to go like, okay, that makes sense. Where do we need to price it? We need to price it here. Okay. Done. And when you price it right, it’s still going to sell and it’s still going to sell fast and it’s still going to get them the most money period. Okay. So that is number two. You’ve got to master pricing. And as the market gets worse, whether that’s immediately or 12 months from now or 24 months from now. Whenever it happens, you’ve got to get very disciplined and effective and skilled at getting the right price on your listings.

3.Build Relationships

Number three, number three is relationships. You have got to build the relationships with your Personal Circle, with the people that you know. This is where the game is going to be. 

When the market does completely turn and everything is looking bad, and especially when you get into a situation where more people are distressed, more sellers are distressed. They don’t want to talk about it. When the economy turns down and people stop being able to make payments, or you’ve got the foreclosure moratorium and forbearance, all that’s gone. People, all of a sudden are financially in trouble. They don’t want to talk about it. So as a real estate agent, you contact them. They’re like, I’m good. We’re fine. No, I don’t want to talk about it. We noticed you had a notice of default filed on your house. I know, I’m good. I’ve got it covered.

They don’t want to talk to you. Who will they talk to? People that they trust. So your magic is going to be the more relationships you have and the greater trust you have in those relationships, that people are going to tell you things that they’re going through. And they’re going to share with you things that their friend is going through and say, Hey, I talked to my friend. They need to sell their house. They don’t want to, but they have to. And I told them they could trust you and talk to them. So this is where building your personal circle, building your relationships is going to be hugely and powerfully important. 

This is more than ever a relationship game. Real estate’s always been a relationship game for top producers, but never more than now. And the main reason is because people are less trusting than they used to be.

And the big question that home buyers and sellers have is who can I trust? So when you have those relationships with people that trust you, then you’re going to be the one that finds out about deals that other people are not going to find out about. So that’s going to be a great opportunity for you. Okay.

4.Get a good coach

Fourth step. Whenever the real estate market gets tougher, this is my belief at any time. This is what turned the door for me back in 2000 as a real estate agent who had been in for about 18 months. And that is to get a good coach. 

Look, if you want to grow your business, if you look at the mega producers, the top producers, they all have strong coaches and mentors. They just do. Now, if you have a bad coach, it’s worse than having no coach. So you want to make sure that you get a good one, but I’m not kidding here. You need a coach to prepare for what’s coming. You need a coach that’s been through a market downturn before. You need a coach that’s got boots on the ground, that pays attention and knows what’s happening. And knows how to prepare you to get through it. And build a strong foundation so that when the market does turn and most real estate agents panic, most real estate agents turn in fear, that you are looking at this and going like, okay, this is what I’ve been waiting for.

Because the dichotomy that’s going to happen in the real estate industry is you’re going to have a group of agents that panic and turn to fear. And the other ones that go like I’m prepared, and I have certainty. And that certainty is going to be your power. 

It is going to be your secret superpower, it is the certainty that you have of knowing what to do of understanding the times and understanding what buyers and sellers should do that is going to be in their best interest to help them win. So your skills have to be better. Your strategies have to be more pure. Your systems have to be impeccable in terms of how to build those relationships, how to be in the right place at the right time in your lead follow up. And all of that has to be in place all the way around.

BONUS: Where the Best Opportunities Are

Now, I’m going to give you just at the end here, a little bit of a bonus of where the best opportunities are going to be to find listings, to get them priced right, to build relationships and all of that. And then give you some coaching options. 

Downsizers

First and foremost is downsizers. People that have been thinking about downsizing for years. Now this demographic are the baby boomers. The baby boomers are those that today are in their late fifties, early to mid sixties, even their seventies. These are the people that raised their family in their home. They bought a home 10 years ago, 15 years ago, 20 years ago, they bought their house. They raised their family in it. Their family’s all gone, their kids have all graduated and moved on. They’ve got this big house, 3000 square feet and larger, nice areas, nice neighborhoods. And all of them are going to be downsizing over the next few years. Virtually every single one of them.

Now, some of them are already downsizing. But, this is where you want to be focusing your lead generation. If you’re doing geographic farming or demographic farming or marketing, you want to be marketing to this group who are looking to downsize. 

Here’s the reason they’re such a powerful demographic. 

Number one, they have equity. Number two, they have nice houses. Number three, they have good credit. Number four, they’re used to being homeowners. Number five, this is not their first go round and so they tend to trust real estate agents. They’re willing to hire a professional.

And so when you build the relationships, you get in front of those people, you build relationships with them and you find them at the moment that they are ready to sell. They’re going to sell their house. They’re going to have equity. So they have a down payment for the next house. They’ve got good credit because that generation, the baby boomer generation, has the best credit in America across the board. So they’re going to buy a new house with equity and good credit. So you’re going to help them downsize, sell their nice home and then buy another home. So you get to double dip and guess who else they know? Other baby boomers. So this is where that relationship game comes into play.

And you’ve got to be ready. You’re not going to go in and hard sell them and convince them it’s time to move, but you’re going to build those relationships so that when they go like, okay, it’s time. Because they bought the house 20 years ago, they’ve been riding it up. Their kids graduated in 2018 or 2019. They’re going like, yeah, we’ve been thinking about downsizing. 

And all of a sudden, they look at what’s happening in the market and they go like, okay, prices are about to start dropping. We’ve ridden up the appreciation of our house. We’ve got great equity in it. Now’s the time to sell, take that equity out, buy our retirement home or our final home, that is our downsized home we’re going to stay in. It’s closer to our kids and grandkids or whatever. And that demographic is going to be a perfect way for you to maximize all that is happening here.As we move forward, distressed sellers are going to be another big time niche. The good news is most of them will have equity this time unlike what happened back in 2007, 2008.

The last thing here that you need to be aware of in this perfect storm… 

In 2007, 2008, 2009, 2010, over 400,000 real estate agents in the United States washed out of the business. They quit. That’s how bad it was. They panicked, they lost their business and they went out. And another, probably 400,000 or more, barely survived. They weren’t ready. And they scraped by in survival mode. Don’t be one of those agents. 

How do you become one of the top 10%, top 5% and the top 1%? Is by doing the things that I’ve talked about right now. One, be aware of what’s happening. Two, go after listings, get them priced right. Build those relationships and get your skills systems and strategies in place and dialed in with a great coach.

Now I want to put a link here in the video that you can click to find out more about our coaching programs, about my training, the stuff that is coming up. You’ve also got my YouTube videos that you’re welcome to subscribe to my channel here. 

I want to know what you think about what’s happening in the real estate market. Are we in a perfect storm? Some of you may be going like, yeah, you’re full of crap. This is not really going to happen. I want to hear what you have to think. Whether you disagree with me or not, put your comment in the comments below so that I can engage with you on it. Give the video a thumbs up if it has helped you and get out there and get ready to win in this market.