Many agents are finding the changing SW Florida real estate market to be tough times. Buyers aren’t as plentiful as in years past, and sellers are more demanding.
Sellers want systems. They want to know what’s going to happen, when, and what the communication will be. They particularly care about where and how often the property will be advertised. Gone are the days when sellers would shop for the lowest priced agent. It’s now a "Flight to Quality". Sellers are scared, they see the For Sales signs go up and only a few come down.
Many agents relied on investor buyers for commissions last year. Investors were easy because they have no emotional attachment to the home. They just buy anything they thought would go up in value. Values aren’t going up anymore, so investors have shut-off.
To make matters worse, many home buyers read the media reports and believe the market is going lower, so they’re holding off as long as they can. This may or may not be wise because it takes quite a price drop to make up for increases in interest rates that can be locked in today.
A $200,000 mortgage at 7% interest rate has a principal and interest payment of $1,330.58 If rates go up 1 %, the payment increases to $1,467.51 That’s a $136.93 increase on interest rates alone. To keep the payment at $1,330.58 at 8%, the new loan amount would need to be reduced to $181,336.09 That’s a reduction of $18,663.91
Because you usually put something down when you prurchase a home, I assume a 10% down payment which equals a 90% loan to value ratio. To borrow $200,000 and putting 10% down would make the purchase price $222,222.22 To save that $18,663.91 you wouold need to buy a home for $201,484.54 That’s a savings of $20,737.68 a buyer would need to save just to make up for the difference in the interest rate. That’s a 9.33% price reduction in the house.
Prices have already come down significantly, and many believe we’re close to the end of price drops. While the jury is still out on that for sure, a buyer needs to bet that home prices in their price range will drop another 9.33% If they beleive it will, they may be better off waiting. If they believe we’re getting close to the end and fear interest rates could creap higher, or if they really need housing, now is the time to buy.
Back to the lonely SW Florida real estate agents. Sales numbers are mirroring 2003 levels. We have many more agents today than we did back in 2003, and many beleive we had too many back then. We’ve started to see agents with little experience getting out of the industry, with many more to follow. Too many agents have not experienced the ebb and flow business cycles of the SW Florida real estate market. They’ve only seen one direction, and it was up. Now that it’s not up they don’t know what to do or how to handle the sellers questions. And when they do list a property, they quickly lose it.
We’ll follow-up later with another article on what an agent needs to do to be successful when the market changes.