Like Many New Agents, Joshua Thomson Has Found The Recent Real Estate Market Challenging To Navigate
Josh Thomson completed his inaugural deal as a real estate agent in December, expecting it would pave the way to further transactions and mark an exciting beginning of his promising career in real estate sales. Yet almost four months later, Thomson is still trying to complete one transaction and close deals.
Thomson of Orlando, Florida, spent $289 in the winter of 2021 enrolling in an online self-paced real estate agent program and becoming licensed in June. When he got licensed, though, mortgage rates had almost doubled, and this caused an overall decrease in buying activity.
Thomson told us this drop had presented him with numerous challenges this year. One of the companies he hired to assist he with finding clients was misled into charging him $600; additionally, Thomson reported he December sale didn’t yield the cash flow required by her business. Josh represented both buyer and seller on their $60,000 sale; her commission on it, however, only totaled $2,600. But that amount wasn’t enough to cover her brokerage firm fees and those from organizations like the National Association of Realtors that provide leads and Multiple-Listing Service, which allows her to search houses listed for sale near where he lived. At times she also needed extra income, so she worked at restaurants or pizza delivery trucks to enhance he and his wife’s incomes and provide for their teen-aged son, hoping not to abandon hope just yet.
Josh also has expressed his great pleasure with his job and its flexibility, although there was one downside he needed to be more fond of his financial insecurity.
Thomson understands the odds are against him but remains hopeful, knowing agents with only two years of experience made a median annual income of $8,800 by 2021, according to a NAR study. Yet even these obstacles did not stop eager buyers from entering the housing market before illness; rising house prices offered tremendous commission opportunities – in fact, their numbers rose 156,000 between 2020-2021, according to NAR studies reaching record-breaking numbers of over 1.6 Million during October alone!
Real Estate Agents Must Get Back To Basics
Real estate agents must now assess if decreasing profits justify spending time and money to maintain their businesses during this recessionary climate. New agents, in particular, need an established network to navigate an unfamiliar business climate and face intense opposition from more established agents who know better how to perform under such pressures.
Homebuyers typically experience increased home sales throughout spring and summer homebuying seasons, thus providing realtors of varying experience levels a critical opportunity to showcase themselves to buyers and potential home buyers alike. Rising tides no longer help lift all boats; instead, the market is taking stock to see who stands by for long-term success and who may or may not.
“Pamela Prichard has seen first-hand that there can be low entry barriers but high barriers to success.”
Prichard is an older second-generation Realtor who has seen many individuals enter and leave the industry. Beginning her career at a title firm in 1999 before receiving her real estate license in 2005. Pamela avoided the 2008 market crash by managing to retain membership at Denver Metro Association of Realtors at 9,500 September – which increased by 20% year over year; as a result of which, there would be monthly orientation sessions held with new members; this trend continued, and reduced substantially this year; Reinhardt budgeted for 10 percent less membership due to budget cut.
Prichard noted, “We anticipate a decrease in sales figures,” having experienced something similar in 2006-07. At that time, an unprecedented influx of Realtors entered the marketplace.
As housing markets experience boom and bust cycles, so do numbers of real estate agents experience fluctuation. Consider 2008, for instance; with such a market, turmoil occurred between 2006-2008 when NAR added nearly 100,000 members for an all-time maximum of around 1.4 Million! At the start of 2012, shortly after the bubble burst, membership had decreased to 964,444. But due to an epidemic and subsequent slowdown, Realtor membership increased exponentially, with an estimated increase of 74,000 since October’s peak membership figure of 964,444. As it remains too early for an accurate assessment, it remains too soon to tell whether this drop is seasonal, like what typically happens at the end of winter each year, or an ongoing one. Lawrence Yun of the National Association of Realtors noted that more challenging economic times might account for any potential agent decrease.
Yun stated in an emailed statement that real estate industry competition among entrepreneurs for clients was fiercely cutthroat, leading to fewer home sales which will invariably cause some to leave the field altogether.
Prior to last year’s start-up of an upward market trend, agents faced unique challenges from its volatile nature. Years of unfinished construction had homeowners new to buying scrambling to compete against investors as well as older, wealthier repeat buyers; making it more challenging for agents to assist customers in finding homes of their choice; desperate buyers often made multiple offers at once and spent numerous hours touring open houses until finally being successful with purchasing one; Prichard described this situation as being in “chaos.”
Pamela explained how her instinct is “worried about buyers who seek to waive inspection and close appraisal gaps and said the same to her: It can be heartbreaking watching someone be so vulnerable.” Sitting back and watching this play out before your eyes can be challenging, let alone protecting buyers who choose these tactics for themselves.
But these were also boom times for brokers: in 2021, agents typically handled 12 transactions each on average (an increase from 10 in 2020), with sales volume jumping 24% year-on-year according to NAR figures; agents with 16+ years of experience saw their average gross earnings jump to $85,000–up from $75,000 during their previous year of experience.
Interest Rates Increased & The Real Estate Market Shook
Beginning around late spring 2022, the Federal Reserve increased interest rates to combat inflationary trends. This caused mortgage interest rates to skyrocket and create an uncertain economy – scaring both sellers and buyers over the subsequent years. Each month, Fannie Mae’s Home Purchase Sentiment Index measures how people are experiencing home prices, mortgage rates, and job security, as well as whether now is an appropriate time for purchasing or selling their homes. With scores from 0 to 100 recorded at 61.3 in March – close to an all-time low recorded back in October but far removed from the COVID-era high of over 80 in 2021.
Shantih Moriarty, an experienced real estate agent from Silicon Valley, told me it is currently “a challenging period for buyers.” People are still fighting hard to acquire an affordable house.
This challenging market has been brought on by various elements contributing to slow home purchases. Like historically-low interest rates attracted potential home buyers during 2020-2021, an increase in interest rates has significantly diminished their enthusiasm. Average 30-year mortgage rates have recently seen a significant spike, hitting six percent compared with four percent between 2020-2021. On an average property valued at $470,000, this variation would mean paying about an extra $1,000 every month on your monthly payment.
Houses are only readily available if a homeowner can save enough for increased rates. Even as home availability has increased recently, national supply was 43.2 percent lower in March compared to its average levels between 2017 and 2019, as reported by Realtor.com. Reluctance on both ends contributes to an endless cycle of indecision: buyers worry they cannot afford another home, and sellers do not wish to sacrifice lucrative mortgage rates, leading them to postpone listing their house to make it more challenging for them prospective buyers.
Realtors have seen an exponentially more significant presence of homes for sale as of late; more than double as many agents than homes were available during March (approx. 1.5 million agents to 563,000 houses for sale).
Slowing real estate markets have rendered once-promising ideas of career change an impossibility. Cha, a 46-years old former fashion designer, obtained her real estate license after moving with her spouse and 9-year-old son from Pittsburgh’s suburb to a Pittsburgh suburb in the fall – her first house sold within days after listing it in November for owner sale! However, Cha’s firm needs help to locate enough homes for clients looking to buy.
“There are enough buyers but not enough sellers,” Cha told me. It can be frustrating.
According to an independent Realtor.com survey, only four in ten newly appointed real estate agents feel confident of long-term success. Although initial costs for becoming an agent might be relatively minimal (usually several hundred dollars for examination and course fees), finding customers can be more challenging for those with strong networks. And making money can often come as an unwelcome pleasant surprise!
“Entering the agent industry involves low barriers of entry but high hurdles of success,” according to Meghan Brown of Realtor.com. I heard this information first-hand.
At every housing market downturn, there’s always the possibility that it could rebound soon afterward. Yun, who serves as NAR’s Chief Economist, suggested that the decline of Realtor numbers could ultimately prove beneficial as competition decreases when things settle down.
Many Real Estate Professionals See Inflation As An Opportunity
“Realtor-savvy agents prefer seeing less competition among themselves,” according to one real estate professional.
Mary Gibler, 28, an agent based out of Naples, Florida, received her license in late October after spending months as an assistant broker – her first experience was positive! Gibler completed nine transactions within six months but decided to focus on rest and preparation for her baby’s arrival once rates started rising and buyers became less active during spring 2018. She returned to work full-time again during January – a typically busy time of the year in this region – though initially had a shaky start that settled by mid-February; currently, three sales transactions are in process, and she works alongside two colleagues on those contracts.
“I was stunned to realize that houses weren’t selling at an alarmingly rapid pace,” Gibler noted to me, noting how buyers she worked with were more selective and took more time making their decisions.
Real estate markets vary and don’t follow a consistent trajectory, yet at times during peak prices; they might appear so. Since prices began increasing throughout this epidemic, their appearance became an illusion. Now as prices are gradually leveling out, it has become harder to describe in broad strokes what our country’s home market entails as prices soar in some regions while simultaneously rising elsewhere; such divergences help certain Realtors in more stable markets find footing quickly and vice versa; analysis conducted by Black Knight revealed home price increases were occurring each year east of Colorado while the decline was noticed on an annual basis in western markets such as Colorado as reported by Black Knight analysis performed by Wall Street Journal analysts found home prices increasing annually while declining significantly while eastern regions east of Colorado where the home price was rising annually on an annual basis but decreasing annually every year of comparison.
Moriarty from Silicon Valley told me “we are no longer one market” due to pandemic-caused distortions affecting global behavior; all individual markets reacted similarly before this point in time, she noted; now “they won’t respond the same.”
Real estate agent work has become more challenging and complex in your local community, even since last year. Experienced agents understand their market intimately; they know the ideal offer to make and how best to implement it – though these skills they need more than ls alone won’t give them a prosperous career path in real estate.
Moriarty noted a key characteristic of successful agents knows how to market themselves and generate referrals, with few similarities between good real-estate agents and successful real-estate agents in terms of traits or skills required to become both.
As with any new business venture, your first announcement could be exciting or terrifying, depending on how you interpret it. Thomson, an Agent in Florida, had just closed one transaction when I spoke with her; she shared her struggles with getting clients. To support herself better and connect with like-minded agents, she joined a support group on Facebook where several others faced similar difficulties; much like purchasing real estate, she believes that investing has paid dividends later.
“I don’t give up easily; in fact, the odds against me give me even more, incentive to succeed and succeed against all odds.”ย
Thomson shared some promising information with me during my second conversation with her, several weeks after our initial encounter: one of her customers attended an open house recently and recently accepted an offer valued at $274,000. Thomson projected the closing to occur within one or two weeks – she predicted this might happen as early as the first week in May.
