Confusion In A Cooling Housing Market
By Bob Schultz
cooling housing market is no longer a threat lingering somewhere in
the future. It is here. Even national
builders are starting to see the effects. The good news
is that you can still succeed in a cooling market. But you must have
a clear understanding of how the market works in times like these.
Cooling Market Is A Confused Market:
Buyers are confused. They suddenly see prices dropping or
leveling, when they are used to prices rising. They aren’t sure if
they should take advantage now, or hold out for better deals later.
marketplace itself is confused. Interest rates have risen, and
continue to rise. Some builders are offering huge incentives to get
prospects to buy. There are more re-sales. The market is
over-saturated with properties that investors are trying to flip.
These conditions have reduced potential buyers’ sense of urgency.
Builders are also confused. It has been a builders’ market, and,
suddenly, it is not. Builders don’t know what sorts of measures they
should take - should they discount their homes? Build fewer of them?
They see a need to lower prices, and in
many cases they can afford to do it, but they are also afraid that
doing so will signal market weakness and discourage people from
salespeople who work for builders become confused. Their sales
slow down. They don’t get them as quickly or easily as they are
accustomed to. They think their builders should be lowering prices,
offering incentives and spending more money on advertising so they
can continue to make sales as easily as they did when the market was
thrive in a cooling market, you must not be confused: The
fact that the market is cooling doesn’t mean it is turning into a
bad market. It is simply returning to normal. Imagine that the
average yearly temperature over a period of centuries in a given
area is 75 degrees. Suddenly, the average temperature in that area
jumps to 115 degrees. It stays there for a few years, and then
begins to fall. If the average temperature the next year is 95
degrees, are you going to say that it’s abnormally cold? Of course
not. It has just been abnormally hot for a few years, and now it is
returning to normal. The same thing is happening with the housing
back to basics: What’s happening now is no different than what
happened in 1974-75, when the Arab oil embargo triggered a market
slowdown, or in 1981-82, when interest rates rose to 18 percent and
caused a housing recession. We went from good markets to
past few years, many people have experimented with all kinds of
“touchy-feely” relationship-selling techniques – and they appeared
to be productive, even though they weren’t, because in markets as
good as the one we’ve had, houses sell even when the sales
techniques are bad.
are many people in this business who have never been through
difficult market times, and unless they are “coachable,” they will
flounder as things get tough. Many people have only come into the
new home sales profession in the past five or ten years. All they
have known are booming times. It will be difficult for them to make
the mental shift necessary to thrive in changing conditions.
Improve the things you can control: As the market changes, you
must identify which things you can and can’t control, and then learn
how to improve on the things that you can control. You can’t control
interest rates, but you can control people’s perception of interest
rates. You can’t control what the competition does, but you can
control what you do – presentation and sales skills,
Follow-Through®, appointment-setting, how your models
look, etcetera. You can’t control what the articles in the newspaper
say, but you can control what you put in the newspaper. You can’t
control the weather outside of your sales office, but you can
control what kind of environment people experience when they come
into contact with you.
market changes, there will be less traffic to convert, so you must
work to increase conversion ratio. Make every prospect who walks
through your door count.
Below are some other specific things you can do to succeed in the
Maintain strong, thorough knowledge of your marketplace.
Research the re-sale market. Track the following re-sale information
on a monthly basis:
How many listings go unsold
How many close
The average sales price
Average sales price as a percent of listed price
Average days on the market prior to selling
at trends. As the market cools, there will be more re-sales than
before, and they will stay on the market longer. How many re-sales
and investor sales are available? At what rate are they selling
compared to normal market absorption (the average over the last 12
months)? You can use this information to estimate how long it will
take to sell your inventory. Also note the names of the Realtors®
who are selling the re-sales. They can help you. If they sell
something in your price range in your market, you can reach out to
them and get to know them, and they may be able to sell some of your
Compare your prices with other selling prices in your
marketplace. You may need to rework your product. You might need to
downgrade the specs of some of your models. As interest rates
increase, even gradually or marginally, people’s buying power
decreases. They can no longer afford to pay the same prices that
they could afford when rates were even slightly lower, because
monthly payments are higher. You may need to reposition your product
to be more in line with current sales prices.
Assure prospective buyers that your market is a strong market.
Never let them think that it is weak. Always tell them that business
is incredible. Don’t ever let them suspect that you may be
struggling. Be a beacon of clarity and reassurance when everything
else is confusing to them.
extraordinary market, it is easy for ordinary salespeople to look
like very good salespeople. But in an ordinary market, it
takes hard work to be an extraordinary salesperson. As the
market becomes more ordinary, many salespeople will get out of the
business and go back to doing what they did before the housing boom.
But those who keep a clear focus stay informed about their
marketplace, perfect their presentation and practice diligent
follow-through will continue to succeed even in tough times.
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