What a difference a year makes

In this newsletter, we always try to balance the good news with the not-so-great news. We admit–last year that wasn’t easy. There were some days when it was very, very hard to find some positivity.

But that’s not the case this year. Far from it. Today’s newsletter is a perfect example. We’ve got stories that show that our industry is heading in the right direction, and we’ll tell you what we expect to happen in the coming months.

As always, we want to help you take advantage. In today’s Foundation Plans, we talk about one of the most important moves an agent can make: choosing the geographic area where to farm leads. 

Let’s all take advantage of this good news, and let’s take in a new edition of The Blueprint!

– James and David

New listings jump nationwide

In February, new listings rose 13% nationwide year-over-year, the biggest annual increase in nearly three years. According to Redfin, February was the first month the number of homes for sale increased on an annual basis after eight straight months of declines. Here are other key takeaways from last month:

• The total number of homes for sale rose 1.7%

• Asking prices of new listings posted their smallest increase in roughly two months

• 5.5% of home sellers dropped their asking price, on average, the highest share of any February since at least 2015

• Touring activity is up 23% from the start of the year, compared to a 14% increase during the same period last year

Our take

Things are truly headed in the right direction, especially for homebuyers. Until now, they had to face two major obstacles: low inventory and high housing costs. We are now finally seeing the first barrier come down as more supply comes to the market. High housing costs are still an issue, but we anticipate they will ease when mortgage rates decline later this year and next year. Every agent should be heralding these talking points from the hilltops! Our only wish is that these trends would move faster.

Weekly mortgage demand surges 11%

Last week, mortgage applications to purchase a home increased 11% compared with the previous week, according to the Mortgage Bankers Association via CNBC. Here’s what else has been reported:

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell from 7.04% to 7.02%

• For-sale listings of homes priced in the $200,000 to $350,000 range grew 25% from a year ago, outpacing all other price categories.

• Applications to refinance a home loan increased 8% for the week and were 2% lower than the same week one year ago.

Our take

The key point to note here–7% mortgage rates aren’t scaring away homebuyers. This is excellent news for us agents. As we’ve been saying, the lock-in effect is easing. It’s not gone, but it’s easing. And all signs are pointing to rate cuts coming this year. Before it makes those cuts, the Fed wants to be confident that interest rates are on a downward path close to its 2% target. It doesn’t want to cut rates and then re-raise them. We never thought cuts were coming in March. At the EARLIEST, cuts will happen in May.

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President’s plan to lower housing costs

The Biden administration has issued an important proposal to reduce housing costs and enable more Americans to purchase a home. These are the highlights of the plan:

• First-time homebuyers would get a tax credit of $5,000 a year for two years. This is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home.

• A one-year $10,000 tax credit to sellers who sell their “starter-home” to another owner occupant. A starter-home is defined as a home that is below the area’s median home price in the country.

• A $25,000 down payment assistance program for first-generation homebuyers. 

• Lowering closing costs for refinances by waiving the requirement for lender’s title insurance on certain refinances

• Lowering the closing costs for home mortgages by empowering the Consumer Financial Protection Bureau to curtail anti-competitive closing costs imposed by lenders

Our take

We welcome this proposal by The White House. Housing is anywhere between 15%-18% of the economy, so bolstering this sector is an unalloyed good in our minds. We also love the fact that this proposal isn’t using heavy “command and control” methods to achieve its goals. Instead, it’s using price incentives to motivate market participants. That’s smart. The final details still need to be worked out, but if this proposal becomes law – and that’s a big IF given how polarized and partisan Congress has become – it could positively benefit a lot of potential homebuyers.

Schematics

The news that just missed the cut

• Use this marketing strategy to maximize returns on your next open-house

• This $120M penthouse is Miami’s most expensive home

• What $2.5M gets you in California

• How to prepare yourself for a decoupled commission environment

• Use these options if your client doesn’t have the down payment

Foundation Plans

Advice from James and David to win the day

Farming a neighborhood is a classic and effective way agents can generate organic leads. But it’s important to choose your area wisely. Otherwise, you’ll be wasting a lot of time and energy. Today we’d like to offer you three tips on how to choose your geographic farm.

Determine the area’s turnover rate – The turnover rate is one of the most important factors to consider when assessing the potential of an area. Turnover is a percentage of how many homes have sold in a defined area in a year. To calculate a turnover rate, use your MLS to pull the properties for the neighborhood that have sold over the last year, and make the following calculation: 

Turnover rate = (# of homes sold ÷ # of homes in area) x 100

A turnover rate of around 10% is a healthy number. Use this rule of thumb: your farm area should have at least a 5% turnover rate before you invest your time and energy.

Determine the area’s average price point – Every agent should aim to boost their average sales price because this directly impacts their commission.

Before farming a neighborhood, analyze historical data to estimate the average sales price and quantity of sales. Focusing on higher-priced homes might entail longer days on the market and increased marketing efforts, whereas lower-priced homes could sell faster with more transactions. Whichever option seems more fitting for you, ensure these numbers align with your business objectives

Determine the area’s agent saturation – Determine whether there is a dominant agent serving the area. If there is, don't immediately discount it, but approach the situation with realistic expectations, understanding that breaking into this market may be more difficult. Typically, an agent with over 20% market share is considered dominant. If there are agents with even higher shares, or multiple agents around the 20% mark, gaining traction will be challenging. Ideally, target a market with no agents holding over 10% share. This offers the best opportunity to establish yourself as the top agent.

To learn how to effectively farm an area, use these resources.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

That’s it for this edition of the Blueprint!

Remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Have a fantastic weekend, and we’ll see you back here on Tuesday!

– James and David