The Big Picture
We are all getting that familiar feeling. Mortgage rates are shooting up, and causing a lot of anxiety around our industry.
But we think it’s important to see the bigger picture here. The experts believe, as do we, that mortgage rates will drop this year, and they’ll also drop next year.
In the meantime, there are many different ways these rate fluctuations are affecting the markets, and we have a couple reports below which demonstrate those effects. We think it’s important to keep an eye on them all, as they too affect the big picture.
As we’ll say again below, we can’t control the market, but we can control how we react.
And with that, let’s get into a fresh edition of The Blueprint!
– James and David
Townhouse construction sees best quarter since 2006
Townhouse construction recorded the best quarter for starts in more than 17 years. That’s according to the NAHB’s analysis of the most recent Census data. Here are other key takeaways:
-
Townhouse starts totaled 47,000 in Q4 2023, 27% more than Q4 2022
-
Townhouse starts totaled 158,000 over the last 4 quarters, 7% more than in the prior period
-
Townhouses made up almost 20% of total housing starts in Q4 2023
Our take
It’s not surprising that the composition of the housing market is changing. Given the current mortgage rates, builders are offering different types of housing. As we reported last week, Bain and Cherry Tree Capital are capitalizing on this trend, partnering to build a bevy of townhomes in SoCal. As agents, we should always keep an eye on all various types of housing out there. That helps our clients see all the possibilities.
    |
Homeowners are staying in their homes longer
Sarasota, FL: https://bit.ly/3qdGSEy
Homeowners stay in their homes twice as long as they did in 2005, according to Redfin’s latest market survey. The typical homeowner spends 11.9 years in their home, compared to 6.5 years nearly two decades ago. Homeowner tenure peaked at 13.4 years in 2020.
There are several reasons why homeowner tenure has increased since the early aughts. 54% of boomers have no mortgage. Their median monthly cost of owning a home is just around $600.
Here are the metros where homeowner tenures are the longest and shortest in terms of years:
|
Longest Tenure
|
Shortest Tenure
|
Our take
There are several reasons for the inventory shortage, and this is certainly one of them. Older homeowners hanging onto their homes, with little or no mortgage. It’s no wonder that existing-home sales hit a 15-year low last year. As agents, we need to be aware of this trend because experts are expecting homeowner tenure to stay flat or increase slightly for the foreseeable future.
| |
Markets with the most office-to-apartment conversions
The number of apartments scheduled for conversion from old office spaces more than quadrupled over the past three years, jumping from 12,100 to 55,300, according to a recent study by RentCafe.
Office conversions now represent 38% of the 147,000 apartments in future adaptive reuse projects. The average age of office buildings being transformed into rentals is 72 years, 20 years younger than those previously converted.
Here are the top ten metros with the most planned conversions in the pipeline:
-
Washington, DC – 5,820
-
New York, NY – 5,215
-
Dallas, TX – 3,163
-
Chicago, IL – 2,822
-
Los Angeles, CA – 2,442
-
Cleveland, OH – 2, 012
-
Cincinnati, OH – 1,563
-
Kansas City, MO – 1,510
-
Atlanta, GA – 1,411
-
Phoenix, AZ – 1,377
Our take
We love this report! As you know, we’re strong proponents of office-to-apartment conversions. The concept just makes total sense to us, especially given that remote and hybrid work is here to stay. We’re mindful that conversions aren’t easy. They also can be difficult and pricey if local governments don’t change their zoning restrictions or provide incentives to developers. Since we need much more housing in this country, we want to continue to see more of this trend.
| |
Schematics
The news that just missed the cut
-
Take a peek into Bradley Cooper’s real estate portfolio
-
Here’s how to use real estate to reduce federal taxes
-
RE/MAX founder on lessons learned through his career
-
What to do when your buyer wants to make a lowball property offer
Foundation Plans
Advice from James and David to win the day
Just when things were looking rosy, mortgage rates shot up exactly when the spring sale season started. We’d like to help you handle this development. Today, we are going to highlight three skills that you should hone to be successful this spring season and the rest of 2024.
Master your message on mortgage rates – With mortgage rates rising, you need to have a solid grasp on how you want to discuss them with clients. The good news is that we’re not in 2023 anymore. Rates were also rising then, but – and here’s the key difference – there was no end in sight. That’s not true in our current situation. Even though rates are up, everyone is expecting rates to drop in 2024 and 2025. Buying now and refinancing later makes total sense. Help your clients get that message.
Learn how to manage emotions – Clients will always have strong emotions when buying a house. It’s the biggest financial decision most people will ever make in their life, and the rising mortgage rates are only adding to the anxiety. While it’s ok for your clients to be emotional, you need to be steady and even-keeled. When you share good news, stay measured. When you share bad news, stay measured. Guide your clients on how to react. Remember: while there are many factors out of your control, you can control how you react.
Learn to work well with other agents – Real estate is a relationship business with both clients and agents. It takes two to tango and two to make a deal. While clients come and go, agents in your market will be there a long time. You need to learn how to get along with them so that they’ll want to deal with you again and again. You’ll also find they can become a source of leads as well. So really consider how you treat them, just as you would consider how you’d treat your clients.
To learn more about each of these skills and how to implement them, start here.
The 1% Blueprint
An on-demand course created by James & David
Discover our strategies and techniques to attract a stream of high-quality leads, propelling your real estate business to new heights of success.
For Blueprint subscribers, the course is 30% for a limited time. If you’d like to take our course to learn how to become the top 1% of your market click here!
Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Mortgage News Daily
We hope you had a great holiday and are refreshed for this week!
We want to hear what you think. What’s your take on today’s stories and tips? Send us a note with your comments, questions, or suggestions.
Thanks for reading, and we’ll see you back here on Friday!
– James and David
