We’ve made it halfway through the year and I thought that it would be a good time to look back and analyze what’s been happening in the local real estate market in the past few months. There aren’t enough superlatives available to describe how extraordinary a time this has been. When you think back eighteen months, many of us were wondering how, after we found ourselves on the other side of the pandemic, we would survive financially. I’ll readily admit that I thought that I was going to go bankrupt. Today, my team and I are on track to sell $75,000,000 in residential real estate- our best year ever. I think that our experience may help to explain some of what’s been playing out in the larger market.
Back in January, my team and I were celebrating the fact that, at the conclusion of 2020, both buyers and sellers had set aside COVID-related fears and spent the warmer months of summer and fall making up for the time that they had lost that previous spring- that period when the pandemic forced us into isolation. We had assumed that consumer needs had, mostly, been satisfied and we hoped that the coming year would be profitable. We were actually surprised that we concluded the first month of 2021 having sold twice what we had the previous January. It was, however, a warmer month and there was probably still some residual demand from the previous year so we assumed that this was simply an anomaly. Well, January became February and February passed into March and, by the end of June, we realized that our sales had increased a staggering 70%.
What happened?
In part, many of the same conditions that defined the market five years ago are still driving conditions today. In 2016, there were 7,500 homes on the market for sale in the six-county region. Currently? There are 900. In other words, there are 88% fewer homes available for sale today than there were back in 2016. Concomitantly, the cumulative growth of unsatisfied buyer demand is driving exuberance. Let’s assume that 5,000 properties available for sale at any given time represent a market that is in balance. (In other words, you have an equal number of buyers and sellers.) Well, if 900 properties are available to purchase and the needs of only 900 buyers are satisfied, you still have 4,100 buyers who are continuing to look. When you add that number to the total number of new buyers entering the market, you begin to understand what’s going on. When this accretive phenomenon plays out over a period of many years, buyer demand far outpaces that of sellers and property values explode.
So where are we headed?
Everybody seems to be sharing stories around their virtual water coolers about a friend who just sold their residence for more than $100,000 over asking as a result of two dozen prospective buyers engaged in heated catfights on the front lawn. These stories are, mostly, true. (However, any rumors that you may have heard that I am leaving real estate to begin filming “The Real Housewives of Monroe County” are purely speculative.) Several months ago, I was absolutely convinced that a correction was imminent. There was no plausible reality that could justify the continued growth of these astronomical valuations. Well, with the passing of time and some new data, I’m now certain that we’ve achieved a new high watermark and that there will be no reordering of property values. Unlike 2008, when the run-up in prices was held together by a bit of string, some glue and scotch tape, things today are much different…
- Today, many buyers are purchasing new homes with cash. If a lending institution is involved, they’re insisting that mortgagees arrive at the closing table with an adequate amount of down payment.
- Likewise, today’s buyers have better credit scores than they did in the run-up to the Great Recession. If you aren’t credit-worthy, you’re not going to secure a loan.
- Twelve years ago, speculative buyers played a disproportionate role in market activity. Most of today’s buyers are owner-occupants who are interested in purchasing a roof to shelter and house their family.
- Finally, and most obviously, until there is an enormous increase in the number of homes listed for sale, buyer demand will continue to far outstrip seller demand. Only when several thousand new homes hit the market and are subsequently sold will the number of buyers looking to purchase begin to diminish meaningfully. Only when several thousand more are listed will market conditions turn in favor of buyers. It’s only at this point that home values begin to drop. I don’t think that anybody- professionals or laymen- are predicting that 7,000-plus new properties will be listed for sale anytime soon.
At the moment, the market is experiencing a bit of a lull. Many buyers have decided that they’re going to temporarily set aside the frustrating exercise of searching for a new home. The common sentiment is that, throughout the spring, they suffered too many disappointments and indignities. A large number of buyers seem to be lying poolside, enjoying summer cocktails with family and friends that they haven’t seen since St. Patty’s Day 2020. That said, this summer respite is proving to be a great time for those buyers who have decided to double down and remain engaged. Although property values haven’t corrected downward, the competition certainly seems to have slackened. I’m predicting that, come Labor Day, as buyers are enjoying the final few drops of their Daiquiris, market activity will once again resume. By September, I’m certain that buyers will return to their search intent on accomplishing in the fall that which eluded them in March, April, and May. In other words, get ready for a resumption of some of the chaos that defined market activity this past spring. Personally, I’m visualizing myself basting a Thanksgiving turkey while negotiating a bidding war on behalf of some grateful seller!
A Team Update
In addition to the increase in the amount of business that we’re conducting, our team is also having to contend withthe breathtaking speed with which technology is evolving. We no longer enjoy the privilege of waiting to look under the hood at the end of the year to make changes. Instead, we need to pivot in real-time if we want to remain at the top of our game and provide the best service to our clients. Strategy, financing, technology, culture, procedures- everything seems ripe for revision, exploitation, and adjustment. Since the beginning of the year, my team and I have made many changes in order to assist our clients find property, successfully negotiate a sale, and close with as little friction as possible-
- We’ve created the best real estate website in all of Western New York- if you haven’t seen it, check it out- www.marksiwiec.com
- We’ve begun working with a company to improve our Search Engine Optimization (SEO) so that, when somebody in Tulsa is looking to buy real estate in Rochester, we’re the first site that pops up in their Google search results
- We’ve worked with Majuwa Kowai-Bell at Genesee Regional Bank to create one of the strongest tools available to buyers in their quest to purchase new property. Most of our clients now qualify for a streamlined mortgage application which, within a matter of minutes, provides them a mortgage approval that is equivalent to an all-cash purchase. This, in turn, eliminates the greatest obstacle preventing many buyers from succeeding in the offers that they’re submitting- the mortgage contingency clause. If you’re looking for one more tool to improve your odds of purchasing, call Majuwa at 472-9345
- Almost every one of our properties enjoys a 3D Tour, regardless of price
- I write and distribute a bi-weekly blog to 68,000 readers to keep clients and prospective clients up to date on the latest news in real estate. Let me know if you’d like to be on the distribution list
- Corey James Moran and I record a podcast, Open House, every week to talk about our experiences in the market. We can be found on the Apple Podcast app, Spotify, or wherever else you find yourself listening. This is probably the most fun that I’ve had in the past six months and our gabfest seems to have taken off. Who would have thought that, in addition to our growing audience within the United States, we would also have listeners in Poland, Australia, Denmark, and Saudi Arabia?
- Finally, it’s one thing to utilize technology to secure clients and ensure that their transaction plays out smoothly. However, we remain committed to nurturing our relationship with clients who have become friends. Last week, along with our partners, Majuwa Kowai-Bell and GRB, we hosted 250 guests at a Red Wings game. We’re looking forward to seeing old clients at our annual pumpkin giveaway at Wickham Farms this October. We’ll be delivering 1,200 pies in the week before Thanksgiving and we’ll probably be dropping hot chocolate bombs in early February.
A Heartfelt Thank You
I mentioned earlier in the newsletter that there are approximately 3,400 agents who sell real estate in the six-county region and there are currently 900 homes on the market for sale. Punching a few numbers into my Casio pocket calculator leads me to understand that it’s not an easy time for most agents. Thankfully, my team and I are bucking the trend and we owe it to the loyalty and the friendship of our clients for their continued patronage and the strength of their referrals. Thank you for believing in us. We’re genuinely grateful. If you’d like to talk about real estate or have questions that I can answer, please feel free to reach out. I can easily be reached at 330-8750.