"We will never see single-digit mortgage rates again. We have a serious problem."
This unanimous opinion was stated in a room with six of Florida's most prominent builders/developers in St. Petersburg, Fl, in 1980, when mortgage interest rates reached 20 percent.
But they solved the problem. Builders always do.
"If we can buy down the mortgage rate to 12 percent, the market should turn around." They started buying down the rate and started making sales.
Builders understood the times and knew what to do.
Today's builders understand the times and know what to do, and they will do it. They have no choice.
The point is that new home inventory will always be available. The same cannot be said for saleable used home inventory.
Three encouraging probabilities bode well for homebuilders and, therefore,Realtors:
- 1. Regardless of the market, there will be a shortage of new homes and salable resale inventory, pushing resale shoppers to new homes. Undecided resale shoppers represent a market segment of its own.
- 2. Builders and their preferred lenders will work out mortgage terms to meet the market.
- 3. New home construction absorption rates should remain steady through it all. Demand is and will continue to be strong.
What Realtors should assume
1. Competition for resale shoppers will become even more intense.
2. Home shoppers will consider both new and resales in new home markets.
3. More builders will compete for co-broker sales because builders know Realtors control qualified home shoppers.
4. Home offices and monthly payments will be more critical than 'location' to a growing segment of home shoppers.
The good news.
The builder may be taking bids on home sites and running behind delivery dates due to lack of supplies, or worse, find his sales slowing down because his homes are out of reach for his market.
There is an unseen but real price ceiling that builders sense they cannot exceed. Appraisals help some, but appraisers tend to move up with contract prices for single-family properties.
The fact is many markets are running out of land. As this impacts housing, you will see more 'vertical' commercial and residential (mid and high-rise condominiums).
Expect apartment owners to announce conversions to condominiums and offer sales incentives to current tenants.
Having converted 11 apartments to condominiums, yours truly can attest to the revenue generated the fastest because there are no construction or closing delays, and investors buy multiple units.
Note to Broker/Owners/Sales Trainers – Some of your agents will start asking about new homes training because they sense a need to better serve new home shoppers and are seeing possibilities to become the exclusive listing agent for vertical construction.
What To do:
Too often, we understand the times, but we do not know what to do.
We all know how that turns out.
It can be extremely costly when thousands of dollars are missed because the agent "ran out of inventory' because they did not offer new home alternatives.
New homes sales training is becoming much more than an afterthought. It is becoming a survival imperative.
Note that the author is retired as a broker but welcomes free consultations to brokers considering new homes training but have questions about how to start, what to offer, etc.
