A Tale of Two Markets: What Will the Shift Look Like for Real Estate Teams?

What's up, real estate team builders. Lars Hedinborg here, the founder of Real Estate B School. And we are going to get into it and typically I don't do any sort of prophesying or guessing around what might happen with the real estate market or our economy. But I think it's time I have been focusing on actually getting more into what's going on in the world in our local economy. And this is a, as much as I can, a politics aside episode that I really want to make sure you're tuned into the right resources when it comes to knowing what's going on in not just your local market, but in the US Real estate market, interest rates and also a little bit what's going on globally and how it might impact your business. And this is a little bit tale of two potential markets. We did a production mastermind in our group Game Changers Nation, powered by Exp Realty. We do a weekly production mastermind and reach out to me if you want access to it. We allow non exp folks into that group as well. And it's a way that we get together and we serve at a very high level. Folks in our group and folks that, you know, maybe they don't have the resources, they don't have a community where they're at in their current situation, their current brokerage. So it's weekly sales and production mastermind. But this last week we had someone on Cliff Freeman, who I will lovingly call him a nerd, who has a very distinct view of where the market might be headed. And I don't disagree with it, but I do have an alternative viewpoint to it. And so dating back to, you know, I got into real Estate in 2007 and the rest of the country had turned a little bit at that point in terms of the mortgage crisis unfolding in different markets, especially the West Coast. In our market, though, I left my corporate job. I remember March 5, 2007 was the last day at my multiple six figure cozy. The whole future was bright. Corporate job. And three months later, and this was looking back like 2009, 10, I was able to look back at the data in June 2007 in the Charlotte market, inventory shot up. I mean, it was like years of just no inventory, no inventory. And then all of a sudden like through the roof, all the buyers were going to sit on the sidelines. Nobody was going to buy seemingly forever. And it was a dark, dark time for a few years in there. But I worked through it and so I feel like I am very well situated that Is not a distant past to me. I remember it vividly, what it took to not only survive in those downtimes, but to totally crush it. And I don't say that with ego, but I went from 27 sides to 44 sides. My first full year was 2008. 44 sides as a solo agent and the market was already turning. It was kind of crazy. 2009, 58 size 2010. Well, 2009, 58, 2010, 118, then 178. 248. The year we did 248 was 2012. That's when I was fully out of production. So the whole multiple stages of business growth that we teach now, which you can go to realestatebusinessgrowth.com to pick up that real estate business growth navigator, uh, I did all of that in the worst market ever. So let me get back to the. To the story here. What wasn't true of those times was the fact that inventory wasn't like it is today. You know, there's. I think I keep track of a few different resources, but keeping current matters has been really good. And it's. Keeping Current Matters.com has been really good in terms of. Even when Covid hit, they predicted that the market wouldn't drop out. And they really predicted it super accurately. I was following a couple other sources at the time that said this is the end of the housing market as we knew it, with all the job losses. And it was dark times. If you remember the first year of COVID all the job losses just stacking, stacking, stacking. But it turns out that the folks that were impacted and lost their jobs were not the folks that were in the market to purchase homes. So it didn't impact the housing market. So but even as we sit here today, most markets, you know, early 2022, right? Pre some of these interest rate hikes and interest rates in the last six months have gone up a point and a half point, three quarters depending on the market, what area, the country that you're in pre those interest rate hikes, I mean, it was like every market we coach probably 25, 30 major markets around the country and in Canada and we've got folks in Spain and like four other crazy countries across the world, Multiple offers on everything. So just out of control. If you're doing any business right now, you know that it's totally out of control, or it was. Markets have cooled off a little bit. We have one of our business coaches, Justin Miller, is on the west coast, Southern California. And typically the California market is a leading indicator for what's going to happen in the rest of the country. And he was saying that, you know, man, just three months ago he used to be able to list a certain home at a certain price and it was sold instantly with multiple offers. And he's doing that now. And properties are sitting. So no surprise there. And I'm not going to get too far into where our country is headed from an economic standpoint with global, what's happening globally and not so much the Russia, Ukraine and what you think of it, but just the fact that Russia made the first big move to dethrone the dollar being the reserve currency for the world, meaning that oil around the world was traded with the most stable currency, which was the dollar. And they've been predicting this for many, many, many, many years, that at some point the dollar will decline and will become worthless. So big steps Russia is now taking either ruples or bitcoin for oil, I think is the report that I saw. And, and so there's just a lot of stuff going on globally, a lot of stuff going on in the US if you follow any of it. I try not to and at the same time I get wrapped up and I've been getting wrapped up in a little bit of it because I do think some things are going to happen here that may impact not just the housing market, but a lot of things as we know it are the way we transact and just some crazy stuff. So I'm not going to go into that part of it. Uh, I, I, I had, I do have a high level mastermind which I'm doing aside sort of training on where I've put my money. I'm out of the stock market completely. I've made some, some pivots. I own physical silver. Never thought I would do that. I am a gun holder. Never thought I would do that. And so there just are some things that I'm guarding against just to keep my, my family in a good situation going forward financially. And if it all hits the fan, back to the housing market. So California shifting a little bit, right? So, so buyers, when a market shifts, it's, it's simply that buyers are disagreeing with sellers. They're just saying, hey, I don't like the price you put on that house, I'm not going to pay for it. So with interest rates going up, for every 1.1 percentage point increase in interest rates. Math, just the math. A buyer's buying power goes down 10%. So simple math. Let's, let's, let's roll this out. A $400,000 home pre interest rate hikes here recently. That home, let's say it just cost $2,000 a month principal and interest, 30 year plain vanilla mortgage with interest rates going up a full percentage. In order for that payment to be same for a buyer with all the same assumptions, the buyer would have to pay 10% less for it. So they'd have to pay 360,000 to have the same payment that they would have with a 1% lower rate at 400. So very simple math. Most buyers are using still using financing to purchase homes. So with the increase in rates and sellers still not, there's no sellers that are decreasing the price of their home. 10% leading this market down. Yet housing affordability has come down almost to the levels and this is where Cliff went on our mastermind call last week. Almost to the levels that they were before the housing bubble of 2005. Six, seven, when whenever your market really felt, felt that bubble burst. So housing affordability has to come down, prices are way up, interest rates are increasing and probably still have a couple increases left in them. Real estate is a cyclical market. So if you peg the peak to 2005 or 6, let's just say 2006 is probably on average that was the peak around the country. We're now at 2022. That's 16 years later. A normal real estate cycle is seven, 10, maybe 12 years. So we're definitely on borrowed time. Here's the caveat and here's the point I want to make is that even if three quarters of the buyer were to leave the market, we don't have enough inventory to serve the buyers that really need or badly want to move. And they're not swayed or they're not discouraged by an increase in rates or they have cash, meaning that they're not going to mortgage most of the property. It's a physical asset. When there are uncertain times, people want to be in physical assets. So there is an argument, and I believe that we've got some challenging things ahead of us which hyperinflation, they say 7.5% inflation. But if you look at the gas pump, the true inflation on most everything you're buying is 20 to 50% over the last year or so. So that's not going away. I think we've got some tough times ahead of us. But if you look at just the simple fact that there are buyers out there for the number of homes that are coming on the market, I think we're going to be okay. Like, I think there's just a period of time, 6, 9, 12 months, maybe more, maybe 24 months, where every house that comes available, whether it's from a new home builder or whether it's a resale, every house that comes available where the seller has some motivation, some purpose to moving is going to sell. I don't believe we're going to fall into an apocalypse. I do think there's a challenge with all of these refis and folks over the last three years that bought at ridiculously low rates or refied. I've refied my home and took all the cash out of it because I don't want to. I want to be in a very healthy cash position. Although I didn't keep it in cash. I've got crypto and some physical silver. But I was going to lock in that ridiculously low rate and I think I did it in just before rates picked up. So my refi was in December 2021. And so all this is really happening sort of here recently. So I think there's a chance that our job as agents, it's to get after the inventory, to have conversations with, you know, folks that are in a position to sell. In every market, there's always folks that have to sell. So the next one or two episodes, I'm probably going to break it down. In two episodes, I'm going to go through what to do to crush a shift. So the title of this episode is that what is it? The shift happens or what? The shift. You know, Tom. And I'm not going to leave you hanging here. So if the market shifts, which it very well might, I definitely do not have a crystal ball. Although that ball behind me there, if you're watching on YouTube, is very cool. It's spinning on an axis. It's not crystal, though. It's actually a little moon. So I don't have a crystal ball. Although that buffalo behind me, if you can see, if you're on YouTube, it's actually a buffalo and it is crystal. So between the two, I guess I have somewhat of a crystal buffalo next to a moon that is lit and spinning without touching anything along next to the squirrel. That reminds me not to squirrel out on things like I'm doing right now. So the next two episodes I'm going to dig into a little bit, like how to brace yourself mentally, how to protect your schedule, your emotional wellbeing, your spiritual well being, your physical body, so that whatever happens, whatever happens, you're prepared. And it might get a little crazy in terms of I'm going to share some thoughts I'm having. I feel like I can let y' all into my world in terms of, you know, this is the most exciting thing I get to do is spend this time with you, just sharing my thoughts. And so for the next, you know, few weeks here, I'm just going to do solo episodes. I am just going to sort of riff on my own and share some of what I have been up to and how I think it can help you getting into what I think is coming. And I think the housing market, my personal opinion is that yes, as a country, economically speaking, we've got some bad stuff to deal with. And I think it's coming. I think the dollar is going to collapse. I think I'm heavy into cryptocurrency, so I think there's just some major challenges. But the housing market, I just think there's not enough inventory. And so I think every bit of inventory is going to be consumed. So I think it's going to be a similar market, less heated potentially. Probably the higher price points are going to cool off a little bit like they did back in the shift that I experienced back in 2008, 9, 10. But I think we're going to be in a similar market than we've seen over the last year or so. And keeping current matters, you know what they said, and there's like seven or eight folks that project real estate appreciation. All of them still project appreciation, but they're all saying it's at a way decelerated rate. So there's decelerating appreciation. None of them are calling for depreciation over the next five years. So they're not calling for house prices to go down, they're just calling for the rate at which they appreciate to come down. We've been looking at double digit and in fact the last month to month, year over year, 19% increase in housing prices nationwide. The home that I live in is worth 50% more than it was three years ago. There's a guy down the street who was a corporate reload. He moved in less than three years ago, bought his house for 900. He put it up for 1695, I believe, and it was under contract in a split second it was, it was only on the market for one weekend and, and off they go. And so, and actually, actually they're currently under contract now. So I wonder if, if they've fallen out of a rate lock and if they're going to have any challenges, if there will be an implication for the market price, the sale price if that buyer walks away because something happened with their rate lock. Because I run my neighborhood all the time and I sort of wonder these things as I'm running around. So my friends, stay tuned for the next couple, maybe even three episodes in terms of how to prepare not just for what might happen in the real estate market, but I'm going to go into some counter cultural strategies that I've been working on. And some of you might just think I'm crazy, which is totally cool. I'm totally fine with it. But for those of you that have means to prepare for some crazier stuff that might go on, I just want to make sure I share some of that stuff with you. And we'll just go through the normal real estate shift stuff as well. So much love everybody. Make sure you go over to realestate Business growth dot com. That's our real estate business growth navigator. And if you want to consider I have an opportunity where I'm building a global real estate team essentially and you have the opportunity, you can partner with me directly. You've been listening to the podcast, you've been getting to know me. You're like, man, I'd love to partner with that guy. Maybe you don't have the means to afford our paid coaching, which is about $22,000 a year. It's like a one year commitment, three year journey. Kind of like the business school, real estate business school. It's like a three year program essentially. If you don't have the means to do that, you can still partner with me directly. Just go to partner with Rebs.com partner with Rebs.com you'll get the complete spread in terms of what it looks like to partner with me directly. You can click on Learn the Truth to really learn more about the opportunity, specifically what I'm building. And there's a link in there where you can book right into my calendar for a business growth strategy session. Much love, much respect. We'll talk to you guys soon. Be good.