How Will a Second Trump Term Impact the Housing Market? Agent Income Will Change!

How will a second term for Trump impact the US housing market? And specifically and way more importantly, how will it impact your income? If you're in real estate sales, you just gotta do the work. I was at a real estate conference a couple weeks ago. Two shocking statistics. The first through July of this year, 70% of agents hadn't closed on a single property. So seven months through the year, 70% of agents hadn'T closed a single home. The other shocking statistic is that this year will be the lowest amount of unit sales that we've experienced. I think it was in 30 year. So we are in an outright unit recession. I think going forward, I think actually the real estate market's going to be in good shape. But I want to get into some data here that'll give you really arm you to be able to navigate what's going on in the market. When I kind of look at the market holistically, there is a really good resource. I don't know if you could see this, but it's the secret. I guess it's not a secret anymore. The Secret Wealth Advantage by Akhil Patel. Clearly I'm a real estate guy, but I'm also into crypto, bitcoin and other more, more larger cap altcoins. I'm not an S H I T coiner for the most part, so don't judge me if you're not into crypto. The point being I pay attention every day to what's going on in the markets. There is a macro cycle in play here which as this book mentions, the Secret Wealth Advantage by Akhil Patel. There is a lot of data that supports this 18.6 year real estate cycle and this the real estate as an asset class, globally it's the biggest asset class there is and it follows a very predictable cycle. It is 18.6 years. In the middle of the cycle there's a mid cycle slowdown. So that just happened to correspond to the sea crash in 2020. The start of our current real estate cycle is 2011 and we went into the, the doldrums in 2007 is when stuff started pivoting and then 2010 we lifted out of it. So right now we are in what is called a winner's curse. And let me just go through some of this here. So this is one of the few macro tools that you'll ever need. So once you understand this and this is going to, I'm going to draw this back to your income specifically not only as a real estate agent, but also if you're just Investing in markets. The beauty about it is it's so simple to follow. You'll wonder why most don't. So most are focused on what's going on today and not what's going on on the macro level. I started educating myself on this cycle back in 2012 after the GFC, the great financial crisis downturn of 2007, 2009. It was the single best thing I ever did to understand how real estate cycles, stock market cycles and economies work. This is not to throw some FUD at you, fear uncertainty and doubt. This is to let you know in those years that he's talking about here in, you know, 2007 is when we were at the peak, took us about three years in my market we went from 15,000 agents to 5,000 agents. That was a very challenging time. I got into real estate in my first 10 months, 2007, March to December, I sold 27 homes. 44 My first full year as the GFC was really taking hold. And then 58, then 118, 178. And all those challenging years I just sold more and more homes. So this should not freak you out. Just an indicator on what might be coming. And here's the thing, there is no president that can really drastically impact the macro cycle. All that said, I do want to go through some info that I think is going to be helpful. We have been in a unit recession for a few years now and so I think no matter what happens with a sort of macro economy, I think most markets we're going to have as interest rates come down here, we're going to have more buyers, more sellers, inventory is already rising. We're going to just going to have a more balanced market with more units selling. And we have had probably 12 to 18 months here of agents just leaving the industry. So agents are leaving the industry and income will be coming back in 2025. But let me go through this. Our friends at Keeping Current Matters an awesome resource if you haven't plugged into this. So the trajectory of rates over the coming months will be largely dependent on three factors and this is important. This is driving most decisions now with buyers and sellers. Hinge around what's going on with rates and you can see mortgage applications go through the roof. As rates first came down and they were projected to come down the last FOMC meeting when they came down a half point, mortgage applications went went through the roof. The performance of the labor market, the outcome of the presidential election which at this point is behind us. Any possible reemergence of Infl inflationary pressure. While volatility has been the theme of mortgage rates over the past several months, we expect stability to re emerge toward the end of November and into early December. So when will mortgage rates come down is the ultimate question. Jobs. This is a sticky subject. So you can see there are lots of job losses in business and jobs are being made up by the government. Our growth in terms of productivity is coming mainly from government jobs. And this may be a little political, but we do have a new focus on efficiency in the government. Regardless of what you think, the Department of Government Efficiency with Vivek and Elon I think will do some good here in terms of just being more efficient with some of this stuff. So let's talk about inflation. So, and this isn't, this is just PC core personal consumption expenditures. Regardless of how you thought we got there, there was some essentially quantitative easing that happened around the pandemic and also with one of the big pushes of the prior or the current administration that did lead to inflation. You can't, you can't really deny it. The Fed is talking about a 2% target and that has been a little bit what's been driving these interest rate reductions. So we should see that continue. So mortgage rates are expected to come down. So you could see the end of 2024, we're still at around a 7% and, and they're expected to come down a full point by the end of 2025, which will get people that are sitting on the sidelines off their butts and into the market, which is a good thing. How about prices? That's the next question here. In terms of prices, it's just a market, right? Supply and demand. If I have one thing and I'm selling this, this thing here and there's 10 people that want to buy it, I can charge more for it because there's a ton of demand. That's what we've been seeing is that builders are filling the gap between resale, existing home sales or resale and new construction fills that gap. I don't know if it's because they got so tremendously burned during the great financial crisis, the gfc, but they have not been back to their run rate and they were overbuilding for a few years in there. Four years, around 2002, three, four, five, six or so. But then we've just had this like massive under building over 15 years of builders not catching up and they're just finally catching up. So I think that is a reason why prices have been inflated here and prices are set to forecast, probably not as high a rate as they had in the past, but prices are set to increase. The good news is that inventory now is coming up. So you can see in 2022, lowest inventory that we've had really ever, 300,000, 350,000 existing homes. That ticked up to a low in 2023, around 600,000. And you could see a year later we were at almost 700,000. And now we're going to get back to more normal levels, which is just a balanced market. This combined with interest rates coming down, more buyers will hit the market. So there were 29.2% more homes actively for sale on a typical day in October, compared with the same time last year in 2023, marking the 12th consecutive month of annual inventory growth and the highest count since December 2019, which is a good thing. So let's talk about the housing market in general and will it pick up? This is the pain we've been experiencing even in the pandemic year of 2020. And there was a couple months where inventory dried up and there weren't a ton of sales. We still sold six and a half million homes that year. So six to six and a half million, even five and a half million. That's where a normal balanced market is. And you can see as we went through 2022, which is when we went from a zero interest rate environment to what do we get up to like five and a half percent increase in just the fed funds rate, which spiked mortgage rates to, you know, 7 to 8%. And we're just coming back from that. And so as rates come down, we will see more property for sale. Here is is the thing, or more units selling. The benefit of this as we've had a squeeze in income. And if you've ever read the book by Gary Keller called Shift, the COVID of that book has a chart where it's like income available to real estate agents and the number of agents. The good thing is, is that a lot of agents have left the industry and income will be increasing with a lesser number of agents. So if you're still in the business, you are winning the game. It has been a game of survival for the most part, not a game of necessarily having your best year ever, although a lot of folks in our community are having their best year ever. If you're still in business, you're in good shape. So is the market going to crash? You bring up something like this and you're telling us that there's going to be this major recession and major Collapse. I don't know that I see that. So I tend to agree with yes, it's not good from a debt perspective. So consumer debt is way higher than it's ever been. Whether you look at auto loans or mortgages or credit cards, every one of these lines are expanding. So if you were to take any one of these and just put them on its own chart, they're all going up into the right, which is not a good thing generally. But here is the story. When it comes to real estate during the gfc, it was a different scenario, right? So you can see. Let me explain these two lines here. The green is homeowners equity, the reddish color is mortgage liability, and the blue is the real estate value. So you could see here in the middle of 2008, all the way to 2013, homeowners equity was less than the mortgage. So homeowners were underwater for middle of 2008 to middle of 2013. So roughly five years now you could see, because homes have been appreciating and there's not as much inventory, supply is not satisfying demand. There's just a divergence of equity versus what is owned. So real estate values are through the roof. Homeowners equity, there's a big gap between what they owe and their equity. You know, so they're not in a position like they were where there were going to be short sales. There may be distressed sellers, but they're only distressed because they need to sell. And maybe they price their home more aggressively and give away some of their equity. They're not going to be in a situation where we have a bunch of short sales or foreclosures. That's very, very clear. And this kind of paints a different story. The total housing market value back during the housing crisis in the GFC years, mortgage debt was 9.7 trillion and equity was 8.2 trillion. So a $1.5 trillion difference, less equity than debt back in that time. Now, even though you have a lot more debt, your Debt went from 9.7 to 13.2. If you were just to look at that story and say, oh my gosh, home mortgage debt is through the roof, it's 50% higher than it was during the GFC. That could be a headline that you're reading that is just meant to fear uncertainty and doubt. The real story is that homeowner equity went from 8.2 trillion to 35.1 trillion. So the delta here is negative during the housing crisis. And the delta here is that there is 22, roughly 20, 21.9 trillion of equity, the delta between debt and equity or a factor of like almost 3x on the right and a less than a 1 times equity to debt. So a wildly different situation. If we look at anyone that's thinking that it's going to hit the fan again, like the GFC or any article you read that likens what we're going through to the gfc, it's just not, it's just not accurate. It's just not telling the whole story. So let me summarize here real quick and then I just want to share a story that is going to inspire you to dig in. When most agents are super scared, home sales are forecast to tick up. So that's a good thing. It doesn't show it on that graph. So from this year we'll hit about 4.6. It's the lowest in a long, long time. 20 plus years we will get a 0.6 million. So that's a 15% increase in sales, which essentially is income. As agent count is going down, which is, which is really good for us. Mortgage rates will come down. That will get buyers off of the sidelines. That will get some sellers that weren't able to take advantage of a move or you know, maybe it was a necessary move, but it was a nice to have move that they will be motivated to make a move. And then prices are still expected to increase. So probably at a slower rate, but your home is still going to be worth more next year than it will be this year. So if you're in the market now, inventory is on the rise or if you're working with a client that's in the market now, inventory is on the rise, which is good for buyers. More selection rates. I've heard marry the house, date the rate so you could get them in a house and then eventually refi when rates come down. But it is looking good for the overall prospects for next year. And then even if there's this bigger macro shift, I just don't think it's going to impact, you know, these are prices. House prices might come down in 26 or 27 into 28 or 29. I think there's going to be a lot of activity. There's so much equity to going back to this chart here. There's so much equity right now that if that equity gets smaller, it's not going to come all the way down and under what is owed on properties. So we're not going to be in a distressed sale type of market. We're just going to have more homes that are selling and it's just going to be an overall better time to be in the market. So I don't see a cataclysmic reduction in units even if prices come down dramatically. So even if this were to come true, where in 2025 and 2026 prices come down for a couple, three years, gradually come down even 20%. So a $500,000 home is now worth $400,000. It's worth what it's worth, but it doesn't mean that that seller can't sell because they may be moving from a $500,000 home that they thought it was worth to a million dollar home. That million dollar home may be worth 800 or 850,000. So they're still going to benefit more by doing that trade up where now they're not making the trade because prices are going through the roof. There hasn't been an adjustment. So I actually hope that a version of this happens where prices do come down and rates come down because the impact overall is going to be this. We're going to get back to the 6 million home sales per year and hopefully agents that are weaker that got out of the industry, they take their time coming back and there's going to be way more income available for less agents that are out there. So let me finish with this. The reason I was able to put my head down and get to work and go from 27 to 44 to 58, sought massive leverage, didn't work a ton of hours, got up to $4,000 an hour in my real estate business. I was able to launch real estate B School in 2013. We've had 2,000 agents come through our world and help them grow and scale and have impact in areas outside of real estate, in their families, in their communities and whatnot. The reason I was able to do that is because most agents had no plan. Agents struggle to build out the systems necessary to to generate leads, nurture those leads, have them pre sold on working with you. How do you motivate someone to sign you as a buyer agent or a listing agent? Put all the nurture and text and email sequences in your content strategy database touch system. We have a killer expired program which I think is going to be as prices come down, there are going to be a lot more expireds. And I did almost 750,000 of GCI with our expire program. In a single year we have members doing three, four homes per month. With our database touch system we have members doing 100 deals per year just with the agent brand authority system. So we implement all of that in a 90 day focused effort. And just go to milliondollaragentmethod.com if you want to check it out. That's milliondollaragentmethod.com and we'll see you over there. Be good.