Real estate agents around the country already know that housing inventories are at historically low levels. In 2017 inventory dropped a full -9% from 2016; days on the market (DOM) dropped by -7% or 83 days; and the median list price y/y for a single family home rose +8%.

Other market conditions also affect your business. For example, the National Association of Realtors reported that first time buyers composed only 29% of the market in 12/17 whereas first timers were 32% of the market in 10/17 and 34% of the market in 11/17.

Effects of the tax bill may affect homebuyers at all price points in the market but, according to Leslie Appleton-Young, vice president and chief economist with the California Association of Realtors, not at the higher price ranges. Higher net worth buyers “…are relatively immune to any changes in tax laws.” (Other experts, however, disagree with her.) Appleton-Young goes on to say that inventory in higher price ranges “plateaued two years ago” and she sees 2018 inventory “remaining flat.”

In terms of mid-tiered markets? Many experts think this market segment will see the most notable inventory improvements. The tax bill may put more money into consumers’ pockets and the doubling of the standard deduction may help. Anticipated Federal Reserve hikes in interest rates may stimulate listing and buying activity as everyone tries to buy/sell before the next rate increase occurs.

How can you adapt your business to capitalize on these inventory concerns?

1. Write up your loan contingencies differently. If representing the seller, counter the lender by proposing a half point under the current prevailing rate. If representing the buyer and the buyer doesn’t qualify for a fixed rate mortgage, counter with the buyer agreeing to take an ARM (adjusted rate mortgage) with an interest rate not to exceed X% (make sure you cap it at a specific number).
2. Jump on a market surge. Owners like to “move up” when rates are lower so contact your past clients who may be in the market for a move-up home.
3. Target Boomers. Most Boomers, 79.5% of them, own their own home as of 2016, according to Steve Cook, founder and publisher of Real Estate Economy Watch. Peruse your past client list to see who has a large family home and who may be ready to downsize.
4. Target single-family home renters. These renters, particularly those who have been renting 2+ years, are on their way to homeownership. They may be ready now to make a move. Also, many of these rentals are mom and pop investors, according to Cook, and may be willing to sell or trade-up since the 1031 exchange provisions in the tax code remains unchanged.
5. Pay attention to both the redistribution and migration of jobs to more affordable housing areas. Appleton-Young believes the big housing story of 2018 will be how the tax bill affects migration from high cost states to more affordable states.

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