How Real Estate Brokers Find Success During a Financial Crisis
In times of uncertainty, it can be hard for any business to stay afloat. The affordable housing crisis doesn't just impact real estate agents and brokers; it affects every single homeowner. It's obvious that a lack of finances would limit a person's spending and investment potential.
The real estate industry has to accept that things are going to be tough for a while, so they must focus on alleviating their clients' ever-growing financial burdens ahead of the looming recession.
Brokers can't control interest rates, cost of living, or the lack of demand that arises from the former two problems, but they have the power to reinvigorate the US housing market.
How Brokers Can Succeed During Economic Downturns
If you run an independent brokerage or plan to run one, there's a high chance you'll have to navigate a recession. Fortunately, brokers can still find success in an economic downturn.
Discourage Real Estate Investing
Should you really turn business away, especially before a recession? Turning away investors seems like a bad idea, and it may be in the short term, but their deep pockets severely affect the housing market. They decrease supply, especially for starter homes, which increases prices.
When prices increase, homeowners aren't able to buy homes. This forces them to rent, and with rent prices so high, it can take even longer to build up a down payment. If you can afford to play the long game, you'll have more options for buyers to work with, improving your overall profits.
Pay Your Staff a Higher Wage
The thought of paying your staff more, especially when you're struggling, sounds ridiculous, but hear us out. Between 1960 to 2017, median home prices increased by 195%, whereas wages only increased by 26%. A family in 1960 could easily save up for a downpayment in 3 years.
In 1960, the average household made $5,600 a year by age 24, and the median cost of a home was $11,900. In 2017, the average household made $28,528 a year by age 24, and the medium cost of a home was $815,906.36. Age is important here, as first-time homeowners in 1960 were between ages 24-25, but there's no way a 24 to 25-year-old in 2017 could afford a home.
It's even worse now. In 2022, Americans need to make at least $46, or $95,000 a year, to make a livable wage nationwide. Only 35.8% of American households bring in over $100,000 per year.
To fix the housing crisis, Americans have to earn enough to afford to buy them. If you can afford to pay a livable wage and encourage others to do the same, you can help improve the economy.
Support Remote Working
Remote work is much more than a trend. Even if it was, brokers should absolutely capitalize on it to save money. In fact, real estate companies can avoid getting priced out of business by facilitating more remote working options. They can even hire freelancers for casual projects.
To help your agents save money on commutes, invest in technology that offers a 360-degree hour tour from the comfort of home. Agents who work from home are often more productive and efficient, so you'll actually reduce your overheads and generate more cash flow simultaneously.
Offer Affordable Housing Options
Many real estate professionals work in areas that have or need affordable housing. Since this isn't a popular real estate niche, you're probably not participating in affordable housing sectors, but they're worth participating in. A fair number of Americans can only afford these houses.
However, you'll still run into buyers that can't purchase a new home in their area. In these cases, you can suggest a rent-to-own program. For example, the Divvy program offers small, move-in-ready homes that aren't fixer-uppers. They cost between $60,000 and $550,000, depending on the area, and buyers only need a minimum credit score of 550 to get a mortgage.
Alternatively, you could look into sustainable or green housing markets. These homes are less expensive to purchase and run because they often use green energy sources, like solar or wind.
It's cheaper, and greener to recycle existing housing stock to turn them green, sustainable, or eco-friendly. If you build new or luxury green homes, it's impossible to make them affordable.
Build in the Savings
When the economy is suffering, we're all looking for ways to save money. While there are plenty of people who can still afford homes, they may rent anyway because of the additional expenses that come with owning a property. Most renters don't even have to pay for utilities or the internet.
When building new homes, make sure to keep property taxes, insurance, and utility payments in mind. For example, building a house on a corner is more expensive to own than one that isn't. The option to incur less tax or spend less money will always be attractive to homeowners.
(Disclaimer: Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)