In fact, existing home sales fell to their slowest pace in two years this July, according to data from the National Association of Realtors®.
But, despite what most people would think, sales didn’t fall because the market was slowing down. They dropped because of a lack of inventory. Buyers simply couldn’t find a home to meet their needs.
As the weather cools, all that could change. Recent market shifts will give buyers a leg up in the next few months and into next year.
At the same time home sales were slowing in July, NAR® reported the median existing-home price for all housing types was $269,600, up 4.5 percent from July 2017 ($258,100). July’s price increase marked the 77th straight month of year-over-year gains.
But this winter, things will change. Buyers will be able to pick and choose with less competition from other buyers. The added pressure of selling before the holidays often gives buyers even more of a leg up, according to Danielle Hale, Realtor.com's chief economist.
So what does this mean for real estate agents?
While the seller’s market may be slowing down, now is the perfect time to convince buyers to work with you.
Sale prices drop in the fall.
While listing prices don’t drop drastically — typically less than half a percent — final sale prices take a noticeable dip. In the 50 metro areas, home sale prices dropped 2.96% on average — $8,300 on the median home — from summer to fall.
Home sale prices are typically lowest in the winter.
If buyers hold off until January or February, homes cost 8.45% less on average than in the summer months. January had the lowest sale prices in 29 of the 50 metro areas, and February had the cheapest prices in 19 areas.
But because most buyers prefer to move into their new homes by the end of the summer, especially if they have school-age children, many miss out on these savings.
What’s really interesting is the number of buyers who are looking for a home in the spring and summer who don’t have kids in school. Oftentimes, their leases expire over the summer because that’s when they moved into their current residences.
You often see this with college kids who move to a new city during the summer, sign a one-year lease and continue renting in yearly increments. When they’re finally ready to buy their first home, they want to close before their lease expires in the summer.
If they haven’t found a home yet, it’s your job to educate them on the advantages of continuing their searches into the fall and winter months.
How do you find these leads?
The buyer’s market is extremely diverse, so there isn’t necessarily a specific demographic you should target. But looking at recent home buyer data in the NAR® 2017 Profile of Home Buyers and Sellers, you can choose certain groups to focus on with the highest lead potential.
According to the report, first-time buyers made up 34 percent of all home buyers in 2017. First-time buyers may be your easiest leads to land because:
- They don’t have another property they need to sell, which might cause some potential buyers to wait for a hotter spring market to list.
- They may not realize they could pay the same — or even less — per month on a mortgage that they’re currently spending on a rental property, all while gaining equity.
- They can take advantage of lower interest rates through FHA loans and other first-time buyer programs.
According to data from Trulia, starter home inventory gets a 7% boost between October and December in the United States.
In 70 of the 100 largest U.S. metros, the number of starter homes on the market reaches its annual peak during this time, meaning those looking to buy their first homes have more to choose from this time of year. This is another great selling point to use with first-time buyer leads.
So how do you find them?
NAR® says the largest share of home buyers fall in the 25-34 age group, accounting for 26% of all buyers. It’s safe to assume many buyers in this age group will be purchasing for the first time.
After all, the median age for first-time buyers has remained between 30-32 years from 1995 to 2017.
We found two effective ways to track down these leads.
When you click on “Order this Mailing List,” you’ll be taken to a page to narrow down your options.
Under the “List Options” tab, choose the selection that says “Include telephone numbers where available.”
Under “Geography,” enter any desired zip codes in the bottom section, then click “Apply entered ZIP Codes.”
With one zip code, I was able to collect 1,436 leads, for a price of $122.06.
If you want to find more targeted leads, under the “Additional Selections” tab, check both boxes for “Extremely Likely” and “Highly Likely.”
This reduced my list count to 722 leads, for a cost of $100.
Click “Add to Cart,” and continue the checkout process. If you aren’t already an Experian member, you can register during the checkout process.
I also used a data-collection site called Melissa Data, targeting consumers in the 25-34 age range who currently rent properties.
When you get to the site, click the link on the right of the page that says “Create an account now.” Create a free account, and verify your account with the confirmation email they send you.
Once you’re registered, you can sign in and begin putting together your list.
Under the “Products” tab, select the option that says “Sales Leads & Mailing Lists.”
On the next page, select the option for “Consumers.”
Then, click the box that says “Build List Now.”
As I built my list, I used the following options:
- Zip Code: 80920
- Home Owner/Renter: Check the box for Renter. (Also check the box that says “Append to File.”)
- Household Age Code: 24-35 (Also check the box that says “Append to File.”)
After each of the above selections, click the button that says “Add Count.” This applies your selections to your final list criteria.
For this particular zip code, I was able to collect 196 records. You can also expand your search area by searching for a bigger radius or full county.
Once you’ve made all of your specifications, name your list and click the yellow box that says “Purchase” under the green section to the right that says “Job Summary.”
This will take you to the final confirmation and payment page. This list cost me $50, which is the minimum purchase price.
You can choose to download your list in a number of formats — I chose an Excel spreadsheet.
Once I finalized my transaction, I was immediately given a link to download my data. You’ll also receive an email to download your data within about 20 minutes.
If you want to verify the ages of the property owners you’ve pulled, you can enter their names into Intelius.com.
According to NAR®, 52% of sellers traded up and purchased a home that was larger in size than what they previously owned. The typical buyer was 45 years old this year.
I recently showed you how to find Move-Up Leads. Check out this blog to learn the best ways to find and convert them.
These buyers may push back because they want to wait for a hotter spring market to sell, or because they have children in school and don’t want to move during the school year. But here are a couple of reasons they may be better off selling in the fall or winter.
- There are less homes on the market, which means less competition for similar homes.
- While they may not get the higher sales price they would in the spring or summer months, the amount they save on the bigger home they purchase could cover the spread — and even land them a profit.
If a homeowner listed a property in October for $250,000, and the final sales price of the home was 3% below list price — $242,500 — that homeowner would lose about $7,500 on the sale.
But if the larger home the homeowner purchased that same month was also 3% below its listing price of $350,000 — $339,500 — the homeowner would save $10,500 on the sale, putting them right side up $3,000 in the selling and buying process.
If that same homeowner sold their home in October or November for 3% below list price but waited until January or February to buy, he or she might save $31,500 — 9% below list price on that same $350,000 house.
That’s $24,000 of savings!
If these buyers are set on staying in the same area to prevent disrupting their children’s education, come ready to show them a multitude of options available right in their school district.
According to the NAR® 2017 Home Buyers and Sellers Generational Trends Report, sellers ages 62 to 70 made up the second-largest share of home sellers at 21%.
Like the previous group, these buyers may be harder to convince, especially if they’re on the older end of the spectrum. They may not want to move in the winter months due to the general hassle and difficulty of preparing a home for sale and actually moving.
As we mentioned under first-time buyers, starter home inventory reaches its peak in the fall months. Trulia defines a starter home as any listing priced below $232,751, based on weighted averages from the 100 largest metro areas in the U.S.
The same types of homes appealing to first-time buyers are likely to appeal to downsizing buyers.
I recently showed you how to find Downsizing Leads. Check out this blog to learn the best ways to find and convert them.
To overcome the objection about moving in the colder months, be sure to send these buyers information about local moving companies who can make the transition as hassle-free as possible — for a reasonable cost. You can even offer to pay for any moving expenses if they list with you.
Convert your leads into listings
The best way to convince buyer leads to wait for cooler months to search for homes is by using a mailer that shows real-life examples of comparative homes sold in the summer vs. winter.
Find two nearly identical homes, preferably in the same neighborhood, school district, etc. Show what the market value of both of these homes should be in your expert opinion.
Find one home that sold in the summer, along with its final sales price, and one that sold in the winter, along with its sales price. Make sure the properties were sold in the same calendar year, and make sure all of the information you give is accurate. Your leads could easily look up the properties you mentioned.
Include pictures of both homes, putting the final sales prices at the forefront.
The heading of this mailer should be bold and say something along the lines of “NOW IS THE BEST TIME TO BUY!”
Include the mailer with your book
If you really want buyers to stop and take a look at your mailer, consider putting it inside your book like a bookmark when you drop it off or mail it to your leads.
Books hold an inherent value. They aren’t likely to be thrown away, like a mailer might be. If you put your mailer inside your book, it’s more likely to be seen.
In addition, you’re providing potential buyers something helpful they can use in the home-buying process.
As a MyBooks member, you have access to two different buyer books to give to your leads: One is a general guide for the home-buying process; the other specifically targets first-time buyers.
The Home Buyer’s Guide shows buyers:
- The best ways to search for homes
- How to compare their needs versus wants
- Negotiation tips
- What to look for in a home loan
- Steps to take during a home inspection
- A rundown of the closing process
The First-Time Buyer’s Book shows buyers:
- Programs offered for first-time buyers
- Common mistakes to avoid
- 12 steps to buying a home
- Information on the closing process
- Moving tips
- Much more!
Or, if you’re interested in one of our seller books, you can get a free sample book here!
Joe Nickelson is a real estate professional dedicated to helping home buyers and sellers achieve their dreams of owning property, and helping real estate agents stop using the sometimes-vicious tactics that weigh on their consciences. He believes that the Smart Agents books will, quite literally, change people’s lives for the better. Check out his full bio here!