Work in real estate? 5 tips to overcome the slowdown in home sales
After two years of a hot market, it’s time for real estate and mortgage professionals to prepare for what could be a downturn in business.
Earlier this summer, housing prices were on fire. There is now talk of a “housing recession”. Due in part to rising mortgage rates and more people on vacation this summer, sales of existing homes in the United States fell in July for the sixth consecutive month, the longest streak of declines in more than eight years.
A client of mine in the Midwest recently put his house up for sale and had no interested buyers – none. A few months ago we were sure it would sell out within days. The plan was to sell the house and pay off their construction loan on their new home before it was converted into a permanent mortgage. Now that plan may have to change.
Several mortgage companies have already laid off thousands of employees and one company, Sprout Mortgage, based in East Meadow, NY, closed in early July. Real estate brokerage firms, such as Compass and Redfin, have also reduced their workforces.
Real estate is cyclical, and while sales won’t completely dry up, anyone connected to the industry should get their finances in order now in case the current downturn lasts for several more months.
Here are some moves to consider:
Build up an emergency fund twice as large as that of an employee
No one wants to get caught borrowing money to pay their bills. While it’s okay to set aside enough money in a savings or money market account to cover six months of expenses, it’s best to plan for a longer period if you work in a cyclical industry.
Consider keeping six to twelve months of reserves available to cover your expenses, about double the amount recommended for salaried jobs.
Keep your lifestyle under control
When the market was booming, you may have started spending more money than usual — eating out often, buying new tech for the home, and taking more vacations. Many households can save hundreds of dollars each month by reducing or cutting these kinds of expenses.
Review your expenses over the past year and determine how you can save money that might be needed to help conserve cash.
Delay any large discretionary purchases
If you’ve been saving for a new car or other large discretionary purchases, consider putting them on hold. This money may be needed to pay for essential living expenses. Look to keep your current vehicle for another six to twelve months rather than risk taking on new debt with fixed monthly payments.
Reimburse all major expenses incurred now
Review your upcoming expenses that you have committed to and determine if any items can be paid for now with excess cash. For example, if you’ve signed a contract for home renovations due to begin in a few months, pay most of the planned expenses now, in advance, or know that the funds are set aside. When your real estate project finally kicks off, you may need those renovation funds for essential expenses.
Continue to market your business
Home sales may be down, but many people will still want to sell their home in the coming year and buy a new one. How can you ensure that you are prioritized when sellers need to sell or buyers need to buy?
Review your list of top referral sources and connect with them now. Do not wait for the critical moment to undertake business development activities. Stay active on Facebook, LinkedIn, and other social media channels to ensure potential sellers see that you continue to generate sales. Try telling someone new every day what you do for a living!
Partner and Wealth Advisor, CI Brightworth
Lisa Brown, CFP®, CIMA®, is the author of “Girl Talk, Money Talk, The Smart Girl’s Guide to Money After College” and “Girl Talk, Money Talk II, Financially Fit and Fabulous in Your 40s and 50s”. She is responsible for the practice area for professionals and senior managers of the CI wealth management firm. Brightworth in Atlanta. Advising busy business leaders on their finances for nearly 20 years is his passion at the office. Outside of the office, she is an avid runner, cyclist and supporter of charitable causes focused on homeless children and their families.