Most tips you find when you need help selling a house in a slow market are actually general tips that also apply in a normal or fast real estate market.
Some are even expected and a basic requirement to have a chance to sell a house in a decent amount of time.
This article will be different, because I will take a closer look at the key factors of a slow real estate market and derive from that which strategies and marketing methods will have a higher chance of success when this natural real estate market cycle occurs.
Characteristics and Indicators of a Slow Real Estate Market
So, let’s take a look at the definition, characteristics and some statistics of a slow real estate market.
When it comes to the definition of a slow real estate market, we can look first at what it generally means.
In the context of trading, for example, it usually means that the trading volume and the volatility are low.
It also means that trade orders don’t get executed as fast as possible. Also, general financial activity is lower compared to the usual market activity.
What you also see is very often a tight consolidation range of prices after big market moves.
Now, let’s translate this to the real estate market.
The equivalent to trade orders not getting executed as fast as possible and a low overall trading volume are houses being on the market for a longer time than usual and the number of real estate transactions decreasing.
There is no exact equivalent for the tight consolidation range of prices in the context of trading financial markets, because in a slow real estate market home prices usually steadily go down.
Because there is an increase in price reductions by sellers. To be exact, in the context of trading this would be a downtrend, and sometimes consolidations also have a slight downtrend.
For the sake of this article, the most important characteristic is actually houses being on the market for a longer time and the number of real estate transactions decreasing.
This again corresponds to a low overall trading volume in the context of trading.
Why is that?
Because steadily decreasing prices by sellers are only one characteristic or indicator, but there are other variables that can lead to fewer real estate transactions.
Also, increasing house prices can lead to a decreasing number of real estate transactions.
How is that?
If you have high demand because of low interest rates, a decreasing number of offers and at the same time house prices increasing in a way that fewer buyers can afford a house, you get the same result – a decreasing number of real estate transactions.
Does the Current Real Estate Market Data Show a Slow Real Estate Market?
This is almost what is happening now, except for one thing which changes everything.
According to the market data from realtor.com, in January 2021 median list prices increased by 15% to $346k, active listings decreased by 43% to 599,632 (a decreasing supply), and the days on the market also decreased on average by 11% to 76 days.
If this last indicator would be an increase, we could assume currently a slow real estate market.
So, right now, the signs look like a slight recovery of the real estate market in the U.S.
What the Characteristics and Indicators of a Slow Real Estate Market Mean for Your Marketing Strategy
Now, I hope I could make it clear enough what characteristics and indicators are important to recognize a slow real estate market.
These can also be used to develop a real estate marketing strategy, and other strategies.
Why think of marketing when selling a house?
Well, your marketing activities have a direct influence on how well you will be able to sell a house.
Without marketing activities, you don’t generate buyer leads and without them, you won’t have the opportunity to apply your sales skills and thus sell a house or two.
Now, for developing strategies let’s focus on the most important characteristic for a slow real estate market, which is again houses being on the market for a longer time and the number of real estate transactions decreasing.
Let’s dig a bit deeper here so we find the problem at the base to develop the next steps.
Why are houses on the market for a longer time and why are the number of real estate transactions decreasing in a slow real estate market?
Here are most of the reasons:
- House prices that are above the budget potential buyers want and can afford and owners that are unwilling to lower the price.
- The house supply surpasses the demand of potential buyers, even if the pricing is right (a buyer’s market).
- Houses in “bad” condition or with an unappealing layout (no curb appeal, a bad roof, too much clutter, and no upgrades made and or going to be made anytime soon due to a stubborn owner).
- Houses that have tenants and aren’t exactly a good return on investment for potential real estate investors or that can’t be shown that easily for that reason.
- Homeowners who make it difficult for realtors to access the house for showings.
- Owners going the FSBO route in combination with one or more of the aforementioned reasons.
Now, let’s apply a stoic principle to the above reasons from the perspective of a real estate agent.
We need to ask ourselves which of the above reasons are more within our control and which ones don’t or rather which ones we can somewhat influence and which ones we can’t.
Reasons Somewhat Influenceable Not Influenceable Too high prices for potential buyers X Higher supply than demand X “Bad” condition or layout of a house (no curb appeal, a bad roof, too much clutter, no upgrades made, etc.) X Houses with tenants X Houses/Owners difficult for showings X Owners going the FSBO route X
As you can see from the table above, most of the reasons can somewhat be influenced or turned.
Only the macroeconomic situation in the case of an existing higher supply than demand can’t be really influenced unless you have some sort of relevant political power.
But even in the case of having political power, the market is usually more powerful.
What Can Be Done to Counter the Reasons Driving a Slow Real Estate Market?
Too High Prices for Potential Buyers
Let’s start with too high prices for potential buyers.
This comes down to how well you can qualify and then persuade sellers to reduce their prices or are open to creative financing options, such as, for example, rent-to-own.
What will also help in this context is having the average household income of millennials in mind, which is between $69,000 and $80,300.
Additionally, it will be helpful to know that they are looking for homes in the price range of $300,000, as I already covered in this article of mine.
Why? Because right now they are the largest buyer group.
By the way, because of the current gap between increasing median home prices, a decreasing inventory and an increased demand from millennials often not being able to afford or finance such homes, a rent-to-own solution may be a good option to close that gap.
Many realtors don’t know how to structure a rent-to-own deal or if this is even something worthwhile doing as a realtor, but it can actually be quite profitable with the right knowledge.
But this would be a bit outside of the topic range of my website.
So, getting back.
When having the first conversation over the phone, you will need to find out how motivated people are to sell.
If they are not motivated at all and just testing the waters with a utopic asking price, I wouldn’t even bother to continue.
What good is getting a seller to sign a listing agreement, when it is based on an empty promise to sell the respective house at an outraging price?
You may have a listing agreement, but a sell in a slow market will be unlikely.
So, I would say that checking the seller’s motivation is even more important in a slow real estate market than in a market with “normal” transaction volumes.
By the way, finding out about their motivation and if they are up to reducing their asking price a bit, or to do a creatively structured deal (e.g. rent-to-own) will also give you valuable information about your chances of influencing them with respect to the other issues I mentioned in the table above.
It’s actually a great way to filter the stubborn ones out.
A Bad Condition and/or Layout of a House
The next reason that we can somewhat influence is the “bad” condition or layout of a house (no curb appeal, a bad roof, too much clutter, no upgrades, etc.).
While we can’t control or influence the bad decisions sellers made in the past, we can try to influence the problem-solving part of today.
Depending on the seller’s motivation to sell and the financial capacity, you may propose several solutions in different price ranges to improve the curb appeal, the bad roof, the layout, and the other things that have the respective house in a bad condition.
If you have some good contractors on hand, you may even collaborate with them on a commission basis that might compensate for less commission income in a slow real estate market.
Let’s think for a moment about the current real estate market situation.
At the moment, median home prices increase, the national inventory size is decreasing and demand, especially on behalf of millennials, is increasing.
In the context of the condition of a house, you could have some tips ready that consider what millennials are looking for in a house.
You could provide these tips to sellers so they know what to focus on when it comes to improving the condition of their houses.
So, the overall principle is to first find out which demographic is the largest in terms of demand, what they are looking for, and then apply that to the way you consult with sellers in terms of improvements.
Again, should the sellers be stubborn and not motivated, thus having no intention in reducing the price a bit, and also wouldn’t be up to do some of the improvements you propose, I would filter them out as unqualified.
On the buyer side, you can focus on the marketing channels where you can best reach them.
Since the most demand right now comes from millennials, you can focus on the marketing channels where you can reach this demographic group.
I covered this already in my article about first-time homebuyers.
In this article, I concluded that you want to target millennials in the age range between 22 and 39, and an average household income between $69,000 and $80,300 and advertise homes in the price range of $300,000 with an open floor plan, two full master suites and one standard bedroom.
For millennials, the ideal marketing channel would be Facebook Ads, and with ad placements on mobile.
There, you can also include interests related to weddings and using first-time homebuyers in the detailed targeting section.
Houses with Tenants
The next reason is made by houses with tenants.
Again, we can’t undo the decision of owners renting out their house to generate some income.
If you target retail buyers and can’t convince the owner to get the tenants out, you might want to skip these kinds of sellers.
Because many of the things to improve the chances of a successful and timely sell in a slow real estate market are tough or can’t be done at all, such as improving the interior and exterior of the house.
On the other hand, if you can also target real estate investors, things might look different.
You will need to crunch some numbers and check if the return on investment on the home is good enough to offer it as an investment property.
Again, the seller might also be flexible enough to accept a price decrease to be able to sweeten the deal in terms of the return on investment for potential real estate investor buyers.
A creative approach would be to work with what is already there – the tenants.
You might be able to convince the seller and the tenants to structure a rent-to-own deal out of it, in which you can also earn a commission as a realtor when the option money is paid to the seller.
But if all these approaches are not possible, you may better want to move on.
Houses Difficult to Show to Potential Buyers
The next reason is owners with whom it is difficult to organize showings.
This one is somewhat similar to the owner’s willingness to reduce the price.
Because it goes back again to the level of selling motivation the owner has.
If owners are really motivated to sell, they will also be motivated to do everything in their power to make organizing showings as easy as possible for real estate professionals.
With key lock boxes, this shouldn’t be that much of a problem provided the owners aren’t living in the house.
And if they are, they could organize with the respective realtor fixed showing times each day and weeks ahead of time.
So, again, if you happen to come across owners that aren’t quite flexible when it comes to showings, it might be another hint that there is not that much motivation to sell, and you can disqualify them during your initial phone conversation.
This will reduce your opportunity costs, so you can focus on sellers that are motivated.
Especially in a slow real estate market, you will need owners you can work with.
Owners Going the For Sale by Owner Route
The last one is owners that went for the sale by owner route.
Due to the wrong pricing, below average selling skills on the phone, and/or often not being able to show the respective home because they were at work or away for other reasons, their house now has been sitting on the market for a longer time than necessary.
I repeat myself but if you come across a house like that, you won’t be able to change the past decision of the owner, but you can try to fix the situation they are in right now.
By having a conversation over the phone, you may test their motivation again, and if the financial condition of the house would even allow for working with a realtor.
It may be upside down and there might not be much room for a commission.
If it was just for reasons that owners had a bad experience with realtors in the past or they wanted to first avoid working with realtors, chances look better to convince them.
Should the owner decide to work with you, you may first want to take the house off the market for a little while to get rid of the stigma of a shelf warmer.
The time off the market could be used to make any necessary upgrades and fixes (maybe tailored to millennial buyers). After that period of time, you can relist it.
But if it’s upside down, you may only be able to fix the situation if you know how to structure a creative deal such as, again, a lease-purchase deal among others.
If the owner isn’t open to that either, then there isn’t much you can do, and I would move on.
There is a lot that can be done to counter the reasons for a slow real estate market.
As a real estate professional, you might have more influence than you think.
In such a market, it is more key than ever to be able to know the owners or sellers and potential buyers.
When it comes to owners, this knowledge is important so you can qualify or disqualify them.
You will need enough selling motivation on their behalf to be able to decrease the price, prepare and improve the product (the house), show the house, and depending on the situation, structure a creative deal for buyers.
And when it comes to potential buyers, it is important to know them so you will be able to better target and reach them on suitable marketing channels.