The real estate news industry hates real estate agents

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The most common consumers of the real estate news industry must be real estate agents, with over 1 million licensed in the US. Yet, the news constantly paints real estate agents as stupid or worthless, and gleefully celebrates setbacks to the industry. Why?

Before we go into that, let's take a look at the market and see where we're at.

I always say there's two parts to an economy and this is actually just standard economic theory. There's demand and supply. Demand is measured probably or at least driven by interest rates in the housing market and supply is how many houses are for sale.

Let's take a look at the latest demand, driven by mortgage rates. Last week decreased slightly and closing at 7.03% still slightly above 7%.

They are about at the mid-point of where they have been over the past year, and should be a rate that will allow more sales if the jobs increase and incomes raise sufficiently.

Now, on the supply side, housing inventory continues to drop while staying near to historic lows.

The inventory, while still about 12% higher than last year, and is dramatically below the historic pre-COVID averages by 30-40%. As long as inventory remains at these levels, housing prices cannot crash or decline significantly absent some dramatic change to the economy. All that said, these numbers may change in reaction to the jump in mortgage rates these past 3 weeks.

Now, real estate is a local market here in Los Angeles, my primary market.

Our overall market rating maintains at a rating of 36 as it continues to be a slightly seller's oriented market but has been moving towards equilibrium over the past few years. I am keeping a close eye on inventory as the significant increase in mortgage rates still has not had an effect on inventory, but it inevitably will.

So, the election is over, what does it mean to you and me? What does it mean to the real estate industry?

A constant theme in the real estate industry news is anti-real estate agent, which is surprising as there are over 1 million real estate agents and they consumer the industry information. That said, somehow the industry finds a way to sell advertising despite attacking one of the main sectors of the industry.

One example is this week in Housing Wire, where they have an article titled "30 must-have real estate text message scripts to convert leads and close deals."

Has anyone EVER responded to a cold spam text and used that company to sell their home? That is not even to address the point that its illegal to send texts to people without permission, its called spam texts, and further does not even cover how miserable the practice is. Yet, this is common in the real estate industry sales training in the news industry. I love how these spam and robotic texts are claimed to "unlock the power of effective communication," as if the only way to communicate effectively is to use pre--programmed texts, and that these spam texts create "strong client connections..."

Another example of misguided real estate industry strategies for real estate agents is in MarketWatch, with its "The simple mind trick that real-estate mogul Ryan Serhant used to create his empire."

The article states that the New York superstar agent says "its all about mindset."

OK, I have followed him online, read his books, he does NOT say its all about mindset. In fact, the mindset he is discussing is something he changed this year, after building this empire of his. If you follow Ryan Serhant at all, you know he is all about doing the work every day of learning the business and being the expert that customers want to work with, it is much more than just a mindset.

One of the motivating forces supporting the recent national lawsuit involving the National Association of Realtors (NAR) was the desire of the industry to reduce commissions. Numerous articles cited that commission rates were lower in other countries, overlooking that those countries also offered lower service levels for customers, lower levels of home ownership, and a real estate industry that was more compliant with the government than supporting the interests of the customers. Numerous pundits gleefully suggested that the result of this settlement last year would be the reduction of commission rates, yet, that has not happened. A study performed by industry expert and real estate professor Mike Delprete shows that commissions are largely unchanged.

Untold hours of work have been put into complying with the legal settlement that has done nothing to help buyers or sellers and whose only result seems to be putting money in the pockets of the attorneys.

Months ago there was much hand wringing that investors were purchasing a higher percentage of homes. Yet, as the market begins a return to post-pandemic normalcy, or the new normal, the percentage of homes purchased by investors is right back to its historic norm, according to Redfin.

Redin managed to exaggerate the swings every month or so, but in reality the rate of 16% of homes being purchased by investors is almost exactly the average over the past 25 years or so.

Locally, more bad news in the Los Angeles area.

One piece of bad news is the near collapse of values in Santa Monica. The project Santa Monica Place has fallen $255 million in value and is seeking a buyer to buy it out of foreclosure after spending a decade as one of the finest shopping districts in California.

This is the result of the overall weak economy and the affect of allowing unbridled crime to destroy retail businesses.

Another example of bad news is Big Lots closing more stores in California.

After closing hundreds of stores when it filed bankruptcy, it announced a new round of closings in California, including: Bakersfield, Los Angeles, Murrieta, Redondo Beach, and Tulare. That does not count 17 other states that stores are either closing or are under review.

One of the constant themes I find in real estate is that the only consistent active buyers of real estate are government entities, such as the $55 million purchase UCLA made in the South Bay for its new health campus expansion.

Its always difficult to compare with government agencies that are both financed by tax dollars AND do not have to pay taxes. At some point the government owning some percentage of real estate becomes unsustainable if no one is left to pay the taxes to subsidize these giant organizations.

Lest you think that the city of Los Angeles politicians took any feedback from the recent election, where their proposed increased rent control was defeated AND their decriminalization of shoplifting was overturned, you can rest assured that is not true. The LA City council voted UNANIMOUSLY to become a sanctuary city.

What is disturbing is that the city relies on federal funding to finance these immigrants. According to the Center Square, the city is described as “broke” by the city controller and now has to borrow $80 million to make court-ordered lawsuit payments.

The article estimates that the state of California spends $15 billion a year in tax revenue for health care for the states 2.7 million "undocumented" immigrants alone, not to mention money spent on food stamps, housing, and other programs.

In past issues, I have detailed how the state of California is forcing cities to build high density and "affordable" housing even where residents do no want them. The LA Times recently reports that the city of Los Angeles has to build over 255,000 "affordable" units according to this process.

EVEN the LA Times documents that the only input from residents was against locating high density apartments in neighborhoods which are currently single family residences. The only calls for more dense housing are from government and quasi-government agencies looking to expand their control over the neighborhoods. One laughable example was a religious organization looking to use a loophole to build 78 "affordable" units for its congregation, despite the organization never having built a single unit in its history. How do you think THAT will work out?

Finally, other states have taken the opportunity to pass laws to protect home owners from losing their homes, as reported in Fox News.

Wyoming joins New York, Florida, and Georgia in adding protections for homeowners. California continues to be among the states most committed to allowing criminals to steal equity from homeowners and tax payers via squatting, aka house stealing.

In Wyoming, the bill passed would make squatting that involves property destruction a felony offense punishable by up to 10 years in prison and a $10,000 fine. Imagine that!

So, what should YOU do about buying or selling real estate in today's market?

If you are looking to buy a home and live there for a while, real estate has always been a great long-term builder of wealth and there is nothing to suggest that is changing if you can afford the home.

If you want to move or downsize, it's still a great market to sell, but a bit more challenging than in the last few years.

Finally, if you can find a property that will give you cash flow, this is a great time to get solid cash flow and enjoy the tax benefits of real estate.

How can I help you? Call, text, or email me.

Bill

Bill Gross

Broker Associate, BRE 01022275

Certified Probate Expert

Direct: 310-210-0008 , [email protected]