People are still buying houses and they always will. However, the hot housing market we experienced coming out of the pandemic, has cooled in most markets. For the remainder of the year agents will need to deal with strong competition and work hard to get the job done. Here are some tips for profitably ending the year.
From hot to cool
Back in July, we polled our agents and they were spot-on. They indicated that affordability, availability and interest rates were among the top three factors that would be the most likely to impact the seller’s market at that time. Today, let’s look at how this is changing and what a slowdown means for agents.
Mortgage rates are rising
The record-low mortgage rates of 2020 and 2021 are gone, having risen significantly since the beginning of 2022. Mortgage rates in the euro area have seen the largest six-month increase ever recorded. (ECB Economic Bulletin 6/22)
Spain: Considering long-term rates and the Euribor; both short-term and long-term rates have been increasing since the start of 2022. The average mortgage has an interest rate of 2.50%; 2.03% for variable-rate mortgages and 2.68% for fixed-rate mortgages. (Instituto Nacional de Estadisticas 7/22) A year ago, variable rate mortgages in Spain were popular, while currently, most mortgages are issued with fixed rates.
Portugal: The average interest rate on new home loans increased to 2.23% in September (compared to 2.01% in August); the highest recorded since October 2015, according to the Banco de Portugal (BdP).This rise is in line with the increase in Euribor rates in August 2022. Portugal has a reputation for welcoming ex-pats, and for having straightforward mortgage conditions.
France: Growth in French mortgage lending slowed to 6.2% in September, as the European Central Bank’s rate increases began to slow demand. The average interest rate for new housing loans was about 1.79% (October 2022), the highest since 2016. However, due to the rules that limit how quickly French banks can increase rates, French consumers have lower borrowing rates than their peers in other major European economies. For example, real estate in Germany hit a rate of 3.03% in September. (BNN Bloomberg)
Switzerland: Interest rates for mortgages in Switzerland have almost tripled since the beginning of the year. Currently, the rate for a fixed, 12 year mortgage is 2.63%. The Swiss National Bank (SNB) is likely to raise key rates again in December 2022 by 0.5 and in March 2023 by 0.25 percentage points, however, stable key interest rates are anticipated by the middle of 2023. (UBS)
North America: Sales of new US homes fell this fall, resuming a downward trend as decades-high mortgage rates are pushing buyers out of the market. Mortgage rates rose to 7.16% last month, the highest since 2001. (BNN Bloomberg)
Clients that purchase a home can expect that the mortgage rates are likely to be lower now than they will be in the coming months.
Even if your clients buy now, there is at least a chance of future relief, as they will have the opportunity to refinance their mortgage and hope to get a better interest rate.
Agent Challenge: Not having enough listings
The current pause in the market is creating this challenge for agents. There are some important actions that you can take, as home buyers and sellers contemplate the current situation and decide when to make their move. We provided some similar tips for agents at the beginning of the year, which still apply here. Check it out.
Agent Solution: Grow your network and stay up to date with market trends. Keep collecting more leads to convert them into customers eventually. Have you investigated the marketing resources in your global agent dashboard? These may be helpful, as you expand into making international connections.
Let’s look at an overview of the international real estate market and talk about affordability and pricing.
Rising mortgage rates cause affordability issues for home buyers. Agents are seeing less sales, as buyers in most markets are adjusting to the hikes in mortgage rates and higher home prices. Many potential buyers who need a mortgage are just not as able, or willing, to find a home in their price range this quarter. The biggest changes in affordability stem from increasing mortgage interest rates, which translates into a jump in payments and less buyers qualifying for a loan. Buyers are quite sensitive to interest rate increases and watching them closely, although overall, we are at the lower end of the interest rates, from a historical point of view.
Agent Challenge: High lead cost with low conversions
Your conversion ratio will probably decrease during this last quarter of 2022, when most of your focus is on attracting clients, rather than nurturing them. Sometimes this feels so expensive, especially in a slow market.
Agent Solution: Improve your conversion rate by partnering with ListGlobally. We offer access to a world of opportunity with very reasonable rates for promotions as well as many helpful features, resources and support to help you get your footing in the international market. If you have more questions, don’t hesitate to fill out the contact form below and we will connect with you.
Pricing and demand
When interest rates go up, mortgages become more expensive which makes it more costly for consumers to purchase a home. When homes are more expensive, the demand for them decreases resulting in a slump in the housing market. This is no surprise to you, but we are still waiting to see a reduction in home prices, after the increase brought on by the pandemic. It appears that for most markets this has not quite happened yet, and we are stuck at neutral.
The housing market needs to get back into balance between supply and demand, the catalyst being pricing.
For now, housing demand has dropped, and we have not yet witnessed a price-drop trend in order to bring the market back to balance. With homebuyers facing pressure from both high prices and increasing mortgage rates, something has to give; and it’s most likely not going to be mortgage rates.
Agent Challenge: Dealing with unrealistic sellers
You may come across sellers that have highly unrealistic expectations of their property listing price, or have an impractical expectation of the time it will take for you to sell the property.
Agent Solution: Every one of us likes to believe we will get the HIGHEST price in the SHORTEST timeframe, but in today’s market, it’s your responsibility to educate sellers so they can understand how to realistically set their expectations and still meet their goal – to sell their property, while making the most money, that they can. This is one of the most common problems that real estate markets face.
Did you know that our global agents have the ListGlobally advantage? We add value to your selling clients by providing:
Maximum coverage by advertising their property on +100 portals in +60 countries
Activity reports that you can generate from your agent dashboard about the leads and interest for their property
Top of online search results where you can promote their listing in specific markets, so they appear higher in buyer searches
Interpreters and buyer support for any foreign leads for their property, conducted by our multi-lingual Concierge team
The homebuying experience is changing
High home prices and rising mortgage rates are pushing some buyers out of the market, but this means that new opportunities are available for those who are staying in. Buyers can take it a little easier now, compared to the chaotic rush of the past two years, although the market remains relatively competitive. Homes that are priced well in the next months will sell quickly, partly because people are still expecting mortgage rates to continue to rise. Buyers with some flexibility can take their time in the search process and discover a property for below list price.
Agent Challenge: Increasing presence of online competitors
With more and more Gen Z and Millenials investing in real estate, realtors must consider their preferences for doing business. These generations spends a lot of time online; from shopping to acquiring services where everything is just a click away. Therefore, an increase in online connections means that real estate agents have more competition on the worldwide web. To keep growing your business, you must meet them where they are – online.
Agent Solution: Build an online presence and share resources as well as information. By staying active on social media, your blog and/or website, you can show your expertise and attract new clients during the slump. Leverage your online presence to build a community that can find you online and put their trust in you. In this article, we talk about improving your agent profile, for either ListGlobally or our own portal, Properstar.
Now that the housing market is cooling, it means that some of the buyer behaviors we saw in the recent past, might fade away; things like waiving an inspection, bidding wars and buying sight unseen. Agents know that the housing market goes through regular cycles, and it is our hope that we can help you find creative ways to end 2022 profitably.
More about ListGlobally
Helping real estate agents to succeed as an international real estate agent is our business and we work closely with agents and their clients from every corner of the globe.
ListGlobally is the world’s largest network of property portals, but we are much more than that. We are a selling tool, we are a differentiator, and we offer the opportunity for you to be at the forefront of international real estate. If you would like more information, please submit a contact form and our team will be in touch with you to carry on the conversation.