On REAL Trending Episode 81, Steve Murray discusses black homeownership rates, the COVID-19 market & insights from our top rankings real estate professionals.
From REAL Trends, the trusted source for real estate industry trends and news, this is REAL Trending, episode 81. We’re analyzing the most important trends affecting brokerage companies and agents.
I’m Steve Murray, president of REAL Trends, today we’re discussing recent housing market news, information about top agent preferences and merger and acquisition activity. What do these trends mean and how can brokerage firms best deal with them?
So, the housing market news is uniformly bullish, in all kinds of ways, but among the most important things, in addition to records sales and closings in June and July, and strong pending activity in June, July, heading for August closings, the Census Bureau announced that the home ownership rate as of the end of June, had hit a 12 year high, 67.9% up from 65.3% in the prior quarter.
As NAR economist Lawrence Yun commented, “That’s a significant jump in one quarter.” He’s never seen actually, such a jump in one quarter. Now the Census Bureau announced that they had changed the way they do the survey because of the pandemic, and did more telephone interviews as opposed to in person interviews, and it could account for some of that big change.
But interesting enough, the home ownership rate for Black Americans rose to 47%, the highest since 2008, and that was up from 44% a year ago. The rate for Hispanics increased to 51.4%, the highest going back 26 years. Now, these things all are very, very good news.
It’s good news, not only for brokers and agents, and we all know since mid May and running now through the end of July, housing sales has been enormously strong. We have numerous clients of REAL Trends that reported their June sales were near record levels in July, we’re going to be even better than that in terms of closings.
We also note that another report, sales of new homes jumped to a 13 year high, also in the month of June, 776,000 new single family homes sold. So, all of the news about housing sales is bullish, low rates, active buyers, all the component parts of a continuing housing bull market, except for 20 million unemployed Americans who are shortly, to run out of protection from eviction as of this date, and who may see their unemployment benefits from the federal government reduced, and or those unemployment benefits reduced at the state level due to funding running out at the state level.
So, it’s not all rosy news for housing. It’s just simply, we just packed 120 days of demand into 60 days of activity, number one. Number two, record low interest rates. As of the week just ended, the average 30 year fixed was 2.98. Never, has that rate been below 3% below. On the positive side, it’s important to note before the pandemic hit, there were 155 million Americans with jobs, approximately.
If we consider nearly 20 million who are currently out of work, that still leaves 135 million people who have jobs and whose businesses are in some fashion getting along, and these people are increasingly choosing to move and buy the homes of their dreams or their desires, or because of immediate plans to move from an urban core area for example, to the suburbs.
Now, some of those moves and those purchases are second homes, just to have a place to go on the weekends, but quite a few of them, according to brokers we’re talking to, are people buying those homes because they no longer desire to live in urban core cities. Certainly, anecdotal evidence says there is a lot of that going on.
We think this market begins to run out of steam a little bit due to the unemployment and due to potential evictions, but more importantly, because we’re simply running out of inventory. Market after market reports to REAL Trends, under 30 days supply in the lower half price points of a given market, and some markets even less than that, 8, 10, 12 days of inventory in some markets at current absorption rates.
Low mortgage rates are still going to be a fact of life. The economy is not going to completely recover this year, that much is clear from where it was, but it’s recovered enough. The unknowns now are, how further does the slowdown in economic activity hurt middle management and upper management employment and incomes? And secondly, what are the impacts from the elections this fall, regardless of their outcome?
Second, we noticed some interesting trends in our recently released agent rankings, both the thousand and America’s best real estate professionals. There were 14,600, some odd applications received that were approved. Well over 95% of these 14,600 top agents are with identifiable, large national and local brokerage companies. Very few of the top performers are with whom we might consider small boutique, local companies.
They tend to be with either the national companies, whoever that might be, the franchises plus the owned companies, or large, identifiable, independent and franchise local brokers. I mean, preponderantly, this correlates well with the study that REAL Trends did about two and a half years ago with the California Realtors Association, on the behaviors of top teams, where our survey of over 400 top teams around the country, showed that the second most important value that a top team fines or receives from a brokerage company, is a well known local or national brand name.
I think we can see from the rankings now several years in a row, that in fact, top individual agents and teams see the benefit predominantly, of being with a large, well known local or national branded real estate brokerage. What should a broker think about or plan when based on this information? Well, clearly, you need to strengthen your brand and what that brand means, whether it’s culture, marketing, technology, the other component parts of building a strong brand.
But please don’t forget that same survey we did and study we did with California Realtors two and a half years ago, showed that the number one value to top teams, likely the same is true from individuals, is legal and regulatory assistance. Not only did they say that was the top value they felt they received, but when asked what additional service brokers could provide, they named the same thing, legal and regulatory guidance as the number one thing they would like more of.
We’re tracking new firms, such as Side Inc., who are in fact, addressing those needs of top teams and individuals, while letting them maintain their own local brands. It’s all part of the great back and forth, and mix, in the pursuit of recruitment and retention of top producing teams and agents.
Last, on mergers, acquisitions and valuations, we reported a month ago, that the market had strengthened, that valuations were still holding their own, that terms had gotten softer. There’s really nothing new, much to report, in that particular area. Indeed, the multiples for brokerage companies are staying roughly equivalent to where they were six and 12 months ago.
However, we reported that terms had gotten a little softer, little less cash down, little bit more on the earn outs or contingent payment periods, that is also true, although we’re seeing that start to firm up. What we’re also seeing, at least at REAL Trends, is a record number of valuations and merger acquisition assignments, in the valuation area it’s up 30 to 40% from where it was in the first quarter, in merger and acquisition candidates, it’s double the number of clients that we had six months or even a year ago.
So, it’s clear that even though housing market has come back, there are those for a variety of reasons, who believe it is a good time to find a combination with another firm, would make good economic and personal sense. We expect the market to continue strong, not hugely strong, but some strong, through at least the end of the year, and perhaps into next year.
Learn more about industry trends and successful tactics for brokerage firms, agents, and teams, as well as listen to past REAL Trending on Apple podcast, Spotify, Google Play and others. Visit www.realtrends.com/channels/. This has been Steve Murray, until next time.