The oldest recorded tax records, around 8,000 years ago, were in the form of tablets found in the city-state of Lagash near modern-day Iraq.
This tax system Read more...
The oldest recorded tax records, around 8,000 years ago, were in the form of tablets found in the city-state of Lagash near modern-day Iraq.
This tax system was said to be based on a time-based rotating system to make tax collection more manageable befor
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Navigating the journey to a rewarding real estate career can be fraught with questions and uncertainties, particularly for those with a past marked by a felony or other problems on their background. As Read more...
Navigating the journey to a rewarding real estate career can be fraught with questions and uncertainties, particularly for those with a past marked by a felony or other problems on their background. As an aspiring real estate agent, you may be wrestling with a question that keeps you up at night: "C
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Entering the world of real estate can feel like learning a new language. As in any industry, real estate comes with its unique terminology, which can be daunting for those new to the field. But fear not; Read more...
Entering the world of real estate can feel like learning a new language. As in any industry, real estate comes with its unique terminology, which can be daunting for those new to the field. But fear not; mastering this language is not only possible but also a critical component of becoming a..
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In the busy year of 2023, the real estate market is changing faster than ever before. New technologies, a diverse buyer pool, and the chance to work flexibly have made real estate a really appealing Read more...
In the busy year of 2023, the real estate market is changing faster than ever before. New technologies, a diverse buyer pool, and the chance to work flexibly have made real estate a really appealing career choice. But even with all these exciting changes, many of our potential students at our real estate license school are asking an important question: Is it still worth it to get a real estate license this year?
As we dive into the world of real estate, we'll look at the rewards you can get from earning a real estate license in today's market. So, if you're trying to decide whether a career in real estate is right for you in 2023, keep reading. We want to show you clearly why now might be the best time to start your career in this exciting field.
Join me as I delve into the current real estate market dynamics, the advantages of becoming a licensed professional, and how a real estate license could be your gateway to financial independence, career satisfaction, and endless opportunities.
The Current Real Estate Market
When we look around in 2023, we see that the real estate market is full of energy and opportunity and it's important to know that a lot of people still want to buy homes. This trend is driven by more and more millennials and Gen Zers trying to buy their first homes. They like things like smart homes, buildings that are good for the environment, and city living—these preferences are changing the way real estate looks.
At the same time, people want bigger homes because of changes in how we work. With more people working from home, there's a need for home offices. This has led to a comeback of suburban and rural real estate markets, with more city people wanting to live in greener areas and out of the concrete jungle.
We're also seeing a change in office spaces (your California real estate license lets you do commercial real estate too) in order to make them more flexible and turning traditional shopping areas into spaces for experiences. Plus, the growth of online shopping has led to a big need for warehouses and logistics hubs.
Moreover, real estate technology, or PropTech, has made significant strides. Virtual tours, AI-powered property recommendations, and blockchain in real estate transactions are no longer the future; they're the present and streamlining operations like never before.
Regarding growth, data from the National Association of REALTORS® suggests a positive trajectory. Despite the typical cyclical nature of real estate, the industry's fundamentals remain strong. There's a constant need for real estate professionals who can navigate this complex yet rewarding landscape, making it an appealing time to jump in and start a career in real estate. The real estate market has had an adaptive response to changes in the world and continues to open new avenues for growth and opportunities, making it an exciting time to be a part of this industry.
Advantages of Having a Real Estate License
While the current market trends certainly add an element of allure to the real estate profession, the advantages of obtaining a real estate license extend well beyond market circumstances. Here are a few compelling reasons to consider stepping into the world of real estate:
Earning Potential: The income of a real estate agent largely depends on their effort and skill, making it an attractive career choice for driven individuals. Unlike traditional 9-5 jobs with a fixed salary, real estate agents earn commissions on each transaction, meaning the potential for earnings can be substantial. In a thriving market, the chances to broker deals and make commissions increase significantly, thus augmenting earning potential.
Flexibility and Independence: One of the significant benefits of having a real estate license is its flexibility. Real estate agents can set their schedules, choosing when and where to work. This career can be especially appealing for those who value work-life balance and the ability to control their own time.
Diverse Opportunities: Holding a real estate license opens up many opportunities beyond buying and selling homes. Licensed individuals can explore property management, commercial real estate, development, and even real estate consulting. This diversity allows for exploration and specialization within different industry sectors, catering to various interests and talents.
Building Valuable Skills: A career in real estate is an opportunity for continuous learning and skill development. As a real estate agent, you'll develop valuable skills like negotiation, sales tactics, marketing strategies, and customer relationship management. These skills aid in career progression within the real estate sector and are transferable and highly valued in other industries.
Obtaining a real estate license offers potentially high earnings, greater flexibility, many career paths, and the chance to hone skills that will serve you throughout your career. It's not just about entering a profession; it's about opening the door to a career that can grow and evolve with you.
The Real Estate License Process in California
Venturing into the real estate profession begins with understanding the process of obtaining a real estate license. In California, there are specific steps potential agents need to take.
Step 1: Pre-License Education Before you can sit for the California real estate license examination, you must complete pre-license education. This includes 135 hours of real estate courses, covering essential topics like real estate principles, real estate practice, and one elective course from a set list. These courses prepare you for the breadth of knowledge needed in the industry, from property valuation to real estate law and everything in between.
Step 2: Exam Application After completing the education requirements, you must apply for the state licensing exam. The California Department of Real Estate (DRE) oversees this process, and you'll submit your application along with proof of completed education.
Step 3: State Examination Next is the state licensing exam, a comprehensive test that evaluates your understanding of important real estate concepts. This exam requires thorough preparation to pass and we highly recommend taking one of our real estate crash courses to help prepare you.
Step 4: License Application Once you pass the state exam, the final step is to submit a license application, undergo a background check, and fulfill other requirements set by the DRE.
Now, where does a real estate school like ADHI Schools come into play? Our school is instrumental in guiding you through pre-license education. We offer the necessary courses, provide resources for exam preparation, and assist in understanding the licensing process. The role of a good real estate school is to equip you with the knowledge, skills, and confidence to pass the state exam and kickstart your real estate career.
The time commitment to this process is a few months, but worth the investment when considering the potential returns. It may take several months to obtain your license between education, exam preparation, and the application process. However, this should be viewed as an investment in your future—a stepping stone to a rewarding career with high earning potential, flexibility, and a broad range of opportunities.
In the grand scheme, the time spent earning a real estate license is relatively short compared to the potential for long-term career growth and financial gains. By committing to obtaining your license now, you're setting the stage for future success in the vibrant world of California real estate.
Case Study
Ryan Rembert is a young real estate agent working out of the South Bay city of El Segundo. The way that Ryan got involved in our real estate classes is rather unique. Kartik was at a dinner appointment at the Shade Hotel in Manhattan Beach late in 2014 and Ryan was his waiter. Ryan and Kartik struck up a conversation and Ryan mentioned that he was interested in getting into the real estate business. A couple of weeks later, Ryan enrolled in the classes and the rest is history!
In this video, Ryan talks about his journey making whatever he could in tips over a given week to making $50,000 commission checks and dream surf trips to Indonesia and other parts of the world - all because of the great real estate business!
What is best about Ryan is how mature and grounded he is for his age. He has since transitioned from residential sales to multi-family apartment brokerage.
That’s one of the greatest things about real estate licensure in California. You can do commercial, residential, property management and more!
Enjoy his story!
Future Outlook
Looking ahead, the future of the real estate industry appears bright. Several factors suggest continued growth and ongoing demand for real estate professionals.
Much like any other industry, the real estate market is influenced by various economic and societal trends. In California, factors such as population growth, urbanization, and the evolution of the tech sector are expected to maintain a steady demand for housing and commercial real estate. This demand will inevitably drive the need for licensed real estate professionals who can effectively navigate the market.
In addition, as real estate continues to evolve in response to changes in consumer behavior and technological advancements, new opportunities are likely to emerge. The rise of digital real estate transactions, sustainable housing, and a shift towards more flexible working and living spaces all point to an industry that is growing and evolving.
Real estate professionals who can adapt to these changes, leverage technology, and understand consumer needs will be in high demand. Thus, having a real estate license won't just offer opportunities in the present but will provide a strong foundation for the future. Lastly, the nature of the real estate business is inherently local. No matter the broader economic conditions, professionals will always need to understand their local markets, provide personalized service to clients, and help them make informed decisions about their real estate transactions.
The future of the real estate industry looks promising, with ample opportunities for growth and evolution. Obtaining a real estate license in 2023 isn't just about seizing current opportunities; it's about preparing for a vibrant and rewarding career in the long term.
If you’re interested in learning more about obtaining a real estate license visit www.adhischools.com or call us at 888-768-5285.
Love,
Kartik
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In the complex and rapidly evolving world of real estate, having the correct information at the right time can make all the difference.
In our great real Read more...
In the complex and rapidly evolving world of real estate, having the correct information at the right time can make all the difference.
In our great real estate business, if you are involved in the real estate sector, your role might be that of an agent
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What Is A Real Estate Exam Prep Course?
A prep course for the real estate exam is an essential tool for any aspiring real estate agent. These courses provide comprehensive learning materials and resources Read more...
What Is A Real Estate Exam Prep Course?
A prep course for the real estate exam is an essential tool for any aspiring real estate agent. These courses provide comprehensive learning materials and resources designed to prepare and ensure exam success. Often
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Unveiling the Math Aspect of the California Real Estate Exam: Is There a Lot of Math?
The California Real Estate Exam is a formidable stepping stone for all those seeking to wear the hat of a Read more...
Unveiling the Math Aspect of the California Real Estate Exam: Is There a Lot of Math?
The California Real Estate Exam is a formidable stepping stone for all those seeking to wear the hat of a licensed real estate professional in the Golden State. As part of their preparation, many potential test-takers ask, "Is there a lot of math on the California Real Estate Exam?" The question is an understandable one. Let's explore this question in detail, assessing the quantitative aspects and providing guidance on navigating this portion of the examination successfully.
The Math Component of the California Real Estate Exam
To put it in plain terms, yes, the California Real Estate Exam contains math - but very little. And the level of math involved may not be as extensive or intimidating as you might think. On average, there are only a small number of questions that focus on mathematical problems. These problems test your ability to perform real estate related calculations like computing real estate taxes, property values, commission rates, prorations, interest, mortgage payments, and depreciation.
The Good News: It's Not Rocket Science!
The type of math encountered on the California Real Estate Exam primarily involves basic arithmetic and some simple algebra, including the ability to work with fractions, decimals, and percentages. So, if you have been fretting over complicated equations, exhale a sigh of relief – calculus and advanced mathematics do not feature on this exam!
And there isn’t a lot of it on the state test.
Preparation is Key
Even though the math portion of the exam only makes up a very small fraction of the total questions, it's essential not to take it lightly. As with any other exam section, diligent preparation is key to success. Many resources are available, including textbooks, our real estate exam prep, and practice problems, specifically designed to help candidates understand and master the types of math questions they encounter.
A good starting point would be to familiarize yourself with real estate terminology and principles. Once you grasp these well, you can start working on the calculations. Solve many practice problems related to loan amortization, property valuation, real estate taxes, etc. Understand the formulas rather than just memorizing them. Knowing when and how to use them effectively will make all the difference on exam day.
Remember, speed and accuracy are crucial for these exams. While you need to work quickly, double-checking your answers is equally important to avoid careless mistakes.
Take a Crash Course
A candidate preparing for the real estate test would significantly benefit from taking a crash course prior to their exam. The real estate field encompasses many complex topics, including property laws, contract laws, real estate principles and practices, ethics, and market dynamics.
A crash course is an intensive, fast-paced program that condenses these vast subject matters into digestible chunks, ensuring the candidate comprehensively understands all the necessary information. Additionally, such a course often incorporates practice tests that mimic the actual exam's format and difficulty, providing the candidate with invaluable experience under realistic conditions. It also allows the candidate to pinpoint their strengths and weaknesses, allowing them to focus on areas that need improvement. Overall, a crash course fosters confidence, thoroughness, and strategic examination techniques, thereby improving the chances of success in the real estate exam.
To sum it up, while the California Real Estate Exam does include math problems, they are relatively straightforward and can be tackled efficiently with consistent practice and understanding. Don't let the fear of math deter you from your goal. Remember, every licensed real estate agent in California has passed this test. With the right mindset, diligent preparation, and extra help, you will, too. The pathway to success on the California Real Estate Exam may require you to crunch some numbers, but the rewards of a career in real estate are certainly worth it.
Math-related vocabulary for the state exam:
Benchmark : A reference point used in surveying, marked on a fixed, stable object. Its position and elevation are known and utilized in tidal observations, land surveys, and other geodetic operations.
Board Foot : A unit of measurement for lumber, signifying a volume equal to a one-foot cube of one inch thick wood. It's often used in the lumber industry to price and sell wood.
Decimal : Related to the base-10 system. It signifies a number or fraction expressed in the decimal system. In a decimal number, such as 125.67, the decimal point (.) separates the whole number (125) from the decimal fraction (67).
Denominator : The bottom number in a fraction, indicating the total number of equal parts that constitute the whole. For instance, in the fraction 3/5, '5' is the denominator, representing that the whole is divided into five parts.
Fraction : A mathematical expression representing the division of two numbers or quantities. It's also used to describe a portion or segment of a whole.
Front Foot : A real estate term, denoting a property's linear footage along the frontage (like a street or road). It can be used for pricing properties but needs to account for the property's depth.
Governmental Survey System/Rectangular Survey System : A land division system used in the US. It divides land into 24-square-mile quadrangles using north-south and east-west lines.
Latitude : The geographic coordinate representing the angular distance of a point north or south of the Earth's equator, measured in degrees along a meridian.
Lineal Foot : Another term for a 'foot' in measurement, mainly used to measure the length of items.
Longitude : The geographic coordinate that specifies the east-west position of a point on the Earth's surface. It's an angular measurement, usually expressed in degrees, minutes, and seconds.
Lowest Common Denominator : The smallest multiple that is exactly divisible by every denominator of a set of fractions. It is used to simplify the process of adding, subtracting, and comparing fractions.
Meridian : An imaginary line running from the North Pole to the South Pole on the Earth's surface. All locations along a given meridian share the same longitude.
Numerator : The top number in a fraction, indicating the number of parts of the whole that are considered. For example, in the fraction 3/5, '3' is the numerator.
Point of Beginning : The starting point in land surveying from which the boundaries of a parcel of land are described. This is most often associated with the “metes and bounds” method of land description.
Product : The result obtained from the multiplication of two or more numbers.
Range : In the U.S. public land surveying system, a 'range' refers to a vertical column of townships in a grid layout. It is six miles wide, running north to south, and is numbered based on its distance east or west from a specified meridian.
Rounding : A mathematical process to approximate a number to its nearest whole number, tens, hundreds, etc. It simplifies numbers while still maintaining a reasonable level of accuracy.
Running Foot : A measurement unit used in the lumber industry to measure the length of a piece of wood, irrespective of its width or thickness.
Square Foot : A unit of area measurement equal to a square with sides each one foot long.
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Entering the world of real estate as a professional can be both exciting and daunting. The dynamic landscape offers numerous possibilities, but the thought of choosing a broker can be daunting. There Read more...
Entering the world of real estate as a professional can be both exciting and daunting. The dynamic landscape offers numerous possibilities, but the thought of choosing a broker can be daunting. There are so many choices out there ranging from a team structure, to an independent company or even a national franchise - there are no shortage of options.
When it comes to commission splits, the 100% commission model stands out for its distinct structure and potential benefits among the available options. This model promises an attractive deal: the agent takes home their entire commission, hence the name '100% commission'. But like any other model, there are pros and cons.
As many of our readers are either enrolled in real estate license school or considering enrolling in license school I wanted to explore the nuances of 100% commission brokerages and assess whether it's the right choice for new professionals aiming to make their mark in our great real estate business.
In theory, a 100% commission brokerage allows agents to keep all their commission from a transaction. In other words, when an agent working under this model closes a deal, they retain the entire commission, hence the term '100% commission'. It’s important to read the fine print before joining such a company, however as sometimes “100%” isn’t really “100%”. Although some brokers may brand their compensation plans “100%” they can involve a nominal flat fee per transaction or a monthly or annual fee that the agent pays the brokerage rather than a commission percentage.
This starkly contrasts the traditional brokerage model, where an agent's commission is split between the agent and the brokerage. In a traditional model, the split is often a fixed percentage. It may range from a 50/50 split to a 90/10 split, depending on the agent's experience level, the brokerage's policies, and market standards. In a traditional brokerage model, the agent could take home anywhere from 50% to 90% of the commission from a transaction.
A simple example can illustrate the difference. If an agent closes a deal that generates a gross commission income (GCI) of $20,000 in a 100% commission model, the agent could keep the entire $20,000 (minus any flat fees or other costs associated with the brokerage). However, in a traditional 70/30 split model, the agent might take home let’s say $14,000, with the remaining $6,000 going to the brokerage.
This might seem like a no-brainer for the agent, but like anything there are pros and cons for the real estate professional in an environment like this.
The Downside of 100% Commission Brokerages
While 100% commission brokerages have gained traction for their potential benefits, they're not without their pitfalls. It's crucial to weigh these cons against the pros when deciding whether this model is right for you. Here, we'll explore some potential downsides of working with a 100% commission brokerage.
1. Lack of Support
One common criticism of 100% commission brokerages is the perceived lack of support. In traditional brokerages, part of the commission split often goes toward administrative support, training, and office resources. These brokerages might provide agents with access to a physical office, marketing materials, continued education, and more. In contrast, 100% commission brokerages typically operate on a leaner model, and you might find yourself largely on your own.
2. Hidden Costs
While keeping 100% of your commission can sound appealing, it's crucial to remember that this figure might only account for some costs. Some 100% commission brokerages charge a transaction fee per sale or even recurring monthly or annual fees. You should also account for costs related to errors and omissions insurance, marketing materials, and other business-related expenses. Therefore, it's essential to factor these into your calculations when determining potential earnings.
3. Less Structured Environment
The increased autonomy that comes with a 100% commission brokerage can be a double-edged sword. For some, this independence is liberating; for others, a less structured environment might lead to reduced motivation and productivity. Some agents may need the structure and community of a traditional office setting to stay focused and motivated.
4. Not Ideal for Newer Agents
Although the flat-fee model can be attractive to new agents from a financial perspective, the lack of support and guidance can make it a challenging environment for those just starting out. New agents often benefit from mentorship, training, and hands-on support to help them navigate the industry's complexities after they pass the real estate exam. With these resources, newer agents may find it easier to succeed.
5. Misleading "100% Commission" Terminology
Finally, it's worth noting that the term "100% commission" can be somewhat misleading. As noted earlier, this model's various fees and costs mean that agents rarely take home the full 100% of their commission. Understanding this can help manage expectations and make a more informed decision about whether this model is the right fit.
While the 100% commission model can offer significant benefits, it's essential to consider its potential downsides. Whether you're a seasoned pro or a newcomer to the industry, understanding these cons will help you decide and choose a brokerage model that aligns with your career goals and working style.
The Upside of 100% Commission Brokerages
In the fast-evolving real estate landscape, alternative brokerage models have begun to challenge traditional business methods. Let's talk about the promising upside of this model, as it holds potential to revolutionize an agent's income and autonomy in their real estate journey.
1. Greater Income Potential
The most obvious advantage of the 100% commission model is the potential for higher income. Agents can maximize their earnings from every transaction by keeping the entire commission minus a nominal flat fee. This approach can be incredibly lucrative for high-performing agents who complete many transactions.
2. Predictability and Transparency
One of the often-overlooked benefits of the 100% commission model is its simplicity. With a fixed fee structure, agents know upfront what their expenses will be, making it easier to budget and plan for the future. This clear-cut approach provides a sense of predictability and transparency that can be comforting in an industry often characterized by uncertainty.
3. Flexibility and Control
100% commission brokerages give agents more autonomy and control over their business. This independence allows agents to be more innovative with their marketing strategies and business plans, adjusting as they see fit without additional brokerage interference. This flexibility can lead to more effective personal branding and, consequently, better business growth.
4. Competitive Service Offering
Lastly, the 100% commission model allows agents to offer their clients competitive pricing in a crowded marketplace, possibly attracting more clients and driving more business.
Is the 100% Commission Model Right for a Newer Real Estate Agent?
Navigating the world of real estate can be complex for a novice agent, fresh from our real estate school. For new real estate professionals, the 100% commission model might seem appealing on the surface, but it's essential to understand what this model entails and if it truly aligns with your needs and career goals.
As mentioned earlier, 100% commission brokerages offer the allure of significant earning potential, allowing agents to retain the majority, if not all, of their commission. This can be especially enticing for those who are just starting and are keen on maximizing their income.
However, the primary challenge for newer agents under this model is more support and mentorship. Traditional brokerages often provide comprehensive training and resources that are beneficial for agents building their skills after passing the real estate exam. These resources can include hands-on training, marketing assistance, and access to experienced agents who can provide guidance and advice. The absence of these support structures in many 100% commission brokerages can make the initial stages of a real estate career more challenging for newer agents.
Furthermore, while the potential to earn 100% commission can be attractive, new agents need to remember that various expenses, such as transaction fees, marketing costs, and insurance often offset this. These expenses can add up and put financial pressure on agents, particularly those who are still trying to establish themselves in the industry and secure consistent transactions.
There is also the aspect of self-discipline and motivation. The high level of autonomy in a 100% commission model requires a substantial amount of self-direction. With the structured environment provided by traditional brokerages, some new agents might be able to maintain their momentum, especially during challenging periods.
So while the 100% commission model can offer greater income potential, it comes with challenges that may prove difficult for newer agents to navigate. It's vital for new agents to consider these factors and seek out a mentor or network of experienced agents for guidance. As with any career decision, it's all about finding the right fit for your goals, working style, and needs.
Becoming a real estate professional is filled with many decisions, and choosing the right brokerage model is an important decision. It's critical to remember that there is no one-size-fits-all solution - each model has its own unique characteristics and considerations. The 100% commission model, with its allure of potentially higher earnings and autonomy, is no exception.
It offers numerous advantages, including greater income potential, predictable and transparent fee structures, and more control over one's business. These benefits can be particularly appealing for seasoned agents with a solid client base and comfortable navigating the industry independently. For them, this model can be a financially rewarding alternative to the traditional commission split model.
As discussed, this model also has its challenges. The often-overlooked costs and the absence of supportive resources can pose hurdles, particularly for newer agents just starting their journey after real estate school. The lack of structured environment poses a challenge to maintaining motivation and discipline, crucial components for success in this industry.
Moreover, the decision should not be based solely on financial considerations. Agents, particularly those new to the industry, should also consider the level of support, mentorship, and resources they may need as they build their skills and client base. In this aspect, the traditional brokerage model with its training programs and support structures can often be more suitable for newly minted agents aiming to make their mark in the industry.
Ultimately, whether the 100% commission model is the right fit will depend on the individual agent's career goals, personal work style, and needs. It's critical to weigh the potential income benefits against the need for support, training, and resources. Agents considering this model should fully understand what it entails, assess their own needs and abilities, and seek advice from experienced professionals in the industry.
This decision marks one of the many milestones in the exciting journey of becoming a real estate professional. Choose wisely, as the right brokerage can pave the way for a rewarding and successful career in real estate - or not.
As always, if you are considering taking real estate license courses with us, visit www.adhischools.com or call us at 888-768-5285.
Love,
Kartik
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A question a have been getting regularly lately is “If interest rates are so high, why aren’t prices coming down?!” I get this question from students in our real estate license school as well as Read more...
A question a have been getting regularly lately is “If interest rates are so high, why aren’t prices coming down?!” I get this question from students in our real estate license school as well as from past and potential clients.
This is a totally understandable question to ask, especially given the fact that interest rates have more than doubled in the past few years. The real estate market is experiencing high mortgage rates and an unprecedented housing inventory shortage - the market seems to be at a stalemate. This isn’t just true in southern California where we operate a real estate school and provide real estate crash courses to prepare folks for the real estate exam - this story is true all across the United States. The reality is that most U.S. homeowners remain tethered to their current homes due to significantly lower mortgage rates locked in over previous years.
A recent analysis by Redfin revealed that nearly 92 percent of homeowners with mortgages have an interest rate below 6%, much lower than the current average mortgage rate of 6.71%. "Why would I want to sell my house when I have a really low 3% interest rate on my mortgage? If I buy a new house, I might end up with an interest rate that could be twice as high as my current one!” is the sentiment of many.
As a consequence, the lack of available homes for sale has led to the housing market entering a very odd place, as noted by Redfin's Deputy Chief Economist, Taylor Marr. The reluctance from homeowners to list their properties, fostered by the significantly higher current mortgage rates, is stagnating the market, making it difficult for buyers to find suitable properties. There just isn’t enough inventory.
A bit of bright news for the market is that the Federal Reserve in its most recent meeting opted against an 11th consecutive interest rate increase, which signaled a "hawkish pause" as it evaluates the impact of the previous rate hikes. However, the Fed indicated the likelihood of two more quarter percentage point increases by the end of the year, pushing the median expectation to a funds rate (not mortgage rate) of 5.6% by the end of 2023.
The pause in interest rate hikes is intended to allow the Fed to monitor the impacts of its policy moves as it battles uneven but optimistic signs of inflation being under control. The decision resulted from various factors, including solid labor market performance and, as previously mentioned, slowing inflation rates. The future outlook suggests the possibility of rate cuts beginning in 2024, with raised expectations for economic growth and an optimistic outlook on unemployment rates. The inflation projections were also adjusted, but the overall impacts of the policy adjustments are yet to be fully realized in the economy. It has been said that an economy as large as the United States’ is like turning an aircraft carrier. To move in another direction requires turning the wheel miles and miles ahead of time.
On a national level, regions where the inventory shortage is particularly acute include Hartford, Connecticut, and Buffalo, New York. Housing inventory hovers near record lows in these markets, where new construction is scarce. Hartford had just 1.4 months of housing supply in December, while in the past, a balanced housing market was considered to have between four and six months of supply.
"Months of housing supply" is a metric often used by real estate professionals to measure the balance between supply and demand in the housing market. It's calculated by taking the current inventory of homes for sale and dividing it by the current sales rate (the number of homes sold per month).
In this context, if Hartford has 1.4 months of housing supply, it means that at the current sales pace, all the homes currently listed for sale would be sold in approximately 1.4 months, assuming no new homes are listed.
On the other hand, a balanced housing market is typically said to have between four and six months of supply. This means that it would take four to six months to sell all the homes currently on the market at the current sales pace. If the months of supply are less than this (like 1.4 months in Hartford's case), it generally indicates a seller's market because demand is outpacing supply. If it's more, it could be a buyer's market because supply exceeds demand.
Therefore, Hartford's low 'months of housing supply' indicates a significant shortage of homes for sale compared to the number of interested buyers, leading to increased competition among buyers and potentially higher home prices. It’s the same story around much of the United States as low inventory continues to squeeze the housing markets all across the country. California is no exception.
In addition to high mortgage rates, other factors contributing to low inventory include older Americans opting to age in place, investors purchasing homes for renting purposes, and the lack of new construction. Buyers priced out of major markets are relocating to smaller cities, creating demand in areas traditionally not associated with a housing crunch. This leads to emotionally charged house-hunting experiences, buyers are left with few options and the prospect of waiting long periods to find their dream home.
Meanwhile, investor activity is also altering the market dynamics, with the proportion of single-family homes purchased by investors increasing from 15-16% each year from 2012 to 24% in 2021 Cities such as Austin, Nashville, and Dallas, which experienced bidding wars and price hikes in recent years due to low inventory, are now seeing a leveling off of prices due to increased available homes.
The U.S. housing market currently presents a bittersweet scenario. With homeowners holding on to their homes and the housing inventory at record lows, it's a challenging time for those looking to enter or navigate the market. As things stand, the market remains skewed, favoring neither buyer nor seller, and it's a situation that appears likely to stay the same in the immediate future.
It's essential to understand that such fluctuations and shifts present unique opportunities for those interested in the world of real estate. Yes, mortgage rates are high, and inventory is low, but this only increases the need for competent, understanding, and proactive real estate professionals who can navigate this challenging terrain. Obtaining a real estate license isn't just about selling homes; it's about understanding market dynamics, providing sound advice, and adapting to changing circumstances. This unique state of the market offers a wealth of learning experiences and the potential for lucrative returns. Moreover, as the market stabilizes and evolves, there will be a strong demand for qualified professionals to guide clients through their real estate journey.
Remember, every market condition brings its own advantages and opportunities – the key lies in being prepared and willing to leverage them effectively. So, don't be discouraged. Embrace the opportunity to learn, grow, and become a valuable player in the real estate industry.
Love,
Kartik
TLDR: The U.S. housing market is currently experiencing a unique state characterized by high mortgage rates and an unprecedented low inventory, leading to a market stalemate with homeowners reluctant to sell due to lower locked-in mortgage rates. However, the market's fluctuations are seen as opportunities for competent real estate professionals to navigate these challenges, understand market dynamics, and leverage changing circumstances to their advantage.
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A foreclosed home is a property repossessed by a lender, typically a bank, due to the homeowner's inability to meet their mortgage obligations. When a borrower fails to make timely mortgage payments, Read more...
A foreclosed home is a property repossessed by a lender, typically a bank, due to the homeowner's inability to meet their mortgage obligations. When a borrower fails to make timely mortgage payments, the le
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