Why Real Estate Agents Must Adapt to This Market Shift or Risk Losing Everything!

Welcome back, Novello Nation. I want to give you this quick update. So the Fed funds rate just did something that it's never done in recorded time, which is that they have raised the Fed funds rate 75 basis points consecutively, meaning back to back. That's never happened before. So what does that mean, right? Because as agents, we have to understand the macro environment. And by understanding the macro environment, then we can therefore begin to give guidance that's appropriate for buyers and sellers so they can make decisions that allow them to accomplish their goals and objectives and are financially sound. So the Fed funds rate is the rate that banks borrow money from the Federal Reserve. And when banks have to pay more money to borrow money, then they pass that on to consumers, meaning that the rates that they charge for things like car loans or mortgages therefore goes up. Now, how that affects us in the real estate game is that when the cost of money gets higher, then the pool of prospective buyers gets smaller, which logically makes sense. So someone who was approved just at the beginning of this year, let's say of like $800,000 at 3% mortgage rates, now over six and continuing to climb will be approved for somewhere around 600,000, right? And give or take a little bit. So that's a dramatic change in purchasing power. So everybody's been kind of pounding their fist on the table and saying, oh, there's no inventory, there's no inventory, there's no inventory. So everybody's just been focused on supply. They're not focused on demand. And the Federal Reserve has made it very, very clear that their intention is to cool down the real estate market. And the way that they can do that is on the demand side. So when you make the cost of money more, therefore demand will shrink. And if demand shrinks, usually what happens is inventory goes up. And when inventory goes up, then traditionally prices come down. And that's what we're starting to see, right? Not only in my own business, because I'm still in production. And also with all the coaching clients we have. We have a hundred paid coaching clients and seeing throughout the country that that's precisely what's happening. Homes are sitting on the market longer, having to get price adjustments, which is something new for agents. Haven't had to do that in the last two years, or at least 18 months in a meaningful way. Having to present offers that are less than the asking price. Haven't had to do that in a long time. So we need an accurate assessment of reality in order to produce a good outcome. That's what Ray Dalio tells us, right? From his book Principles. So the accurate assessment of reality is this is really what's true. Now, I'm aware that there's a lot of information out there right now trying to spin that and say like, well, that doesn't mean things are bad. And two quarters of negative GDP, that doesn't mean we're in a recession. Starting to try to change the definition of things. At the same time, what's very true is when we look at these economic factors, we have interest rate going up faster this year than they have in the last 30 years. We have record high inflation at 9.1%. We have a FUD funds rate now, even with the last rate hike at only a 2.5%. And when you look historically, the Fed funds rate, whenever there's been inflation this high has been much higher than that. And we have stock market retreating and this deleveraging and other assets that were heavily leveraged like crypto and things of that nature. The question I ask myself is like, okay, realistically, does it seem like with all of that data and information, are we in for a time moving forward of economic expansion and prices going up exponentially? Or are we beginning to pump the brakes and we're in for some economic contraction and some downward pressure on pricing? So it's not debatable. If you're in the business and you're doing a meaningful amount of transactions, you can already see what's happening. So what do we need to do to deal with it? The formula is a dream plus dealing with reality plus determination equals a successful outcome or producing an outcome that's favorable that you wish to produce. So the question is, is which part of that equation is the hardest for most people? And let's say in this instance, agents. Is it a dream? No, everybody has a dream, various different people that are in that dream and circumstances and props and players and things of that nature. So that's not it. Is it determination? People have various levels of determination, some more than others. The hardest part of that equation is dealing with reality. So first I need to accurately assess reality, then I need to deal with it. So what do we need to be doing as agents to deal with it? Well, the first one is we have to start getting exceptionally good at prequalification. So meaning determining what the buyer's or seller's goals and objectives are, what they're looking to accomplish and why. And what we're looking for is life events. Life events are things like death, divorce, job relocation, moving to assisted living facilities, retirement, downsizing, things of that nature. Some sort of life event that's a compelling reason to cause somebody to be in the marketplace at this moment. The next skill that we need to get exceptionally good at to deal with of changing market is presenting price. We're at this place in the cycle where there's no capitulation yet. So sellers are still under the false misperception that the environment is what it was six or seven months ago when money was exceptionally cheap. And that's not the environment that we're in anymore at all. So their expectations are not in alignment with reality. So we need to get exceptionally good at the pricing portion of the presentation, really questions-based, not me telling you. Instead, me asking you questions to help you to self-discover that perhaps your expectations are off and where the marketplace is showing us that buyers are seeing value at this current moment. The third skill that you need to get exceptionally good at is price adjustments. Now, I'm aware that that's a rude awakening for a lot of agents. They haven't had to really talk to sellers that much over the last 18 to 24 months. Property has been selling right away immediately. And we have to go back to honeymoon periods. We have to go back to focusing on servicing the listing. Once we get it, massive amounts of communication upfront, giving them updates, showings, how many views they've had online, things of that nature, keeping them update with market data and statistics. Because we didn't even have to look at that stuff previously. And now we do, meaning how much inventory has gone up month over month, how much transaction volume has gone down month over month, looking at things like how many properties are on the market in that particular price point, how many have adjusted their price over the last 30 days. These are all data and statistics that you're going to need when you're having these conversations with regards to price adjustments. And keep in mind, each one of these that I mentioned to you is a skill. And we just went through an environment over the last 18 to 24 months that as an agent, you didn't have to be particularly skilled in order to sell real estate in high volume. And now that's not the case. When times get tough, only the skilled get paid. So make sure you're one of those skilled people. And then the last skill that you're going to need to really work on and focus is presenting offers that are less than the asking price. We haven't had to be particularly good at negotiating. There's no negotiating if all offers are coming in at ask or hire. And now you're going to have to be very good at that skill. So if you need help with that skill, you know where to find your boy. You can always leave a comment here. I do my best to answer. You can check me out online on Instagram at Aaron Novello or on TikTok at Aaron Novello. If you like this content and it's helpful to you, be sure to share it with somebody, smash the like and the subscribe button so you can be updated and I appreciate y'all. Let's go be great. I'll talk to you soon.