Year in Review
Well, we didn’t see that coming!!
“That” being the “irrational exuberance” that helped to define real estate as it was conducted in Rochester this past year. Sure, we accurately predicted that there was going to be a lot of pent-up demand in the first few months of 2017- demand that resulted from buyers and sellers delaying their activity until the conclusion of the presidential election. Remarkably, almost everything else that came to pass was, like the Bills winning five of the first seven games of the season, an enormous surprise. The lack of inventory that existed during the first quarter of the year was never resolved. Throughout the year, there were more buyers than there were sellers. As a result, bidding wars never subsided. Sure, I’ve seen bidding wars play out in my 27 years in the business but nothing approaching the excitement on exhibit during the past twelve months. To wit…
- Erin Lewis, from our team, wrote an offer on behalf of a client only to find out that 27 other offers were written on the same property
- Multiple offers were actually common during the middle of snow storms last winter
- Buyers were purchasing property without having engineer’s inspections conducted
- I marketed a property this past spring that sold $50,000 over list price
- Most homes were selling within 24 hours of listing
- A lot of real estate was purchased with cash as buyers tried to distinguish themselves from the competition by eliminating the mortgage contingency
In part, the lack of inventory has to do with the fact that consumers aren’t buying and selling as often as they used to. A few short years ago, the average homeowner would stay in their house for seven years. Today, that figure is ten years. Rather than move to a new property, owners are staying put and emulating HGTV’s Chip and Jo by renovating their existing residence.
As a result of the tight inventory, sales in the greater Rochester metropolitan area decreased approximately 3% from the previous year (actual numbers won’t be available until the end of December). My team and I are glad to report that we sold $64,000,000 in real estate this year- an increase of 5%! There are a lot of reasons why our sales continue to increase year over year. In 2017, two strategies readily jump to mind:
First, we were able to sell an inordinate amount of property without it ever hitting the market for sale. Because of the volume of business that we conduct, like Yente from Fiddler on the Roof, we’re able to match our buyers and our sellers and give both parties to the contract a leg up on the competition. Sellers enter into the agreement knowing that they will only sell their house if they secure both a pre-determined price and their ideal closing date. Buyers are thrilled to enter into this kind of agreement because it eliminates the headaches associated with the bidding wars that I described earlier.
Secondly, I think that the strategy of hiring a client concierge a couple of years ago was the right one. Increasingly, clients are aware that a member of our staff is available to help them secure estimates from contractors or unlock the house for Spectrum/Time Warner- all free of charge. As a result, our referral –rate continues to hover at about 77%.
My year in review wouldn’t be complete without some thoughts about the art of pricing. Our team oversaw approximately 225 transactions this past year. The commonality associated with each successful sale had to do with a commitment on the part of the seller to list their house for the appropriate price. If they did so, inevitably, the home would sell within 24-36 hours of listing, with multiple offers, over asking price. In many ways, my job wasn’t simply about listing homes for sale. Instead, my job transmuted to one in which I was responsible for strategically creating bidding wars and selling homes for ridiculous sums of money. Frankly, it was a lot of fun! Those few individuals who chose to list at a price of their determination often found that their house would languish on the market for several months and, if it sold, it sold at a price far below what they would have enjoyed if they had only been more realistic to begin with. I’m always glad to list at whatever price a client deems appropriate- unfortunately, an unrealistic valuation proved to be a money-losing strategy for the three or four clients who chose to pursue this particular road.
Year To Come
So, as I begin to think about the coming year’s real estate market, I’m sensing continued vitality. Both the national and the local economies are doing well. There are still a lot of buyers out there who haven’t purchased the home that they were hoping to buy in 2017. Additionally, interest rates remain low. The thirty-year rate is currently pegged at 4% while a fifteen-year mortgage can be secured for 3.5%. The Federal Reserve has indicated that, as a result of a strengthening economy, they’re going to continue raising interest rates in the coming twelve months. However, each increase is expected to be modest. In other words, the Fed will try to combat the possibility of inflation without raising rates so dramatically that they dampen economic growth. The great and obvious unknown is the Federal Tax Bill that has just passed the US Senate. Both the House and the Senate need to resolve the differences between their respective bills and are expected to do so by the end of December. Only then will we know if or how it is that this sweeping legislation will impact our local market. My gut tells me that, because 16% of the US economy is tied to real estate sales, any potential impact will be offset by the buoyant forces that I described in the beginning of the paragraph.
Personally, as we gear up for the year to come, the team and I completed our annual review of our business model. We discussed, as we do every year, that which is working and that which needs to be tinkered with. We read a few business books to inspire us. (If you haven’t read Phil Knight’s Shoe Dog, do so! This story of the founding and growth of Nike is incredible. Angela Duckworth’s Grit is another great book for those looking for motivation).The takeaway is that The Mark Siwiec Team has finally gotten the formula right. It’s the reason that we’ve enjoyed an 84% increase in our sales in the past five years. Sure, a few minor processes will be tightened. However, other than the addition of a part-time assistant, everything seems to be playing out exactly as we had projected and we obviously don’t want to interfere with an already proven formula of success!
As always, thank you for your amity and your support. My life remains enriched as a result of the many friendships and, seemingly, hundreds of relationships that I enjoy throughout our community. And, as a result of your kind words and referrals, our business continues to flourish. Enjoy the few remaining days of the holiday season and best wishes for the year to come!