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Strategies for Working the 2023 Luxury Real Estate Market

In the most people-focused sector of a people-centric industry, how you are seen—your brand, your image and your online presence—will directly correlate with your success. Conversely, understanding the needs, priorities and lifestyles of wealthy luxury clients is just as vital. 

This may seem obvious, but it’s the “how” of integrating yourself in the luxury world that becomes tricky. Shining a light on actionable strategies to associate your brand with other luxury products or businesses, keeping up with the trends that are most important to affluent homebuyers and sellers, and weaving narratives that will make your name synonymous with the luxury lifestyle were just some of the expert opinions provided by company leaders at RISMedia’s recent Real Estate’s Rocking in the New Year virtual conference.

In a session titled, “Preparing for the Future–Market Trends in Selling Luxury Real Estate,” Tami Simms, lead instructor at The Institute For Luxury Home Marketing, moderated a discussion that included panelists Patrick Ryan, principal owner, Genuine Real Estate; Josh Tucker, managing broker, Corcoran HM Properties; Jim Walberg, REALTORⓡ, The Bay Area Team – Compass; and Jordan Ayan, partner and REALTOR®, the Lifestyle Collection at Launch.

Tami Simms: Welcome everyone! Let’s start with this: What changes have you seen in the last six months in terms of who your luxury-home buyers are and what the market activity is, and perhaps even who’s selling?

Jordan Ayan: I’m in Scottsdale, Arizona, which is, for some people, a second-home market, that’s probably a very large percentage of my clientele. I’ve been seeing a lot more of our higher-price homes being sold for cash, and I’m seeing a slowdown in our sub-million-dollar market. I saw a meme the other day that said sellers are trying to sell like it’s March of 2022, and buyers are trying to buy like it’s 2008. That’s a really good statement about what’s happening now.

TS: And have you seen that shift as well, Patrick? Are you seeing that same sort of dynamic happening in your Chicago market?

Patrick Ryan: I think there is always, in my mind, a delay, especially in real estate. Other things, like a stock market blip, can take a day. Sometimes it takes six months to settle into sellers that the market has changed. The fact is, interest rates have doubled. Even in the luxury market, it takes a pool of people out when monthly payments double. The people that do have cash, they are savvy buyers, so they’re not apt to pay full price or there’s more negotiation. There are much fewer multiple bids, so it’s affecting most price points, not as much for the cash buyer, but they know they’re in a smaller buyer pool and want more for what they’re paying.

Josh Tucker: I mostly operate in the Carolinas, and over the last 10 years we’ve seen a large influx of people from the northeast. Previously it was between the Carolinas and Florida. A lot of them ended up going to Florida, but we’ve seen that trend go more in favor of us recently. There’s a couple of things driving that. The hurricane a few months ago did a lot of damage, so I think that has a lot of people who want to be in the southeast reconsidering the Carolinas. And some people from Florida are coming to the Carolinas. Florida basically has two seasons, hot and hotter, and a lot of people coming from the northeast appreciate the four seasons we get here in the Carolinas.

TS: That makes me remember that it’s not just general real estate market conditions, but also we have impacts from weather, from natural disasters and those sorts of things. Jim, I know that you saw a really dramatic shift in who was coming to your marketplace. I’m curious whether those changes are still happening.

Jim Walberg: The reality is that our markets are depending on the inter-urban migration that took place from 2020 to 2022 in Silicon Valley and San Francisco. The demographics were 35-year-old tech folks. That migration is still happening, but we’re seeing a nonstop trend of about half of the trades that happened during the pandemic. And days on market have gone from 10 to 30 or more, but we’re still holding on pricing as a whole, which is unusual when you think about other places in the country. So it’s been a very interesting market.

TS: You all are always looking to what’s next, being proactive rather than reactive. Jordan, share what you think is coming next and what you’re planning in the year ahead to adapt to those changes as they come, and perhaps even as they change in and of themselves.

JA: I think as we come into this new market, we’re going to see a downshift and probably a slowing of what’s going on. We’re using time right now to refocus some of what we’re doing, more digital than print, trying to communicate with our clients in new and innovative ways. We’re constantly looking to be the people driving the narrative that our clients are hearing.

There’s so much negativity in the press about real estate, and if clients just listen to them, they think the sky is falling. But, it isn’t falling. There’s lots of opportunities for deals to be made, it just may take a little longer. I put a house under contract that we had on the market for about $700,000. Typically that would sell in two days, this time it took 48 days. The difference is this time the seller had to be willing to do repairs, which in the past two years they really hadn’t. So, you’ve gotta come up with ways of communicating with your client that ‘hey, there’s still a market out there, but you have to change your expectations.’ As an agent, you want to drive that narrative. You don’t want to let the consumer just listen to the news and hear all of the bad things, because there’s also a lot of good things.

TS: That’s so important, as we move ahead to drive that narrative and curate the messaging that people are receiving from major media. Patrick, what do you think is next in your Chicagoland area, and what do you have in store for being proactive?

PR: Instead of running away from the market, you actually have to dive in and push more, adding different advertising avenues. This is a time when you can pick up market share. There’s a lot of people that come into the market when it’s great, but don’t do well in challenging times. In challenging times you have to have hard conversations with sellers, and educate them on what the reality is of the market. As an example, I have a listing at $625,000. At the beginning of the year a mortgage with a rate around 3% would’ve been about $2,300 a month. Now it’s closer to $3,600. That’s a massive jump in a monthly payment. So, it’s educating the sellers that it’s a different market, it doesn’t mean the market is cratering. There are always people buying and selling, moving around, but now you have to expand the marketing and hit a bigger pool of people to keep up.

TS: Josh, what do you think?

JT: Communication is key. Sellers want yesterday’s price and buyers want tomorrow’s price. So a lot of it is trying to marry those two together and work a deal that’s fair for everybody. You have to be realistic with a seller, go over the data, and show them exactly what’s going on. You can’t tell them what they want to hear. You have to tell them what’s relevant, what’s happening today. At the same time, if you’re working with buyers, you have to calm their fears. A lot of buyers are extremely nervous about interest rates, but there are ways around that.

We’ve been seeing buyers doing ARMs, which lowers the rate. There are a lot of options that can get buyers closer to where they want to be, or feel like they could have been six or eight months ago. Our industry has really grown in the last 24 to 36 months. We’ve seen the National Association of Realtors go from 1.1 million to 1.6 million members.

What everybody has to realize, whether you’re a buyer or a seller, is that probably 30% or more of today’s agents haven’t been through a market like this. The more seasoned professionals are the ones really doing their homework. I think we have to get back to full service brokerage. There’s a lot of agents that, over the last 24 months when stuff was a lot easier to sell, would take a few pictures, put it on the MLS, and then two days later you had a full price or an over-price offer. Getting back to what works in a balanced market when homes take a few months to sell, or longer, and really tuning up your marketing, finding new areas to reach new people, those are things that I’m looking at.

TS: This is also the time when we need to be strengthening relationships with lenders so that we can help clients realize the best options. Jim, what do you think is coming next and what are your plans for proactively addressing that?

JW: We are expecting the number of sales in 2023 to shrink by as much as 5% or 6%. The work we have to do every day is called the positioning game. What position do we have in the mind’s eye of our audience? My audience here is only about 900 families that we have served over all these years. We are in a massive touch program with that group about 40 times a month, everything from phone calls, handwritten notes, stop-bys, postcards… just every way that we can possibly touch that group.

The challenge that California has is our property tax, the way our property taxes are pegged when a home is purchased. For instance, my wife and I have had our house for 30 years. Our property tax is about $6,000 a year. If we bought our house today, the property tax would be about $30,000. So you have folks that are prisoners of their property tax rate, or if they have a 3% fixed 30-year mortgage, they’re trapped in their interest rate. So sellers right now are not gonna re-buy in California. It’s a real challenge with this pent up need to sell, but they can’t because they’re prisoners. Our job is to be their trusted advisor and continue to just touch them as often as we can. That’s our plan for 2023.

TS: What do you think our most important value proposition to clients is as they are considering their options? Jordan, first to you.

JA: I think this is the time to really tell your clients, and especially your sellers, what your marketing plan is. It’s no longer a market where you just sign up and have a sale. You really have to have a proactive marketing plan your client gets behind.

TS: Patrick?

PR: My value position is that I’ve been through a challenging market before. A lot of times you have to explain that there are different things we have to do. To be aware of the different mortgage options, or if we could buy down rates. I need to be able to think for them and tell them, here are some scenarios that you may not have thought of, because we haven’t seen a market like this in years.

TS: Josh?

JT: It’s knowing the right people to help get a deal done, whether that’s attorneys, inspectors, surveyors, etc. And being able to prove to sellers or buyers that you’ve been through this market before, you understand it and that you can guide them through it.

TS: And Jim?

JW: We positioned ourselves as their real estate wealth advisors. And our value proposition is just to be their trusted advisor. Recently we had one case where we advised them to not sell their home. Our value proposition is as their trusted advisor.

Stay tuned to RISMedia for more reporting from this year’s Real Estate’s Rocking in the New Year.

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