Market Update Jan 30, 2023: No Rate Cuts Yet, Austin Price Drop & 10 Best Real Estate Brokerages

Mike Mills (00:00:08) - Hey, what's up to all you resourceful, resilient realtors out there? This is the Texas Real Estate and Finance Podcast Market update for the week of January the 30th. I'm your host, Mike Mills, a local North Texas mortgage banker with Geneva Financial. And while I moonlight a couple hours a week doing my little podcast here, my main gig is helping your buyers purchase the home of their dreams with little hassle and great service to make sure that you get eight more referrals after that deal closes. My team and I are here to help, not only to serve your customers in a way that helps make them your clients for life, but also we have so many tools and programs to help you grow your business and expand your sphere for 2024. So if you want to find out how, give me a call or shoot me a message and I'll show you. Now, for those football fans out there, we finally have the Super Bowl all figured out. Although it's going to be two weeks from now before they play the game.

Mike Mills (00:00:54) - The Kansas City Chiefs are going to the Super Bowl for the fourth time in five years, which is freaking nuts, and they'll face off against the San Francisco 40 niners who are on their second trip to the big game in five years. And the last time that they were here, they played the Chiefs. So it's rematch time, I guess. Now I know there's a lot of football fans out there that are mad about the whole Taylor Swift coverage, but say what you will. The NFL loves the Travis and Taylor storyline. It'll most likely lead to one of the most watched Super Bowls in history. So head on that girl if you like. But she brings an entire economy with her wherever she goes. And now the Swifties have their eyes set on the Super Bowl. I, for one, am here for it and I'm picking the Chiefs to win. Not because of Miss Kelsey, but because I would never bet against Pat Mahomes in the playoffs. So there's your football talk for the week to just a brief little interlude there.

Mike Mills (00:01:38) - All right. Now that I got my personal commercial and Super Bowl opinions behind us, let's get to the meat and potatoes of today's episode. What kind of fun little news nuggets are we going to get through today? So I'm going to run through a few headlines quickly before we get to the main topic of today's market update. First, we've got some updated market rate cut expectations. I have some insight on housing inventory levels in Dallas-Fort worth. I'm going to tell you how builders are doing financially after the biggest year of incentives we've ever seen. We have some purchase application and overall inventory numbers. And finally, a story about how a Texas city has won the award for the largest home price decline in the country. But most of today's episode is going to be about a recent breakdown done by Housing Wire of the top ten real estate brokers in the country, and how they compare to each other. Whether you're looking for the best comp splits, the most training or best technology, I'm going to give you an overview of each of these firms and how they can best help your particular book of business.

Mike Mills (00:02:26) - And even if you aren't looking to change brokerages anytime soon, it's always good to know what the competition is doing. So hang around after the news for that. But let's start with rates, as we always do, because that is what everyone wants to know about. So Reuters recently ran a story stating that the US Federal Reserve will actually be waiting until at least quarter two at the earliest this year to start cutting interest rates. Now, this is according to the vast majority of the economists polled for the story. They even went as far as stating that June is the month. That's most likely that we're going to start seeing these rate cuts take place. And since the fed announced earlier this year that they had plans to start cutting rates, many in the markets were expecting this to happen in March. But with all the recent economic data like jobs, GDP and inflation all showing signs that the economy is still humming along, at least at the surface, they're starting to push the expectation on when these rate cuts are actually going to occur further back.

Mike Mills (00:03:11) - I do find it odd, however, that GDP is up. According to the government, jobs are plentiful. According to the government, spending is strong again according to the government, and inflation is not all the way down yet again according to government reports. So why is the fed still saying that they're going to be cutting rates, which is something that you do to stave off a recession? Typically, if everything's just doing amazing, just something to think about now. A recent article featured by Lance Lambert, a former guest at the podcast. And great follow on Twitter if you love great housing stats. Lance states that the inventory in Dallas-Fort worth area is extremely bifurcated. You see inventory of available homes in and around metro areas such as Dallas, Plano, Fort Worth and especially in far north Dallas are down, in many cases up to 50% since December of 2019. While the surrounding areas are more rural, parts of the North Texas region are up close to 50%. See, this just means that more people have flocked to the urban areas of the metroplex and put a strain on available housing supply, a strain that will take a long time and lots of homes to ease.

Mike Mills (00:04:09) - But there is opportunity outside the city limits, so if you have clients looking in this area and they don't have to worry about commuting, there are some real opportunities for good price points just 30 minutes outside the metroplex. You just have to know where to look to head on out to the country and find yourself a nice little homestead to raise them youngins. Now, if you do have to look into more metro areas right now, builders seem to be doing the best with available inventory. Now your buyers might be having to pay 20% more for that home and won't be in a good spot to sell for a couple of years. But the builders are offering insane incentives in many cases, so much so that many builders stocks have lost value in the fourth quarter of 2023 because profit margins suffered due to these incentives. And D.R. Horton recently stated that these incentives are here to stay for the immediate future, regardless of what it's doing to the profit. In fact, in the fourth quarter, Dr. Horton's net income fell by almost 5%, which caused their price per share to fall as well, sending the stock.

Mike Mills (00:04:59) - Value lower for the first time in a long while. But look, don't be too sad for these guys. Their overall revenue still jumped by almost 2 billion last quarter, and their profit margins overall are still humming along at a good 20 to 25% clip. So they are not hurting. Just pay attention. If you own any of these builder stocks, as they might become a little bit more volatile as they continue to offer deeper incentives to get buyers to purchase their inventory. All right, now that we are full steam ahead towards the spring buying season, the mortgage application data is starting to show it as well. You see, purchase applications rose 8% from last week as rates ticked down just a little bit. Now it's still 18% lower than this time last year, but it is trending upward. But this is not helping. Overall housing inventory, which was down a little bit week over week. You see right now, overall listings are only around 503,000 in the country. And to give you context, the lowest listing level in 2022 was 240,000 units, and the peak inventory in 2023 was 569,000 units.

Mike Mills (00:05:52) - So we're clearly getting better, but it is declining. Hopefully we'll see this start to grow headed into the spring. Now you see, with rates starting to come down, people might be more willing to list their house with lower rates, seeing as they have a better opportunity to find something else and not be at such a high price. But look, don't expect a miracle. It's still going to be tight, and there's going to be more and more competition for some of these listings. So start preparing your buyers now as we may have to start offering above list price to win deals, at least in certain areas of the country. My last little hit on this week's headlines is that Austin leads the country as the city with the fastest falling home prices since 2022. It's down 16% overall. New Orleans came in second, down 11%. You see, Austin was one of the hottest markets in the country with everybody and their brother moving to Texas in the last three years. But with high profile names like Elon Musk and Joe Rogan taking up residence in the city, it became a boomtown for new Texans.

Mike Mills (00:06:40) - Looking for a little bit more autonomy here in our fabulous Lone Star State. So if you bought your home prior to 2021, you're still doing amazing and your values through the roof. But if you bought it last year, your value might be a little tight if you wanted to sell, at least for now. But look, hang in there. This is all a cycle, and as rates continue to go down, the demand for housing will continue to remain strong. So you're going to be fine. You see, real estate, given a long enough time horizon always goes up. So don't worry, you're going to be back in the black soon enough. All right, now let's get on to our main topic for today. So anytime there's a slowdown in the market and your business takes a little bit of a hit, many will start looking around to see what other real estate brokerages have to offer. Maybe there's something you're missing out on, or maybe there's a better fit out there that matches your mission and vision for your business.

Mike Mills (00:07:20) - And recently, Housing Wire did a breakdown of the top ten national brokerages in the country and what they each have to offer. They highlighted commission splits and what made each firm stand out from the rest. Now, look, I don't personally endorse any of these, and these are just the big boys. Most of the agents that I personally work with are tied to some smaller boutique firms that may have better commission structures, especially for those agents that already have a solid book of business and may not need all the bells and whistles of a larger agency. But to each their own. Either way, though, it's good to know what's happening in the market because you never know where life might take you. So without further ado, let's get onto the list. Now, these aren't in any particular order. These are just the top biggest kids on the block and how they stack up against each other. So these are the five metrics that were used to evaluate the brokerages expenses and commission structure, market share and track record marketing, technology support and training, culture and community.

Mike Mills (00:08:07) - All right. Let's start with Keller Williams. Now, Keller Williams was measured to be the best for new agents, according to Housing Wire. I'm sure it has to do a lot with their training program and what they do regarding leads and how they can help agents kind of get into the system of selling homes. Now, as far as their commission structure goes, it's a 7030 split in most cases, plus an 8% franchise fee, at least until you reach this, uh, a specific office cap. And then it's 100% as far as the splits are concerned. So they say Gary Keller's best selling books reflect his expertise in real estate. And this leads to Keller Williams being renowned for their comprehensive training for new agents. Now, despite an average 85 to 15 split, robust support, mentoring and technology investments, including 1 billion allocated for future enhancement make it a top choice for new and experienced agents seeking a solid foundation and a family like professional environment. So if you're new to the business and looking for a place to kind of really get your feet grounded, Keller Williams seems to be a good spot.

Mike Mills (00:09:01) - Now let's move on to Coldwell Banker. Now, Coldwell banker was judged to be the best company for agents looking for a strong market share. Now their commission splits seem to be ranging from 5050 to 9010, depending on how long you've been in the business and your volume of sales. So it states that Coldwell banker, which is a trusted real estate brokerage since 1906, received the 2023 Women's Choice Award for customer recommendations, highlighting its appeal to women and key decision makers and real estate. Well known for consistent branding and professional agents, it faces challenges in updating technology and marketing tools as part of the larger anywhere real estate company. Caldwell offers a strong luxury division, making it a good fit for agents with established systems seeking to leverage its market presence and name recognition. So if you've got a good base and you're trying to brand yourself a little bit better, but maybe don't need a strong marketing tools or technology, Coldwell Banker might be a good choice. Next up is Sotheby's. Now, Sotheby's was ranked the best company for luxury agents southern.

Mike Mills (00:09:59) - International Realty, so typically their splits are 7030, with a few exceptions. Now, the report states that Sotheby's International Realty, stemming from the renowned Sotheby's auction house, is recognized globally for its luxury real estate listings and affluent clientele. With over a thousand offices in 80 plus countries, it offers agents a vast network of referrals, so it provides above average marketing tools for agents that are investing in high end luxury segments that like to spend money on marketing the brand's significant online presence, evidenced by a record 46 million website visits in 2022, and an innovative social media campaign positions it as a top choice for experienced luxury agents or those aspiring to enter this market. So if you want to dip your toe into the luxury market and you're interested in picking up referrals that might be moving into your area that are relocating and you got a pretty strong digital footprint, some social media presence, then Sotheby's could be a good fit. All right. Now let's talk about real real with a backwards L if you've ever seen it. So they were judged to be the best real estate company for tech savvy agent.

Mike Mills (00:10:58) - Now the commission splits look to be about 8515 at least until you reach 80,000in total commissions. And then it goes to 100%. So they say that real is a new player in the real estate industry since 2018, and it offers innovative income opportunities for agents similar to Exp model. So it provides additional income streams which can be vital during market fluctuation. Its operating in 49 states and parts of Canada. Real stands out for its technology, offering mobile platforms and AI driven tools to streamline your work. And although younger and smaller than established brands, Real's community oriented approach and Agent First technology make it an attractive choice for agents confident in selling a new brokerage concept. In fact, the author of this story switched over to real in 2023, so they gave it their own personal endorsement here. I know a lot of younger agents that have moved over to real. They really seem to enjoy it. It does have more of a forward driven, tech centered AI platform, and with younger Gen Z and millennial buyers being a big making up a big part of the market these days, real might be a good option if that's something that appeals to you.

Mike Mills (00:12:00) - Now, this next one's a little surprising because it is a brokerage, I guess, but nobody ever thinks of Redfin as being a real estate brokerage. At least I don't. I look at it more as being an online search platform, but I guess they are pretty heavily into employing real estate agents these days. So this was voted the best real estate company for agents who need consistent income. Now Redfin does a little bit different. They actually offer a base salary plus bonuses for every transaction that you close. So the article states that Redfin is known for its unconventional approach in guiding clients through the buying process involving multiple agents, and it has success because it's a familiar brand for consumers searching for properties, which is a model that provides built in lead generation for any agents that work for Redfin. And they're very unique in offering a base salary plus bonuses instead of purely commission base pay. So Redfin is attracting agents that require a more stable income. Now, according to their calculator, it shows that first year agents can earn around $87,000.

Mike Mills (00:12:50) - In Boston, for example, in $86,000 in Fort Myers, including salary, bonus and benefits. So it could be an ideal for new agents looking for consistent income. Despite the multiple agent transaction process. Now, the downside to that is, like anybody that's been commission based as a realtor for a long time, understands that the salary sounds good. But when you look at the actual money that you could make on your own, then it tends to be quite a bit higher. The difference is, is that Redfin is actually providing leads for you. So if you don't have a good bit of a good bit of business or you're moving into a new area, then maybe Redfin might be a good choice. All right. So let's check out compass next. So compass was voted to be the best real estate company for agents who want marketing money. Now they range in commission splits from 8515 to 95 five. The article states that compass is known for attracting agents with substantial sign on bonuses and marketing packages, and this is how initially they made a very strong impression in the real estate market.

Mike Mills (00:13:43) - Now, despite recent budget cuts, they remain leaders in providing effective marketing tools, potentially saving agents up to $50,000 annually. So they claim they've really focused in on the luxury market with enhanced marketing and PR efforts. It seems like everybody's focused on the luxury market these days. I guess all homes are priced in the luxury market, it would seem now. Compasses unique strategies include Transit Marketing and insider guide to off market properties labeled as private exclusives, so they have off market properties listed solely there that they try to get their clients inside their database to see first. So it keeps the transactions in-house. And they boast that impressively. Compass Chicagoland agents in 2022 led in sales volume, units and price and time to market. So for agents prioritizing major marketing support, compass could remain a very strong option. And speaking of exp. Exp University, which was voted the best real estate companies for agent who liked recruiting. So the commission splits on this are about 80 over 20 until you reach a 16,000 annual cap. Now Exp Realty, popular among new and experienced agents, operates on a unique revenue model where agents earn by recruiting others, receiving 3.5% of the new agents gross commission with an annual cap.

Mike Mills (00:14:52) - Now, this cloud based brokerage offers online training, meetings and resources through Exp University, which is accessible 24. Seven. It's ideal for tech savvy and on the go agents, or for those balancing real estate with other commitments. So your part time agents, however, aggressive recruiting tactics by some Exp agents have led to skepticism in the industry. Despite this, the brokerage innovative approach and extensive resources make it a potentially a great fit for many agents. So if you feel like you're better selling to other agents, then maybe you are selling to clients and you feel like you could build a really good team, then Exp could be a good choice. But because of some of its aggressive tactics, it's gotten kind of a bad name in some parts of the industry. So choose wisely. All right. Next up is century 21. Now century 21 was actually voted the best real estate company for Latino and Latina agents. The commission splits range from 5050 to 9010. It states a century 21 stands out for its significant number of successful Latino agents, consistently topping the top 250 Latino agents report by the NH rep.

Mike Mills (00:15:55) - Factors contributing to this success include the brand's long standing presence in diverse communities and a strong focus on mentorship, particularly for Latino agents. Additionally, century 21 scholarship program initially targeting Miami, Houston, and Los Angeles, now aids Latino entrepreneurs nationwide, offering pre licensing course funds and matching them with experienced Latina mentors, fostering the growth of underrepresented groups in real estate. So here in Texas, we have a very strong Latin community. Century 21 might be a great fit. All right. Next to last is Berkshire Hathaway. So Berkshire was the voted the best real estate company for agents who value community and connection. Now they're commission splits range from 5050 to 9010. Berkshire Hathaway HomeServices, part of Warren Buffett's empire, emphasizes community, culture and connection, appealing to socially oriented individuals. It's known for trust, integrity and stability. B HHS typically operates on a 5050 commission split, a consideration for agents weighing financial and social benefits. The company is dedicated to community service, notably supporting the Sunshine Kids Foundation for children with cancer.

Mike Mills (00:17:00) - Unique to be HHS is the Rethink Council fostering the next generation of industry leaders. HHS is ideal for those valuing community involvement and corporate culture despite the split. So they take a good chunk of your cash, but they have a big community and support you through all your philanthropy endeavors, I suppose. Um, I guess so. If they're going to take 50%, uh, but Berkshire Hathaway could be a good option for you because it's been around a long time. And, you know, maybe you'll get to meet Warren Buffett, I don't know. All right. Last and certainly not least, would be Remax. So the Remax was voted the best real estate company for agents who want to work with seasoned veterans in the business. Now the splits are 60, 40 and up to 95 five, but the 95 five commission split also has to pay a desk fee. But every brokerage is a little bit different, so you'll have to ask your local broker. So Remax is known for its experienced agents averaging over 13 years in real estate, offering a blend of independence and support embodied in the motto work for yourself, never by yourself.

Mike Mills (00:17:58) - Now, with a global presence, Remax enhances an agent's personal brand credibility. Agents at Remax reportedly earned an average of $250,000 a year, significantly above the national average, and it's aided by comprehensive training and a support staff with a high agent to staff ratio. So their training platform, Remax University, focuses on skill and business development, leading to agents closing up to 38% more transactions. So with pretty favorable commission splits, especially on the high end and high amount of training, and you get to be around people that have been doing the business for a very long time. And if you look at the numbers overall in that there have agents closing up to 38% more transactions than agents from other large brokerages, Remax looks like a pretty solid choice. Well, guys, there you have it. Now you know, just a little bit more about what your options are as a realtor these days. Now, again, we didn't highlight any local brokerages. These were just the big boys. But wherever you are, if you're happy and you're treated well, then you're probably in the right place.

Mike Mills (00:18:55) - Okay, that's it for today. As always, I appreciate each and every one of you that tune in each week, and I cannot thank you enough for all the support. We're growing more and more every week, and I feel fortunate to have you guys here with us every single week, tuning in and sharing our real estate journey together. Join me for a live podcast this Thursday as I welcome Ginger Bell to the show. Ginger is a nine time best selling author and Emmy winning producer who's coming to talk to us about how to make content that educates your clients in an engaging and entertaining way. She's the founder of Edu marketing and has a great insight on how to make videos that your clients will find incredibly valuable, not just today, but also into the future. So please don't miss that one, especially if you're ready to take your video game up a notch. I hope you guys have a great rest of your week, and we'll see you back here next Tuesday. Until then, be great humans.

Mike Mills (00:19:41) - Keep grinding and I'll see you next week. Take care.