With buyers on the sidelines, real estate agents play the long game

Johnson Tsai’s business is usually 50-50: evenly split between representing buyers and handling leasing transactions in New York. Rising mortgage rates have changed this dynamic.

“Given the current market, my business is at least 60% renters, and the other 30% to 40% are buyers and sellers,” said Tsai, a brokerage agent. REAL New York. Tsai expects this trend to continue into 2023 and likely expand when New York’s rental market recovers in early spring.

Potential buyers who don’t have the cash for a big down payment may continue to rent because they don’t want a big mortgage and the risk of going underwater when a recession looms.

Chen Zhao, Redfin Economics Research team leader

As mortgage rates have risen to their highest level in decades, potential home buyers are increasingly on the sidelines. In accordance with National Association of Realtors.

“The monthly mortgage payment is about $1,000 higher than it was a year ago,” said Nadia Evangelou, economist at the Realtor trade group. “So current buyers need to earn about $40,000 more to buy a home at the median price compared to buyers who bought their home a year ago.”

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As a result, many potential home buyers choose to continue renting while waiting for mortgage rates to improve.

“It almost always makes more sense to rent if it’s a short-term lifestyle or you need the flexibility to move quickly. But now, for a larger part of the population, renting is financially beneficial,” team leader Cheng Joa Redfin Economics Research, said. “Buying first-time buyers who don’t have the money for a big down payment may continue to rent because they don’t want a big mortgage and the risk of going underwater when a recession looms. Also consider how you spend your money: Renting makes a lot of sense if you can put what you would have used as a down payment into another investment that is likely to appreciate in value.

While renting is financially viable for most potential home buyers these days, it’s a tough break for real estate agents. Very few agents get rich from the rental market – depending on the market the agent operates in, the commission on a rental property often ranges from 25% to 50% of a full month’s rent. However, if the property has a listing agent, depending on the agreement reached, this 25-50% is often split 50/50 between the listing agent and the tenant’s agent.

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Depending on your interests and skills, there are so many different things you can do in your industry besides just working with buyers and sellers.

eXp Real Estate Agent Stacey Pulliam

Although tenant agents are common in the highly competitive New York rental market, they are less common in other markets because tenants typically find potential rental properties and negotiate their own leases. Many agents lose their commission entirely when a potential buyer decides to rent.

With Federal Reserve With interest rates expected to be raised at least two more times in the coming months and housing prices expected to decline only slightly due to tight inventory, industry experts believe that demand for rental units will remain strong for the foreseeable future. According to data from National Council for Multifamily Housing and National Apartment Association, an additional 4.3 million apartment buildings are estimated to be needed by 2035.

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Although in Augusta, Georgia eXp Realty agent Stacy Pulliam has seen some of her potential buyers continue to rent in recent months, she remains optimistic about the future of her business. To overcome the current housing market slowdown, she wants to further diversify her business.

“There are so many different things you can do in your industry, depending on your interests and skills, beyond dealing with buyers and sellers,” Pulliam said. “There is a government contract route or you can go into coaching or property management. For me personally, based on my skills, I am looking for more commercial properties as well as government contracts.

But at the end of the day, Pulliam doesn’t see losing clients in the rental market as a loss for her long-term business.

“I’m a people person, so I want to meet new people,” Pulliam said. “By staying in touch with customers who are renting, you can hopefully keep that customer as a future home buyer. However, it is a long-term investment. Instead of getting paid now, you invest to get paid later.

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