Should Home inspectors be preparing for a real estate downturn in 2023?
Are you hearing rumors of the big collapse?
The housing market has been booming and showing steady growth since the US economic recession of 2008. But with predictions of a stock market crash, real estate downturn, and the weakening value of the US Dollar always floating around. The increasing news of large companies laying off employees is starting to look like a recipe for disaster.
The buoyancy of the real estate market is widely celebrated as an upward trend following a slump during the Great Recession. Home buyers from all levels of income have had greater access to home ownership, but some commentators are predicting an imminent drop-off in 2023 due to macroeconomic forces globally.
Potentially driving this bearish sentiment and concern over unemployment starting to increase and increasing interest rates; both factors can lead to a downward spike in the housing market if not managed carefully. For home inspectors who help evaluate the safety and condition of properties before closing on sales, understanding how to protect themselves through periods of turbulence will help them weather any storms that may come their way. Let's examine some strategies that can be employed now or later to prepare for what could be another deep dive into a recessionary period like 2008. Although the crash of 2008 was brought on by bad home loans that lead to the stock market crash. This recession in the housing markets may be driven by different reasons like high inflation, mortgage rates, Job layoffs, and a possible stock market crash. All these factors take buyers out of the home market and the market will have to reset once again. So does the real estate industry really need to start preparing for a collapse in 2023? I think it's a good idea.
Are there any indications in Houston that the real estate market is slowing down?
The news from the Houston Association of Realtors (HAR) October 2022 Market Update is grim. The number of single-family homes sold decreased by 22.8 percent, from 8,592 in October 2021 to 6,641 a year later. This drop is indicative of a larger trend as the market is currently 6.7% behind 2021's record-setting volume on a year-to-date basis. November dropped even worse to 30.4 percent compared to November 2021. This decrease can be attributed to a range of factors including rising unemployment rates and increased mortgage interest rates. As long as these conditions persist, it looks like home sales will remain low for the foreseeable future.
Since September 2022, I have heard rumblings from fellow inspectors, Real Estate agents, and my termite inspector that they have been slowing down. As a matter, of fact as of January 9th, my termite inspector says three of his inspectors have called him to see if he was busy. This is the same story when reaching out to Real Estate agents that use me as an inspector. The data generated in January and December from the Houston Association of Realtors (HAR) supports this see the link below. I personally didn't find inspection sales dropping off at that time. I slowed some in November 2022, and December 2022, but still did a good amount of inspections those two months. This drop-off did not alarm me because the home inspection business usually slows down during the winter months. As a matter of fact, this has happened to me since 2009 except following the pandemic when the Real Estate Market was setting all-time highs for home sales. Now we're in January 2023 and I have seen a significant drop-off in inspections. I personally believe the market is transitioning from a seller's market to a buyer's market. Saddle up Houston inspectors and Realtors this might be a rocky ride while we wait for this market to transition into a buyer's market.
What will it take for the real estate market to return to a buyer's market?
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A buyers market is created when there is an abundant supply of homes for sale and limited demand. With more homes than potential buyers, sellers are often forced to lower their asking prices in order to attract home-buyers. This is beneficial for buyers, as they can often purchase properties at greatly reduced prices. Sellers, however, may have difficulty finding an interested buyer willing to pay what their property is worth. The current economic conditions create situations that make it even more difficult for sellers; low employment levels mean fewer people with the ability to purchase a home, and thus a widening gap between the properties available and those who want to buy them. At this time in Houston inventory is starting to go up, but prices haven't seen a significant dip yet. So at this time, we are either waiting for increased inventory and either lower interest rates or prices to decrease so homes are affordable again.
No, the Real Estate market will reset and inspectors will thrive again. Just like in the crash of the 2008 housing market, some inspection companies will go out of business, but others will come out of this stronger and more profitable than ever. So a recession or a downturn is not necessarily a bad thing if the inspection company can take advantage of the opportunities. Don't get me wrong I don't welcome a recession many people will struggle.
What are some opportunities a home inspector can take advantage of during a recession?
During a recession, home inspectors can focus on strategies that would otherwise not get attention during busy economic times. I know this firsthand as a single inspection firm. For the last two years, I haven't been able to focus on anything besides performing inspections and pushing out home inspection reports. As an inspector, you should always try to improve every year. This slowdown is my time to catch up on many things I haven't had time to do. The companies that take advantage of this downtime now will emerge from it as a renewed and better version of themselves and have greater power against their competition.
Benefits inspectors don't realize what a recession can do for their business.
That's a funny statement right? Well, not really most people are too scared to start a new business during a recession. People tend to start businesses when the economy is thriving. That means less competition. Many will fail especially the newer inspectors that are just starting out trying to drum up business. I know it's sad, but many inspectors will just give up and turn to earn a consistent paycheck. This happened in 2008 and history has a way of repeating itself.
Things home inspectors can do right now.
I personally feel better when I keep busy. Keeping yourself busy will keep your mind off the poor performance of your business during a slow real estate market. Working on things to improve your business gives you a positive outlook and sense of accomplishment as opposed to being discouraged or depressed. Market your business. Marketing doesn't mean you have to spend money. There are plenty of great ways to market without spending a dime. With that being said I would not cut my marketing budget I may even be more aggressive. I like to treat each inspection as a marketing opportunity. Yes, it took me a while to learn this, but every job can be a chance to share unique content with the world. If you see something very dangerous, funny, or beautiful take a photo or better yet make a short video. Then post to all your social media accounts like Facebook, Tic tock, and Youtube. This mindset can help all inspectors and even Real Estate agents new or experienced. Take time to improve your website if you don't have one you should. Write some great blog articles to help agents, clients, and other home inspectors. Share articles with real estate agents and give them something helpful. This gets your name out there and they may give you a shot with one of their upcoming home buyers. If you are not gaining real estate agents to work with then your business won't grow to its potential. The inspection report is marketing every inspection you do. The report documents the quality of work you perform. Many times it may be in front of four people or more. First-person will be your client then the client may release the report to their realtor, sellers, and seller's realtor. The report has your company name, your name, your phone #, and your website address. I can't tell you how many realtors, and clients I have gained from producing a really detailed and thorough report. I have sellers tell me I didn't care for your report when I was selling but I definitely was hiring you as my inspector because of the accuracy and thoroughness of the report. A always liked the Warren Buffet Quote “I will tell you how to become rich. Close the doors.
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
I would use the dual approach of free marketing and paid advertising.
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Take time to become a better inspector. How may you accomplish this? Take this time to improve your inspector's knowledge with additional education. Improve your home inspection comments in your inspection software. Learn more about marketing there are plenty of YouTube videos and information online to improve your marketing skills. A home inspector must wear many hats to be successful or delegate and hire people to perform certain tasks.
If you are not happy with the efficiency or quality of your home inspection report software this would be a great time to look at other software options. Really good inspection software can improve the quality and look of your reports and help inspectors with the daunting task of completing reports. Many software providers offer a free trial. Below are some links to some of the best software providers in the home inspection industry.
Take this time to gain additional certifications or licenses so you can add additional services to your home inspection business. You could be licensed or certified in the following areas to increase additional services like pool inspections, termite inspections, mold inspections, Septic inspections, Stucco inspections, etc. Inspectors can perform these services as a stand-alone service and as an additional service when the opportunity presents itself. This can help inspectors make more money on a particular inspection that needs additional inspections or perform the service by itself helping inspectors weather the storm. Becoming a one-stop shop is also very attractive to Real Estate agents.
I wouldn't lower the price of inspections. Instead of lowering your price, I would recommend giving a one-time discount or coupon to new agents that haven't ever used you before. This gives you a chance to market to a new agent and all their potential clients. How to get real estate agents' information. There are two parts to obtaining the information. My go-to method is going to Zillow and clicking on agent finder then putting in the location you desire in the search box. This will bring up all the agencies and a list of all the agents working at that brokerage. The secrete to getting the agent's email is going to the TREC website. Insert the agent's name into the license search and boom there's the email address for the desired agent. Find the links below to start an email marketing campaign.
Do you need to upgrade your website? Think of it as a digital representation of your company. A poor website will affect how others view your business. Now is the perfect opportunity to better its appearance and content. Consider creating new content and optimizing with SEO standards.
Regularly post to social media accounts with inspection photos videos and informative content.
Make sure your running your business as efficiently as possible and cut back where you can without sacrificing quality to the client. I know that in my business I can save a lot of money by just leaving earlier and taking a travel route that doesn't include a toll road. Tolls rack up quickly in the Houston area so just leaving 30 minutes earlier can save me an easy $20 dollars a day. Trade in a gas-guzzler truck for a more efficient one. I have already done this a couple of years ago. I miss driving a bigger truck, but I save 3 times the gas so my pocket doesn't miss it. I would weather take that money and invest in advertising for another job These are just a few ideas, but you will have to evaluate your business to see where you can save. I recommend starting now before it's too late.
It takes a lot to run a successful home inspection business.
Lots of folks don't recognize how much effort is required to be a successful home inspector. At the start, it can be tough to build up a business from nothing. However, during a hot market when everyone needs an inspector quickly makes this appear easy, so many fresh inspectors assume it doesn't demand much labor. But, in the imminent future, they will learn differently. To stay afloat and survive in the industry, home inspectors must assume multiple roles: marketers, communicators proficient in their field, writers, SEO specialists, teachers, and learners combined with driving and secretarial chores not to forget the fundamental task of inspecting homes. In composing this article my intention is to assist fellow real estate professionals who feel anxious about a sluggish housing market as well as give advice that could help them get through adversity. This is my opinion what do you believe?
Inspecting Houston and surrounding areas one home at a time.