Ellis Posner Year in Review 2022

NO ONE RINGS A BELL AT THE TOP OR BOTTOM OF THE MARKET

REAL ESTATE IS A CYCLICAL BUSINESS

Here’s a video with some, but not all, of the properties I listed, sold or leased in 2022.

Well that happened.

The out of control speeding freight train of a Seller’s market for homes in all prices ranges came to a screeching halt. And rather abruptly.

If you’ve been following the Real Estate market at all or even just paying attention to the news in general, you already know what happened. Mortgage interest rates more than doubled from sub 3% at the beginning of the year to over 7% in Q4 of 2022.

That plus persistently high prices, inflation and the ongoing economic and global uncertainties have led to most Buyers just saying no. We quite rapidly moved from Buyers submitting offers before they’ve even seen properties to Buyers just not willing to write even low ball offers.

In many of the neighborhoods I focus on, sales have declined by close to or even over 50%. Curiously, prices have NOT declined anywhere near as much although they are certainly down from the highs of April and May. In the near term, chances are that the highest comps you may see are for properties that closed escrow in June of 2022.

MAKING IT PERSONAL

So, how did yours truly fare? Well, all in all a solid year in a challenging environment. I came nowhere close to my $40M sold in 2021 but still turned in some solid numbers. And as usual, most of my business was in Redondo Beach CA.

The year started out for me feeling very much like 2021. I closed a deal representing a Buyer on a townhome in North Redondo in January. February saw another closing of an investment property in Long Beach (on Redondo Ave, lol) followed up by two more sales in March - one in North Redondo Beach and another in Lawndale just across Inglewood Ave from North Redondo Beach.

So far so good and as I usually log more sales the second half of the year, I felt my Q1 run rate was keeping me on pace.

April saw my listing at 1818 Stanford Ave in the Redondo Beach Golden Hills go into escrow rather quickly. But things started to just feel different. The traffic and offers were down. I initially chalked that up to not having any Open Houses or a lockbox on that listing. My Seller clients just weren’t into OHs and agents using Supra access. None the less, I was more than pleased with the outcome and wound up representing both the Buyer and the Seller on that one.

A listing I put on the market in May on Fisk Ln in the El Nido neighborhood in North Redondo Beach felt more normal. Crushing traffic at the Open and multiple offers after the first weekend it was on the market. That one closed in June as did a Buyer deal for a 3 on a lot I did that sold on Carnegie Ln in North Redondo Beach.

By the time I was writing the offer on the Carnegie Ln sale, I started sensing something had fundamentally changed. I even had advised the Buyer against going as high on their offer as they would have gone. And we got the deal.

WHAT ABOUT THOSE RENTALS?

Coincidentally, a lot of my landlord clients had renewals coming up on their leases during 2022 and when I listed those properties, it felt like the sales market of 2021. So many potential renters showed up, I would quickly lose control of the schedule and felt like I was at an Open House! And I received multiple applications on each listing. One leased after one showing and another after 5 days and 2 showings.

Hmnn. Something’s going on for sure.

When I’m doing a rental, I often see the credit worthiness of the tenant. Many of the tenant applicants had over 800 FICO scores and hundreds of thousands of dollars in the bank. In other words, people who 100% would have been Buyers had the rates not accelerated as rapidly and high as they did. In fact, some of these people even said to me that their friends and family were all asking why they weren’t buying.

WHY AREN’T WELL QUALIFIED BUYERS BUYING?

I can tell you why.

When the rates got into the 6s, in almost every instance it was a few thousand dollars less per month to rent than to buy. And that’s without putting any money at risk if prices declined. So why not? There’s just enough really negative housing articles out on the inter-webs positing that we’re in a bubble and that prices will decline by 20%. So why would you want to put 20% down that you could lose in the next 12-24 months? Assuming you believe that, it would be far better to rent, pay less each month, and not risk your nest egg.

ARE BUYERS REALLY JUST SAYING NO?

Unfortunately, yes.

Over the Summer, I held Open Houses where maybe 1-2 parties showed up. And it just wasn’t mine. I would often get calls from other Agents doing Opens asking me if I had any traffic. What few offers came in were typically well below the list prices. And then, the price reductions started. I’d see properties drop $50K, $100K at a clip with no different outcome. There were that many fewer Buyers in the market.

Around Halloween I started to notice a difference: Buyers who were coming to Open Houses weren’t talking about the economy or the rates anymore. They were just back to the usual stuff Buyers say, “how long has it been on the market?”, “what are the taxes?”. Well, one new twist, “are the Sellers negotiable?”.

By the time we got to Thanksgiving, the Buyers in the market were real (again). Maybe not as many of them and maybe not as willing to waive all their contingencies (was that really a thing?). But Buyers who just wanted to find a place to live. Imagine that!

Lots more happened in 2022 that affected housing and the line of work I’m in. Let’s take a look.

THE 2022 ECONOMY HIT THE REAL ESTATE INDUSTRY TOO

CRYPTO AND THE STOCK MARKET

Beyond interest rates and their effect on mortgages, the collapse of crypto in general and the stock market decline also negatively impacted the Real Estate market in 2022. Beyond the “wealth effect” of people just feeling richer as their portfolios increased, a lot of people cashed out their stocks or borrowed against their 401s for all or part of their down payment. They were literally buying the house with the house money. The DOW, the S&P, and NASDAQ definitely did not help the Real Estate market this year.

And Crypto? Don’t even get me started. All I’ll say is that the a lot of people cashed out their Crypto profits for their down payments. Some even were able to buy houses with their Crypto profits. And forget about the agents that were touting they did deals where the actual payment was made in Crypto. I even know an agent who was paid his commission in Bitcoin. Wow.

WHAT’S THE FUTURE OF iBUYING AND PROPTECH?

A few years ago, a lot of agents were worried about the effect the iBuyers would have on getting listings. It never became that big a thing in the LA area although as noted in the video, I did sell one of the last listings in Zillow’s inventory.

If you are not familiar with iBuyers, basically those are the cash offer companies that decide what price to pay based on an algorithm.

Looks like the major players in that space have already had huge attrition and have lost billions - with a “B”. Simple to understand why. It’s one thing to buy homes to flip when the market is going up and to do it on a low margin. When the market goes down, well there goes your profit and then some.

A lot of companies touted themselves as being in the “Proptech” space. However you define that, as it turns out, they were a lot better at pitch decks and raising money than actually doing real estate deals. For those who have kept their doors open, lots of layoffs.

HOW MANY LARGE BROKERAGES CAN SURVIVE?

After throwing lots of money at agent acquisition and technology, a lot of Brokerages had layoffs and started to cut back on staffing levels. If you are reading this blog, you probably already know that I’m an independent Broker not affiliated with a larger Brokerage. That means I work under my own license. So I really have no dog in this fight.

I don’t think there will be enough transactions industry wide to sustain all the the large firms and many of the smaller ones. No one is predicting that sales volume will increase. Brokerages already work on very tight margins. So all that fancy office space, onboarding specialists, and agent perks probably don’t survive this cycle.

ARE TEAMS ANY BETTER OFF?

In normal or better than normal markets, the large teams can afford to generate a ton of leads and keep their Buyer Specialists (agents) busy. They’ll also have enough listings to feed some agents Open House assignments. What happens in a slower market? As team agents aren’t being fed enough to meet their financial goals, some will inevitably go off on their own. That will take the few transactions they may have brought in off the books and that makes sustaining the team that much more difficult.

WHAT WILL I BE DOING IN 2023?

More of the same - trying to keep my business 50/50 between Buyers and Sellers with a few twists added to the the mix.

NEW MARKET - PALM SPRINGS

When I was doing my year end analysis I noticed that the Coachella Valley, while showing some of the same trends as LA County, was not as impacted as much as the Beach. The city of Palm Springs, which has a similar population to Redondo Beach, had more sales that all three Beach Cities combined. My thought is that the pool of potential buyers is much larger. People buy 2nd and 3rd homes in Palm Springs and the winter population comes from all over the country and the world.

Being an independent Broker allows me to ply my craft anywhere in California. The contracts are the same and while there are local difference for sure, houses are houses wherever.

My goal for 2023 is 4 deals in the desert. I’m starting small. Let’s see how it goes.

NEW REAL ESTATE VIDEO SERIES

In addition to my listing videos and the neighborhood videos I have planned, I’m committing to do two weekly shows. We’ll see if I can do them for 52 weeks. Maybe I’ll do just one show, Here’s the idea.

The first “show” will be Keeping It Real. That one, I’m just going to rap about whatever Real Estate topic is in my head that day. Maybe it’s a minute, maybe 5. My plan is to put it out on Wednesdays. Then on Saturday (or Sunday), I’ll be doing the Weekend Update. No, not on SNL, on IG and YouTube. That show will be more numbers oriented and what’s going on in the market and I’ll try to keep it to about a minute. We’ll see. Anyway, a lot more video.

COACHING - MY SIDE HUSTLE

Over the past few years, I’ve built up a nice coaching business. Just word of mouth and people finding me on my coaching website - which is different from this one: coachellisposner.com.

Many of my friends ask why I do coaching. I can tell you, it’s not a money maker for me. But I do it because over the years, I’ve had some great mentors in my sales career and really believe in giving back. I also really want to help other agents succeed and do it the right way.

Where other sales careers have proven ways to succeed, in Real Estate, the “industry”, meaning Brokers and Brokerages, coaches, managers, and trainers are all teaching most agents the way to fail because they are teaching the wrong things. Their intentions may be good, but the results just aren’t. I can and will do better. It’s all about giving back - even if I charge for it.

HERE’S SOME, BUT NOT ALL, OF THE HOMES I SOLD, LISTED OR LEASED IN 2022

Well, that’s about it for 2022. Done, over. Neither my best or worst year professionally. Personally, a lot of amazing experiences and milestones.

As always, I want to thank my absolutely amazing wife for her support and understanding. As the saying goes, behind every successful man….

Namaste