Real estate brokers have two markets to think about, and they could not be more different.
The housing market is inherently local. Most brokers — if they survive their first year — discover what classes of housing information are useful to them and their clients.
The second market brokers must know about is the credit market. IOUs of all kinds (bonds, mortgages, munis, corporates — all the same at a high level).
The 2 rules
First rule: Stick with the simplest things that you understand, and spread out gradually.
Second rule: Nobody predicts the future. (Your clients will want you to.) Instead, smile and say, “I’m better at predicting the past.”
It’s reasonable for you to know the recent and longer-term patterns of interest rates.
It is not reasonable to know what the Fed will do next — if only because the Fed doesn’t know, either.
National housing trends vs. local housing trends
It’s worth knowing about national housing trends because one could move into a neighborhood near you, but it’s more important to be aware of the national news and propaganda pouring through the heads of clients, and to know how to bring them safely to local reality.
Housing-local has two forks: housing itself, and local economic drivers. Every broker knows how to dig stats from the MLS, although how to present the information to aid decisions is a form of art learned over time.
What local data should you study and show to clients?
Title companies often publish compelling stats on fine scale. The Federal Housing Finance Agency data is excellent, but rarely finer-scale than counties or metro areas (Standard Metropolitan Statistical Areas, “SMSAs”).
The most important single thing about presenting housing data to clients: avoid industry data. Use the most independent sources possible.
Even when it’s not self-serving, National Association of Realtors data can look suspicious to clients — any Realtor analysis does.
It is not always a great time to buy or sell, and often a Realtor’s most valuable application of skill is in markets that are not great.
And avoid analysis by the likes of Zillow and Trulia, which don’t always have complete data sets.
How to parse local economic data
Local economic data comes in a zillion different forms. To make it manageable, easily updated and understandable to clients, stick with just three categories: local population growth, the local unemployment rate (a good proxy for economic health in general), and additions to local land supply by annexation or subdivision.
If population is growing, jobs are plentiful and land is scarce, you have it made. And vice-verse.
Credit markets: What you should know
If you become comfortable with a few market basics, you can help clients avoid self-sabotage.
All of us have counseled clients who can’t make decisions because of some macro fear, like the stock market, which has very little to do with interest rates, or even the economy, and practically nothing to do with local housing markets.
How to learn about credit markets? Not easy. The Wall Street Journal is typically wrong-headed about real estate and mortgages, but quite good on everything else. CNBC is weak on everything, a circus presentation, but Bloomberg is pretty good.
Avoid at all costs any publication or “news” from a Wall Street bank — these are sales materials designed to manipulate all readers, not to provide wisdom.
And, of course, as an Inman subscriber, you have access to the best weekly update of all.
Mine!
Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.
