22: Hot Markets
You've got to have a USP, unique selling proposition. You have to have something that sets you apart, and a USP is not, I'll give you a free market analysis or, I give the best customer service. You and everyone else, pal!
About This Episode
Cities around the country are experiencing unprecedented growth, and many of them have become superstars overnight. In this episode, we explore their sudden success, dig into their housing markets, and discover what a fast-moving market means for you as a real estate agent.
Read more about the hottest markets here: https://www.theceshop.com/shop-talk/blog/top-5-hottest-markets
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JON: In several mid-size cities over the last decade, the prevailing real estate story has been one of unprecedented growth. Whereas frenzied construction in the past was relegated to the usual suspects - typically America’s largest cities like New York, LA, or Atlanta - nowadays the stars seem to be the mid-range cities. The ones in what were previously called flyover states, sometimes far away from coasts.
JON: Any Best Cities list from the last few years will likely feature Austin or Salt Lake City in one of the top spots. Nashville was declared the “It City” by the New York Times in 2013. Denver is currently experiencing the lowest unemployment in its recorded history. Seattle holds the current record for construction cranes, with an incredible 59 of them sharing the skyline with the Space Needle.
JON: So what makes one market hotter than another? And why are cities that have been around for decades or even centuries just now experiencing this manic growth?
JON: Hello and welcome to Shop Talk: The Real Estate Show. I’m Jon Forisha and on this episode we tear apart some of America’s hottest real estate markets to see what led to their current popularity.
JON: There are of course a million different ways we could break down America’s hottest cities, and many different criteria for crowning the top city. On our blog, we chose to go with data compiled by USA Today, which analyzed the fastest-growing markets based on year-over-year change in median sale price and unemployment rates. You can find a link to that blog post in our show notes.
JON: First, let’s travel to the foggy hills of San Francisco. The Bay Area’s famously huge community of tech startups, which has inspired countless thousands to pursue the dream of starting their own business, has over time created the least friendly real estate market in the country, and one of the most expensive in the world. San Francisco home prices just fell for the first time in 7 years, but for many it’s too little too late.
JON: Despite San Francisco’s many charms, a poll conducted by the Silicon Valley Leadership Group for Bay Area News Group found that 44 percent of those asked said that they plan to leave. And it’s not just the Bay Area - the Northeast is hemorrhaging residents faster than any other region of the country. Between July 2017 and July 2018, the Empire State lost 180,306 residents and gained just 131,746. That’s a loss of 48,560 people in just one year - the biggest decrease of any state.
JON: Despite the threat to move abroad by many people depressed with the state of American politics, America’s overall population is not declining. So when you hear about some of the country’s largest cities losing residents, the obvious question is where are they going?
JON: Mallory Meehan is a Professor of Real Estate at Penn State, where she teaches courses on risk management. When asked about the recent rise of second-tier cities, she had this to say:
MALLORY: Well besides the fact that a lot of major corporations are going there, I think that these cities are creating a vibe that younger people want to go there. Specifically like Nashville, you have a city like Nashville that typically it was just a country music type of scene. Now you have places where you have a lot of beer gardens, so you have a lot of activities that people can get their hands around. And it's a very lively city. And I mean, same with Denver and Seattle, there are a lot of activities going on, but it's more affordable than living in maybe another city. Maybe not Seattle. Seattle's pretty expensive now. Amazon kind of took over, but national for a long time it was a very affordable city. And you know, Nashville's weather's nice, you have a lot of accommodations, you have a lot of activities to be going on. So I think that the fact that these cities kind of took, we have to differentiate ourselves. We have to kind of bring in these vibes that are going to attract these young people because you know, our population is aging. There are going to start going to smaller cities or even nursing homes. So we have to kind of go after the younger crowd. And so it's very, not necessarily hipster, but that's almost the vibe that a lot of these cities are going after. A lot of nightlife, a lot of things that are going to be engaging for people and just really wanting it to be safe too. Safe towns, clean towns. That's what a lot of these second tier cities have that the major cities don't, major cities have a lot of crime. A lot of them are dirty. These cities are small enough that they can contain themselves, keep them clean, keep them safe, but offer a nice vibe, a nice level of activities for young people.
JON: You’ve undoubtedly heard much about the affordable housing crisis, which is a complicated issue we’ve talked about on the show before. The problem has many causes, including slow new home construction and an entire generation saddled with hefty student loans. A Bankrate study last year found that most Americans think that 28 is the ideal age to purchase a first home, but what happens when your city has literally no houses within your price range?
JON: Well, you would likely move to a less expensive place. In most cases your income will similarly decrease, but if it means battling less traffic and a generally lower cost of living, then many find it a worthwhile change. For real estate agents, these markets not only offer a bevy of new clients to work with, but also a bustling and fast-moving market. In February of this year, the typical home sat on the market for 83 days, but in cities as hot as Seattle or Salt Lake City, that number of days is just 37. And that’s the median number, meaning many listings soared by in a week or two.
JON: It’s a double-edged sword for agents when their market blasts off like that. On the one hand, those sweet sweet commissions roll in with the new business, but on the other, business becomes a grind. Naturally, more agents are attracted to a place with a booming market, so how do you stand out from the pack?
JON: Lars Hedenborg is the founder of Real Estate B-School and host of the Business Freedom Podcast. After putting a crack team in place with his real estate business, he now coaches others on how to work smart and build their own teams. Here’s Lars:
LARS: How do you stand out in a crowded real estate market? You don't. So 15,000 agents in our market, when I got into real estate, it was I think about 10,000 and then it went in the crapper and it went to 5,000 and since 2010 or 2011 we'd gone up to 15,000 so we've tripled. There is no way to stand out unless you're doing direct response marketing and you're having single conversations with somebody over text, email, or the telephone, you know, so to think you're going to stand out as we can't, we sell hundreds of homes a year and we can hardly stand out. And we spent 20,000 a month on radio and most people don't hear that. You know, you couldn't, you have to just take every opportunity to know what you're going to say to someone given the chance. And if they don't, if you don't get them on the phone and you're texting them with a very specific thing where you're emailing them with a specific thing or you've got a system for following up with people that you know, A, B, C and we have a very specific lead management protocol. And so you don't stand out, but you just generate opportunities and you just commit to the daily activities because it's impossible. Like if somebody is better looking than you and they have a better, like they spend more time doing Facebook live. Okay. Like that's, I mean I don't coach to that, you know, like I just coated, just generate a lead, say something that's going to motivate someone to give you their contact information, period. You know, if the thing is good enough, they're going to, they're going to do it. And if it's not, then become a better marketer. So my response now that I've talked through it is stand out by becoming a really good direct response marketer with the brand story stuff sprinkled in like make when you have a closing, make them the hero, you know, not like look at me I'm the number one number one guy in the world or something.
JON: Coastal metropolises have become prohibitively expensive for many, and they’re seeking greener pastures elsewhere. Areas previously derided for being flyover states are suddenly the hottest markets in America, and it’s easy to see why. Historically speaking, most major cities were along coasts and waterways because commerce was centered around boats. Nowadays, though, with more and more jobs that just require a computer and a solid internet connection, successful businesses can be located anywhere.
JON: Lenient tax laws and cheap abundant land have led Texas to become one of the most popular new destinations, with an estimated 1,000 people moving to the Lone Star State every day. Cities thrive on young energy, and most young people are pretty cash-strapped, so cheaper locales like Phoenix and Boise, Idaho are suddenly sought-after destinations with busy markets.
JON: When Amazon announced the competition for its second headquarters in 2017, many cities and real estate professionals were thrilled. One of the country’s most massive corporations was finally looking to expand beyond the town they more or less own, and they were promising an enormous number of high-paying jobs that would undoubtedly lead to affluent new residents wherever they set up shop.
JON: This was the opportunity for a lucky second-tier city to make that climb to the big leagues, to shed any stigma of their past and charge into the brave new future. It was pretty disappointing, then, when Amazon announced their decision. They chose to split HQ2 in half, with one facility planned for Long Island City and the other in Northern Virginia. Neither of these places was particularly “second-tier,” and the new HQs likely wouldn’t launch their cities into any new era of economic prosperity but would almost definitely add to already-existing traffic problems and untenable housing markets. In fact, Long Islanders opposed the decision in such high numbers that Amazon eventually pulled out of New York.
JON: Putting aside the debate as to whether corporations should have such influence over city development and real estate, it’s unavoidable that jobs create hot markets. If you were to juxtapose the list of hottest markets with a list of best local economies, you’d see a lot of the same players.
JON: Mallory Meehan spoke earlier about the appeal of smaller cities, but in her role teaching at Penn State she primarily works in commercial real estate development. Here she is to talk about how commercial real estate plays into a hot market:
MALLORY: Well, obviously if people are there spending money, they want to be in good school districts. I think school districts are kind of the foundation of residential business and you know, the demand for that is creating a hot market. And so what's going to happen is you create this hot market because there's a great education, a great school system and businesses want to be around there. So it has a, you know, a cause and effect where as these markets are to grow residentially, they're going to grow commercially. So I mean as one grows, the next one grows or vice versa.
JON: It should be no surprise that where there’s great education, there will be thriving economies, and where there are thriving economies there will be happy and busy real estate agents. The busy market is where many agents want to live and build their business, but it can also be a bit intimidating, particularly if you’re just starting out.
JON: When it comes down to it, if you’re in a hot market and sweating bullets hearing about all the success of your realtor friends, just take a step back and re-evaluate your approach. Booming markets have plenty of deals to go around, and a crowded space just creates more opportunity for you to stand out in a unique way. When you’re feeling lost, go back to your target market and further define your niche.
JON: Michael Hellickson is the founder and CEO of ClubWealth Coaching, where he coaches agents how to make the most of their time as they build and scale their business. When asked how to stand out, here’s what Michael had to say:
MICHAEL: So what you got to do, you've got to have a USP, unique selling proposition. You have to have something that sets you apart. A USP is not, I'll give you a free market analysis or, you know, I give the best customer service. Nobody freaking cares, right? Like you and everybody else, Pal, right? So you have to have something that's truly unique. Uh, so we recommended, we've got a whole blog post on this as well in terms of unique selling propositions. Um, as an example, uh, as for sellers, you might, you say, I'll sell your home in 30 days or less guaranteed, or I'll sell it for free, right? Uh, or you might say, buy from me, move for free. Uh, you know, there's, there's tons and tons of different unique selling propositions that can be used. Uh, the key though is you've got to figure out which one's going to work for you. So we've got a whole list of them on the website. I'd say go through there, but have one pick one to start with and you can have more than one, but you need to kind of have your main one for buyers and your main one for sellers and you need to market the heck out of them consistently over a very long period of time. You need to become known as that person.
JON: Now we get to the million-dollar question: how long will these booming markets stay glowing hot? No one really knows, but there are plenty of reports that Americans are moving less than in previous generations - only 10 percent of the US population changed residences last year. It stands to reason that if that trend continues, all of these recent transplants to Texas and Salt Lake City and Denver and Phoenix and Boise and Nashville will stay put and become long-time residents.
JON: It may well be that the people driven away from the Bay Area and the Northeast’s exorbitant housing prices will permanently stay put in previously less-populated areas, which will result in an interesting shift in the nation’s population density.
JON: As with most real estate forecasting, we’ll have to wait and see how it all shakes out. When your market heats up, though, you’ll know just what to do to stay ahead of the competition and ride that wave of prosperity.
JON: That’s it for this episode of Shop Talk, thanks for listening! You can subscribe to us wherever you get your podcasts, and if you enjoyed this episode leave us a review! Feedback always helps us make the show better.
JON: Shop Talk is a production of The CE Shop.