The market is changing – your way.
2018 was probably the best year for home inspection businesses in the last decade.
But there will be an important improvement.
You’re reading about it first, here. (You expected that.)
So don’t let the depression in mass media stories get you down. Keep your eye on the ball, and expect it to keep rolling.
Headline noise says a “Housing Slump Continues.” National averages support that a little, with the emphasis on “averages” and “national.” (Remember, national and regional “averages” never describe individuals or our home inspection markets, or even the cities our markets cluster around.)
What’s wrong with the “national” “average” picture?
Just about everything that matters – to home inspectors. The three most important trends will drive your home inspecting business in 2019.
The Numbers Are Good, Actually
First, Kentucky home sales are not slumping. The 20 biggest coastal cities – the core data for most of those slumping news articles – are slowing, slightly. Those big population (and housing) concentrations throw off the headline numbers in “national” stories.
In fact, total homes sold in Kentucky has been steadily going up, ever since the 2008 financial crisis.
Take the Greater Louisville market, for example. It’s Kentucky’s largest. Here are the real numbers there:
Single family residential (including condos) home sales for Greater Louisville, 1/1 through Sept. 30, 2018, from 2009 to date, were:
2009 8,810 houses 146 Average Days on Market (DOM)
2010 8980 131
2011 8380 142
2012 9641 135
2013 11,437 106
2014 11,039 98
2015 12,508 87
2016 13,454 73
2017 13,935 58
2018 13,741 55
Dig deeper, and the picture gets better. In particular, if we strip out multi-family housing from single family residential sales, then both existing home sales (the main thing we inspect) and new home sales are rising. Existing home sales were 5.45 million in 2016 (up 3.8%); 5.52 million in 2017; and 5.64 million projected for 2018. New home sales were 561,000 in 2016 (up 12%); 614,000 in 2017; and 700,000 projected for 2018. That’s not the usual definition of a “slump.’
In fact, home inspectors state-wide are finishing up their most prosperous year in a decade.
Say Hello to a Buyer’s Market
Second, the market is shifting. It has been a “seller’s market” until now. But that’s changing — for the better.
Kentucky markets are gradually are shifting to a “buyer’s market.” Slowly but surely, we see less and less of the near-frenzy that brought us clients who signed their purchase contract the instant they saw a home, and then felt pressure to waive contingencies to get their offer accepted before another offer showed up. We’re hearing less and less now about how fast an inspection needs to get done “because there is more than one back-up offer” on the house.
Those days are falling behind in the rear-view mirror.
The shift is crucial for home inspectors – even though none of the media “news” focus on it.
Home inspections are driven up in a buyer’s market. Clients in a buyer’ market regain the power to protect themselves against costly repairs they only saw through rose colored glasses when they made their offer. (They also are protecting more now against deal-churning appraisals that interfered with above-market offers for the last several years.)
That’s exactly what we’re seeing now.
Buyers have returned to putting contingencies in their purchase contracts. The prime contingency is a satisfactory home inspection.
Expect this growing buyer’s market to increase the number of inspections in 2019 – even if total home sales stay flat in your market. The percentage of inspections among all homes sold will be rising.
The Economy Has Your Back
Third, just as importantly, “flat” sales overall may be likely, but far from locked in. Housing sales simply do not crater when employment is high, wages are rising (even slowly), there are more job openings than there are unemployed workers, Gross Domestic Product (“GDP,” the shorthand gauge of the whole economy) is up significantly, and the stock market is hovering around all-time highs. You can take that to the bank, courtesy of both Econ 101 and American history.
GDP, a leading indicator, has grown 1.5% in 2016 to near double – 2.8-3% — for 2018 so far. And it is rising
The pressures toward a flat housing market are not very strong, at least in historical terms. For example, you’ll hear a lot about “rising mortgage rates” shaving home sales and hurting affordability. But today’s rates are 4.75% for a fixed 30-year mortgage. Historically, that’s on the low side of scale. It just seems high for people who got used to 3.25-3.75% rates a year or two ago. (Rates averaged 3.6% in 2016 and 4.0% in 2017.) Most home inspectors can easily remember paying higher mortgage rates themselves in years gone by.
What’s normal is not “negative.” Most of the so-called negative pressures on home sales actually are nothing but returning to normal.
So, big picture: Expect another very good year!
You know that if you need a hand bringing on employees, PLI can help. PLI not only has the top prelicensing graduates, it has the deep bench, years of experience in all market conditions, and the know-how to help your business grow.
And, as the “buyer’s market” shift gets stronger, expect home inspections – as a percentage of sales – to grow even more.
Gear up! Have fun!