After two years of a red-hot market, it’s time real estate and mortgage professionals get ready for what could be a slowdown in their business.
Earlier this summer housing prices were on fire. Now there is talk of a “housing recession.” Due in part to higher mortgage rates and more people vacationing this summer, U.S. existing home sales fell in July for the sixth straight month, the longest streak of declines in more than eight years.
One of my clients in the Midwest put his home up for sale recently and has had no interested buyers – none. A few months ago, we were certain it would sell in days. The plan was to sell the house and pay off their construction loan on their new home before it converted to a permanent mortgage. Now, that plan may need to change.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Several mortgage companies have already let go thousands of employees, and one company, Sprout Mortgage, based in East Meadow, N.Y., shut down in early July. Real estate brokerage companies, such as Compass and Redfin, have also slashed their workforce.
Real estate is cyclical, and while sales will not totally dry up, anyone tied to the industry should get their finances in order now in case the current downturn lasts another several months.
Here are a few moves to consider:
Build an Emergency Fund Twice as Big as a Salaried Worker’s
No one wants to get caught borrowing money to pay their bills. While putting away enough money in a savings or money market account to cover six months of expenses is normal, it’s best to plan for a longer period if you work in a cyclical industry.
Consider keeping six to 12 months of reserves available to cover your expenses, which is roughly double the amount recommended for salaried jobs.
Keep Your Lifestyle in Check
When the market was booming, you may have started spending more money than usual – dining out often, buying new technology for the home and taking more vacations. Many households can save hundreds of dollars each month by reducing or cutting these kinds of expenses.
Review your spending over the past year and determine how you can save money that may be needed to help conserve cash.
Delay Any Large Discretionary Purchases
If you’ve been saving for a new car or other large discretionary purchases, consider putting them on hold. This money may be needed to pay for essential living expenses. Look to maintain your current vehicle for another six to 12 months rather than risk taking on new debt with fixed monthly payments.
Pay Off Any Committed Large Expenses Now
Review your upcoming expenses you’re committed to and determine if any items can be paid for now with surplus cashflow. For example, if you’ve signed a contract for home renovations to start in a few months, pay as much of the anticipated expenses now, ahead of time, or know the funds are set aside. When your home project finally starts, you may need those renovation funds for essential expenses.
Continue Marketing Your Business
Home sales may be falling off, but many people will still want to sell their home during the coming year and buy a new one. How can you ensure you are top of mind when sellers need to sell, or buyers need to buy?
Review your list of top sources for referrals and connect with them now. Don’t wait until it’s crunch time to undertake business-development activities. Stay active on Facebook, LinkedIn and other social media channels to ensure potential sellers see that you are continuing to generate sales. Try to tell someone new every day what you do for a living!
-
Markets Weigh Earnings and Inflation: Stock Market TodayThe major U.S. indexes struggled Thursday amid a hot inflation reading and seasonal headwinds.
-
$177 Million AT&T Settlement Announced — Are You Eligible for a Payout?Millions of current and former AT&T customers may be eligible for payments after two 2024 data breaches exposed personal information.
-
Asset-Rich But Cash-Poor? A Wealth Adviser's Guide to Helping Solve the Liquidity Crunch for Affluent FamiliesMany high-net-worth families experience financial stress because of a lack of immediate access to their assets. Liquidity planning aims to bridge the gap between long-term goals and short-term needs and avoid financial pitfalls.
-
Social Security Planning Strategies and Challenges as It Hits Its 90th Year: A Financial Adviser's GuideLonger life expectancies and changing demographics put extra pressure on the program, making it crucial for future retirees to understand its evolution, common myths and how to strategically plan for their benefits.
-
How to Build Your Financial Legacy Three Piggy Banks at a TimeA wealth adviser shares a childhood saving technique that taught him lessons of stewardship, generosity and responsibility and helped him answer the question we all need to answer to define our lives by impact rather than greed: 'What is this all for?'
-
Which of These Four Withdrawal Strategies Is Right for You?Your retirement savings may need to last 30 years or more, so don't pick a withdrawal strategy without considering all the options. Here are four to explore.
-
DST Exit Strategies: An Expert Guide to What Happens When the Trust SellsUnderstanding the endgame: How Delaware statutory trust dispositions work, what investors can expect and why the exit is probably more important than the entrance.
-
Think Selling Your Home 'As Is' Means You'll Have No Worries? Think AgainThere are significant risks and legal obligations involved in selling a home 'as is' and by yourself, without a real estate agent.
-
What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's GuideFor Americans in lower- and middle-income tax brackets, the enhanced deduction for older people reduces taxable income, shielding most of their Social Security benefits from being taxed.
-
Financial Planner vs Investment Manager: Who's the Better Value for You?When markets are shaky, who do you trust with your money? A recent study provides useful insights into the value that different financial professionals offer.
