Every conference full of agents or brokers has an economist that lets you know what is happening in the market. They are fantastic and often the most interesting sessions. I am surprised because I believe that brokers and agents know more about the market than any economist; they are the ones living in the economy. Perhaps its validation–but how should brokers and agents really incorporate economic realities into their business?
Budgeting
Clearly, there are many economic reports that should inform the ways that brokers budget. Are you budgeting for a growth economy or a shrinking economy?
Real estate brokers should budget for economic fluctuations by diversifying their strategies and maintaining flexibility in their financial planning. Here are a few key steps:
- Build a Financial Cushion: Brokers should maintain a reserve fund to manage downturns. This can cover operational costs during periods of slower sales or declining commissions, allowing brokers to avoid layoffs, office closures, or cutbacks.
- Revenue Diversification: Brokers can expand services to include property management, rentals, mortgage, title, escrow, or new home, providing additional revenue streams when sales slow.
- Monitor Economic Indicators: Keeping an eye on interest rates, housing starts, and consumer confidence can help brokers anticipate slowdowns or booms. Adjusting marketing, staffing, and inventory can align with these trends. If you are catching a falling knife, catch it at the top, not the bottom.
- Control Fixed Costs: Reducing or managing overheads such as office space, technology, and marketing expenses will ensure that brokers remain agile in the face of unexpected downturns. So you, too, can take advantage of expected growth through acquisitions or opening offices ahead of the anticipated volume.
Recruiting
The fastest way that a broker can grow their headcount in real estate is by firing agents. I know that this sounds crazy, but if you invite non-productive agents to leave, you saturate competitive firms with those agents; as well as attract productive agents who hate it when brokers fill up the firm with non-performers. Top producers want to work where other great agents work. Your class of agent and inventory is a magnet to professionals and consumers, alike.
Changes in housing volume significantly influence recruiting strategies for real estate brokers, as volume is a key driver of the demand for agents. When housing volume (the number of home sales) increases, brokers often expand their teams to capitalize on the growing market. This may involve recruiting agents who can manage increased buyer and seller interest or specialize in high-demand areas. Conversely, when housing volume declines, brokers may prioritize recruiting top-performing agents with strong networks and closing skills to maintain profitability in a tighter market.
Be smart about it. If first-time home buyers are a hot segment in the market, then focus on recruiting parents of school age children. If the market leans toward older people, focus on real estate as a post-retirement career.
In either case, housing volume data helps brokers align their recruitment strategies with market conditions. A high volume of listings might lead brokers to recruit more agents quickly, while low-volume encourages a focus on retaining agents who bring in steady transactions or larger deals.
Advertising
The most important take-away from economic data is in advertising. Real estate brokers can effectively use economic data to shape targeted advertising strategies by aligning their marketing efforts with the financial realities and motivations of potential buyers. Here are some key ways:
- Local Economic Trends: Analyzing employment rates, wage growth, or the health of key industries can help brokers target advertisements to areas where people are more likely to move, upgrade, or invest in real estate. For instance, if a city experiences a tech boom, then brokers might highlight luxury homes or urban living spaces to attract higher-income professionals.
- Consumer Confidence and Interest Rates: When consumer confidence is high or interest rates are low, more people may be willing to invest in real estate. Brokers can use this data to ramp up advertising for mortgages and home purchases, specifically promoting affordability and long-term investment benefits to potential buyers.
- Demographic Data Integration: Economic data on housing affordability, average incomes, and household formation trends can help brokers target specific demographics like first-time homebuyers, downsizers, or luxury property seekers. This data enables the creation of tailored ads that speak to the financial capacity and needs of different groups.
Using economic data to create targeted campaigns reduces wasted ad-spend and increases relevance, ultimately improving lead quality. The risk of hallucination here is very low since the recommendations are based on common business and marketing principles.
Hire WAV Group
WAV Group provides comprehensive strategic support for brokers to pivot to success in any market. Reach out to Victor Lund and my team for a discussion to see if there is an opportunity to work together.