Caleb Carlson has been a realtor in the Twin Cities for eight years.
Prior to the COVID-19 pandemic, Carlson was steadily establishing himself as a trusted and reliable real estate agent, with clients raving about his ability to match them with properties uniquely tailored to their lifestyle and budget.
“Things were great,” the reserved and stoic Carlson says of business pre-pandemic, which saw him sell upwards of fifty homes in 2019 alone.
“I was also starting to learn about how to effectively market so that I could help sellers as much as buyers.”
At the time, interest rates were hovering around 4-5%, figures that kept prospective buyers and sellers happy, but then March 2020 arrived, and suddenly Dr. Anthony Fauci became a household name.
“Then Trump and Fauci announced that we were going to lock down the country for two weeks, and so, like the rest of the population, I started watching Tiger King on Netflix,” Carlson recalls with a laugh.
For as riveting as the Netflix drama was, Carlson’s viewing pleasure was routinely disrupted, albeit in a good way.
His phone inundated with calls, Carlson was fielding inquiries from anxious buyers and sellers alike.
“People started to realize that the lockdown might be longer than two weeks, and once they found out that their jobs were secure, they started to look at their housing situation and analyze what kind of moves they could make,” Carlson says.
Conjunctively, interest rates started to drop, at one point to below 3%, and then a secondary market of homeowners looking to refinance quickly developed.
“When people learned that they could reduce their mortgage payments for virtually nothing, they acted expeditiously,” says Carlson, who throughout this frenetic stretch was attracting buyers who were looking to move on purchasing second or even third homes due to the availability of capital flowing through the economy.
“During that time, anyone could do my job,” Carlson cheekily claims.
“But that doesn’t mean that they could do it well.”
As it happens, a deluge of people from a variety of other industries became real estate agents, the majority eagerly seeking to capitalize on the booming housing market.
For some, posting a dancing TikTok video introducing themselves as a real estate professional was enough to generate business.
That’s how hot the market was.
But when the market tabled off, many of those same individuals no longer could effortlessly secure clients, and promptly left the real estate industry.
Then, roughly twelve months ago, when interest rates shot up over 7%, the market changed even more, leaving unproven agents in disarray, and buyers and sellers in a state of legitimate uncertainty.
“We are not technically in a recession, but there has been way less demand for houses,” Carlson notes, in the same breath mentioning that surging interest rates have made the middle-class’ once-affordable monthly mortgage payments now practically unfeasible.
In reality, that means that prospective buyers quite literally cannot purchase properties without floundering into debt, and homeowners who bought their properties at low interest rates are essentially forced to stay in their current home, unless they want to navigate the mercurial landscape that is real estate in 2023.
For sellers, attracting buyers has been much more difficult than even a few years ago, and while some property owners have made concessions on their asking prices, others have opted to retain their assets and wait for the market to eventually shift.
“People just don’t have an incentive to leave their home and their sub-3% interest rate,” Carlson states.
“Inversely, hopeful buyers are looking at their potential monthly payment and determining that getting into a home right now just simply isn’t worth it due to the exponentially higher cost.”
Carlson predicts that the number of transactions in 2023 will be half of what it was the previous year, which has made competition among real estate agents stiffer.
“There is less food to go around for the realtors,” Carlson deadpans.
“Simply put, there has to be something drastic going on in a client’s life for them to be willing to stomach that kind of increased payment every month.”
At the same time, Carlson is quick to mention that real estate transactions are always occurring, and even though some pundits have foisted a bleak outlook onto the industry heading into 2024, Carlson is more optimistic, and he is proactively doing all he can to equip his clients with all the relevant information they need to achieve a desirable outcome.
“Right now, I’m telling my sellers to be aware that they are in an environment where buyers are very picky because of how expensive it is for them to purchase,” he says.
“Therefore, make sure your property is above average in comparison to your competitors. Your listings need to be cleaner and have better photos, plus more amenities and upgrades; all at a compelling price.”
Adds Carlson:
“It’s never a bad time to sell. You just need to have good expectations of what the market will generate for you with the product that you have.”
When it comes to consulting homebuyers, Carlson is equally optimistic that buyers can win despite the unnerving state of affairs.
“If you’re a first-time homebuyer, the best time to plant a tree was 20 years ago. The next best time is now, with the caveat that you need to make sure that if you buy today, your monthly payment is within your budget,” Carlson explains, before cautioning that buyers looking to upsize should simultaneously examine their motivations for absorbing a larger payment.
“People who are looking to move into a bigger home need to ask themselves if their increased payment will deliver an ROI, or a tangible utility, meaning if your mortgage payment increases by $1,000 every month, are you getting $1,000 per month worth of value out of that purchase? If you’re not getting that value, then the best thing to do is just stay where you’re at and reevaluate in the coming years,” Carlson says.
If the real estate market seems rife with unpredictability, that’s because it is, but Carlson is also an avid proponent of long-term investments and taking a measured approach to real estate, as opposed to endlessly scouring Zillow for an undiscovered gem that only offers the slim potential of being one’s ticket to massive wealth.
“I’m a big believer that the rich get richer, if they’re patient. The people who are willing to live in their homes and slowly build equity are the ones who are likely to profit in the years ahead and capture more market share,” he says.
Which is why it is paramount that buyers and sellers partner with a proven real estate agent throughout their journey, someone who has witnessed the fluctuating nature of the markets and persevered.
Someone, well, like Caleb Carlson.
“There is always somebody who is looking to buy and sell, but like I said, in general, there will be less transactions in the immediate future, and for the real estate agents who can’t bring consistent value to their clients or walk them through this current market, they’re going to struggle immensely,” the Golden Valley resident says.
“I’m fortunate that I’m in a position where people continue to trust me with their homes and their well-being, and that’s not something I take for granted, which is why every day I’m doing everything I can to make sure that my buyers and sellers are achieving the outcomes that are most advantageous to them and their situations.” QS
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