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Luz Scott-Lenger has been preparing for a housing market downturn since January. The Tulare County Realtor with Century 21 Jordan Link Co. follows several experts who have been warning about the impact rising interest rates will have on home buying and selling. Scott-Lenger heeded those warnings and began paying monthly for a marketing consultant to make sure her name is out there once buyers don’t have the appetite to commit to record-breaking home prices.

For months on end, it seemed the housing market could reach no peak, with inventory shortages and high demand perpetually pushing values upward. But in response to rampant inflation, the Federal Reserve hiked interest rates to curb the money supply. Mortgage lenders followed suit, doubling the cost to borrow in some circumstances.

Now, the housing market has shown the first signs of change. Mortgage applications are down 40% nationwide from their high in January, according to business news website Kiplinger.  

Where once a house might get eight-to-ten offers in the first week, houses are getting one-to-three offers in two weeks, said Scott-Lenger.

Moody’s Analytics in August claimed the housing markets in 184 metros are overvalued, with all four Central Valley counties as much as 25% higher than where they should be, according to their analysis. Interest rates at 6% come as housing prices have climbed at record rates.

For real estate agents, this means houses don’t simply sell themselves as they have over the last 18 months. In the last economic downturn, agents left the business in droves, with declines of more than 125,000 between 2009 and 2014, according to the California Department of Real Estate. Only nine months into the year, 2022 has had the highest increase in agents since 2008.

But without a more active approach, the incoming president of the Tulare County Association of Realtors said agents who think sales will be more of the same may be in for a rude awakening.

“It was much easier over the last 18 months because of high demand and low inventory,” said Mike Allen, president-elect of the Tulare County Association of Realtors. “A home priced within reason would sell in three days.”

Allen has been preparing the 325 agents in his Century 21 offices for the shifting housing market. Allen is president of Visalia-based Century 21 Jordan Link Co. He and his business partner, Mike Gutierrez, recently acquired Fresno-based Century 21 C. Watson. They also have offices in Kern County.

Allen refined his strategy down to seven points ranging from how to break out of comfort zones, being mindful of budgets, maintaining active schedules and associating with positive people.

What he advocates are the “brilliant basics” to help them prepare for the downturn.

Agents need to step out of their comfort zones, Allen said. Over the past 18 months, agents didn’t have to network or pound the pavement — buyers would come to them.

“The only way we’re going to continue to grow our business right now is to make sure we’re focused on things that probably will make us uncomfortable,” Allen said.

Agents are going to have to start making phone calls, knocking on doors and visiting past clients.

Scott-Lenger said she first noticed the slowing market in April at the subdivision she works for. Soon after, she noticed the rest of the market follow. In Tulare and Hanford, Scott-Lenger says houses are sitting on the market longer than usual.

Houses in those markets are taking 15 to 18 days to sell. In Visalia, a house is taking nine to 12 days to sell. Six months ago, a house would sell in five days, Scott-Lenger said.

Scott-Lenger said business has slowed about 10%.

Realtors need to be deliberate with their investment, Allen said. At the height of the market, money would go toward vacations and cars and “status possessions we enjoyed buying.”

“Realtors are guilty just like a lot of people,” Allen said. “Really we’ve got to focus on business growth and understanding every dollar we save is going towards our bottom line.”

The investment Scott-Lenger made into the marketing company has been paying off and she’s now noticed business starting to pick up. Scott-Lenger pays $1,500 a month to the marketing company, and she gets targeted ads, customer relationship management and weekly meetings with a marketing manager. She said if she would have been using it in 2021, she would have cleared a six-figure salary easily.

And even if an agent isn’t going to spend money, they need to spend time, Allen said.

Scott-Lenger sees some younger agents who started after the pandemic assuming business will walk up to them as it has in the past.

At the end of the year, when dues come, Allen expects to see some attrition.

But interest rates are still below historical averages and agents need to stay positive, said Allen.

Scott-Lenger likes to work with more seasoned agents who have been through the downturns, she said. She anticipates rates to come back down once actions from banks start to take effect.