Market reports are an essential tool for real estate professionals, but experience also matters. In Paul Wells’ case, he boasts over 35 years of experience in real estate and has seen plenty of ups and downs throughout his career. The broker/owner of RE/MAX of Barrington in Barrington, Illinois, takes his experience and marries it with a hunger to read whatever market reports cross his desk. This keeps him up to date as far as what’s happening on a macro level and allows him to contextualize it through the market conditions his business has experienced over the past several years.
Wells is candid about pretty much anything you ask him, which is why we wanted to get his thoughts on the current market and how it compares to national trends, the very real challenges facing real estate and his outlook on the future of the industry.
Caysey Welton: Let’s talk about your market. How has it been performing, and is the spring shaping up like you expected?
Paul Wells: Based on what I know from 35 years of experience, I would say that I was absolutely wrong in what I expected, and I almost had to walk backwards. When this pandemic hit, my initial thought was that the real estate market was just going to fall off the face of the Earth. I figured people were going to be more focused on their lives and getting things together. And while they were focused on their lives, we were a part of it, and that’s something I didn’t expect. I didn’t expect people to hunker down at home, nor did I expect to see offices moving into the home. I also didn’t expect to see families regathering in one household and multi-generations moving in together. It was kind of shocking, and I certainly didn’t expect there to be a lack of inventory virtually overnight.
Our market is reflecting most of the major markets throughout the United States in that we’re very short on inventory. Even with interest rates doubling, inventory hasn’t been affected. It’s still super low, and while there are hints that things may be softening a bit, every time I say that, I see one of our listings get 12 – 15 offers. So, what I expect to happen and what actually does happen are two different things. And if we look at the market, there are no indicators that this is going to slow down much. It’s all driven by inventory. If you look at any business in the world, prices are driven by supply and demand. What we’re seeing in real estate is an incredibly low supply and an incredibly high demand—and it’s not waning.
CW: So it sounds like your market is strong like so many others.
PW: It’s very strong.
CW: Which segments of your market are thriving?
PW: It seems to be thriving everywhere, with the higher stuff just as hot as the lower stuff. They’re all on an upward swing that doesn’t seem to be slowing down. I think buyers are a little more apprehensive now because they think they’re buying into the top of the market. Dare I say that I don’t think it’s the top; we’re still going up. We’re sitting in a position where if we look at the real numbers, we’ll probably see half of the appreciation we saw last year.
That being said, there will probably still be a reduction in sales due to lack of inventory. If you would have told me 10 years ago that we were going to begin seeing a 5% – 6% appreciation level, I’d be dancing in the streets. Now I’m kind of expecting that; that’s the norm.
CW: There’s a lot of macroeconomic uncertainty, from gas prices to interest rates to inflation to what’s happening in Ukraine. What, if anything, is concerning you?
PW: My big concern is new construction. For 10 years we’ve been shorting new construction because things were relatively new and flat. But when the pandemic hit, everything was selling, including new construction. The prices have gone up due to the cost of building supplies and labor going up, and there’s nothing you can really do about that. I’m concerned that the builder’s market is beginning to slow, but there’s still a demand. They’re going to cut back, and there’s going to be fewer houses on the market. That takes some time to have an effect, but six months to a year from now, there’s going to be less new construction, which is going to add to the appreciation of homes.
“The big difference back in 2008 is that lenders ran out of people to lend money to, so they made them up. Something was wrong, and we pretended like it wasn’t. That’s not this situation.”
- Paul Wells, Broker/Owner, RE/MAX of Barrington
CW: This is out of your hands as a broker/owner…
PW: All of it!
CW: So what can you do to mitigate some of your concerns?
PW: I think part of it is telling your agents what you believe to be the future. For instance, one of my clients is currently looking for a house in the lower price range, and it’s very hard to find. She’s nervous that she’s going to be paying top dollar, and I said, ‘You are. You’re paying top dollar in today’s market, but in tomorrow’s market, top dollar is going to be even higher.’ The lower end has no place to go but up.
CW: Are you confident that the market will self-correct and not collapse?
PW: Yes. The big difference back in 2008 is that lenders ran out of people to lend money to, so they made them up. Something was wrong, and we pretended like it wasn’t. That’s not this situation. Back then, you had lenders lending to anybody, and that was based on whatever people said. Now, you actually have to have a job. They actually want you to have income to borrow money, and they want you to have a good credit rating.
I’m a lot more confident now. I don’t think we’re going to see anything like that last dump. That wasn’t caused by single-family homeowners. It was caused by investors and multiple people buying homes who shouldn’t have been buying them. They all got in trouble at the same time, and they brought everything down in a quick swell. That’s not going to happen this time.
CW: What are some of the internal challenges brokers like yourself face in terms of doing your jobs better?
PW: There’s a guy out there who changed my whole life, and his name is Howard Brinton. He said, ‘If you can’t track it, don’t do it.’ If you want your money to work, you have to know exactly how and why it’s working. There’s not a great CRM out there. There’s not a great transaction manager. It’s amazing that our industry can’t come up with those solutions, but I see so many people and companies stumble on this, and it’s a priceless component to the next step in real estate. But no one’s got it that I see yet. No one’s figured it out.
CW: Until that happens, what can brokers and agents do to make sure their efforts aren’t in vain?
PW: We don’t realize it, but it’s been in our hands forever, and it comes down to keeping in touch. That’s all. Make the phone calls, send them a text, stop by and do something crazy like say ‘hello.’ It sounds so dumb, but it’s not just the backbone of our business…but every business. We think we can somehow automate that so we don’t have to do it anymore, but the successful agents are the ones who make that a priority everyday. And the successful businesses outside of real estate say the same thing.