Hidden Costs of Rising Interest Rates
It’s hard to find any media source today that isn’t talking about rising interest rates. It’s almost as if this is a brand new phenomenon that has never occurred before. Granted, it’s been a while since we’ve experienced rate hikes like this, but obviously, this is not the first time in history.
Rate hikes and the combination of rising inflation are causing expected challenges for both home builders and resale markets. While many of these challenges are obvious, new home builders should be wary of the not-so-obvious obstacles they now face.
Supply and demand factors over the past 24 months have led to booming market conditions marked by rapid price increases, low inventory, and long lists of people waiting to purchase a newly built home. But in today’s circumstances, those long lists may be cause for concern.
To understand this concern we should consider why an interest list is important in the first place and then take into consideration how rising rates and inflation are likely weakening our pipeline.
The Questionable Quality of Interest Lists Today
When it comes to the sheer numbers of prospects on interest lists, chances are that builders are feeling pretty darn good. Herein may be the largest cause for concern for residential real estate sales professionals. The question we must ask ourselves is how many people on our list are still real buyers?
The affordability factor is once again in play. It’s safe to say that current economic conditions have likely swallowed up a good portion of those lists. Many prospects are uneasy and less willing to move forward as they read the news and hear the negative reports. Others are simply priced out of the market based on their inability to qualify.
Inflation and interest rates are out of our control. But the frequency and quality of conversations we are having with our prospects are very much in our control. We must ensure we are being proactive and helping our buyers when they need us the most.
Of course, this means that sales professionals must be prepared to carry on these conversations. Trouble is that with a hot market many of these sales conversation skills have gone dormant. When we get into an order-taking mode we often possess a different mindset about selling in general.
Lower These Hidden Costs While You Can
The good news is that there’s a rather simple solution. It will require some effort from you and your team but it is totally worth it in the long run. Start by doing some analysis on your lists. Do you have multiple prospects on multiple lists in your own organization? When is the last time you’ve made contact with these people to gauge where they are at today? Are they still buyers or should they be removed from the interest list altogether?
It is quite impossible to effectively manage our business without access to accurate information. It’s time to get realistic about an important factor: knowing where our next sales are coming from.
