– December 2022 Update
You may be wondering given the news, whether now is still a good time to become a licensed real estate agent in Idaho?
In this article we’ll review the economic factors that go into this, but also provide some questions to answer regarding your individual situation. The market could be going strong, but that doesn’t necessarily mean that it’s a good fit for you.
Whether it’s a Buyer’s Market or a Seller’s Market, the good news is that as long as houses are changing hands, there’s an opportunity to help and earn.
Let’s dive into whether now is a good time to get your Idaho Real Estate License.
Some people go into real estate well equipped for success while others struggle much more to keep their heads above water. What’s the difference?
There are broadly two main factors at play here (at an individual level):
1) Who you know (including how well you know them and how many people they know)
2) What you bring to the table in terms of personality, character, values, communication skills and so much more
It goes without saying, but people who have been deeply connected to their community for many years have an upper hand for instant referrals and business among locals.
If you don’t have any connections or are new to an area, don’t fret. Your superpower is going to be focusing on out-of-area buyers with whom you can better empathize.
Whether you have a broad network or not, either way the makeup of new buyers is going to matter to you.
Question for Reflection
+ Are you a member of any groups, attend church or belong to any associations?
+ Create a list of names of people in the area who you know well enough to invite out for coffee. This is your initial sphere of influence. These are the people who will (hopefully) become your fans, let others know that you’re a licensed Idaho real estate agent if it comes up in conversation and help you build your network.
What are your personal strengths? A real estate agent is a salesperson. Their job is to help facilitate a transaction. Yes, there’s a certain amount of technical knowledge, but the majority of the job is people and project management skills. If you’re the kind of person that people find likable, that gets invited to parties and events (or hosts them) then you’re at a natural advantage.
Let’s not forget two other very important factors here: drive and grit.
Do you really want to be successful?
Are you committed to putting in the hours and making things happen?
When things aren’t going well, are you going to give up?
You might have one, two, even three or more slow years where you have to struggle to get by before you start to make a significant income.
Questions for Reflection
+ Why do you want to be a real estate agent?
+ Do you enjoy meeting and connecting with new people?
+ Do you have habits that set you up for success
(like being on time, following up, being organized and reliable etc)?
+ Do you have habits that are holding you back?
Notice how we haven’t started talking about market timing yet?
All the content so far isn’t addressing timing in as much as fit. The reason being, if you’re a great fit for real estate and you’re committed to making it work and have the drive, the timing becomes less important in the long run.
Okay, we’ve taken a look inside ourselves to determine how badly we want it and how well equipped we are to hit the ground running, now let’s dive into the other side of the equation: market conditions.
Real estate agents make money every time a house changes hands, therefore understanding the factors that impact house sales is fundamental to your success. Here is a short-list of 6 key factors:
Replace Idaho with the market that you’ll be servicing. It should be big enough to support you, but not so large that you couldn’t answer questions about market trends, new development, code changes and so on. In some parts of Idaho, that might mean you focus on an entire county and in other areas like Boise, maybe you only do one or two zip codes.
Let’s dig into what each one means and why you should care about it.
This is a measure of how many homes get sold in a period of time (often broken out by month, quarter or year). The more homes that get sold, the more opportunities for one of them to be a house that you handled.
According to Windermere Real Estate’s Idaho Real Estate Market Trends Q3 2022 report, home sales across the state are declining compared to prior year between 15% to 49%. As the old real estate adage goes, it’s all about “location, location, location.”
As of Q3 2022, there are fewer homes selling which creates more competition for each house that gets sold (assuming the same number of agents).
Home prices rose the most in Bonner County in Idaho in Q3 2022 and declined the most in Blaine County. If homes sell for more year-over-year, then the transaction value increases as do commissions. So, while you may be selling fewer homes you can offset some of the decline with higher prices.
The average home price was $625,275 across the State according to the abovementioned Idaho Real Estate Market Update from Windermere Real Estate. Let’s walk through some math to see what commission selling one such house might be worth to you.
Sales Price = $625,275
Commission = 6%
Commission Split between Buyer’s Agent & Seller’s Agent = 50/50
Commission Split between Agent & Broker = 80/20
Let’s assume you found a buyer for another agent’s listing.
A Hypothetical Commission might look like
$625,275 x 6% x 50% x 80% = $15,006.84
While the sales price, commission rate and split will change by region and brokerage, this shows that you’d need to sell 7 houses in a year to make more than $100,000 before tax.
More expensive houses mean higher commissions all else being equal. As you can see from the above, whether prices are raising or declining will depend on your county and market specifics.
This is a measure of how many days on average it takes a home to sell broken out by region. This is a useful measure to set expectations for an “average” home. In reality, each property is unique and may well take longer or shorter depending on your area and circumstance. Looking across the Idaho counties, we can see that in Q3 2022 in general a home takes about twice as long to sell in the North as it does in the South.
Another way of thinking about this metric is, “how long will it take me to get paid?” on average. This measure is also a barometer of how “hot” the market is.
Unless you specialize in cash buyers, the people buying homes will need to get financing and to get financing they will need a job. Idaho’s unemployment rate was at 3% in November 2022. The COVID peak unemployment was 11.8%, but it didn’t last long. Idaho’s unemployment rate broadly mirrors that of the US, which was at 3.7% for the same period.
A low unemployment rate means more people with jobs, which is a positive thing for home prices and the economy.
Much of the news has been around the Federal Reserve raising interest rates. While mortgage interest rates are more closely tied to bond prices (more on that here if you’re interested), we can see clearly from the below graph that rates have risen significantly since Summer 2021.
As you would imagine, a higher interest rate equates to higher monthly mortgage payments which either prices more people out of the market or discourages them from buying.
Housing Prices typically have an inverse relationship with mortgage rates, meaning that as mortgage rates go up, housing prices come down. The wildcard here is supply and demand. If there’s greater demand than supply then this need not be the case.
According to real estate company Redfin, in November 2022 there were 6,779 homes for sale in Idaho, up 6.7% year over year. That equates to an average 4 months of supply, up 2 months year-over-year. From this we can observe that inventory is rising to 2018 levels.
Lower inventory isn’t necessarily a good thing. It also means there’s fewer homes for sales, which means fewer opportunities for real estate agents.
Answering the question, “is now a good time to get an Idaho real estate license?” we’ve seen there are really two parts that go into it. One is what you bring to the table and the other is market conditions.
From a market condition perspective when you combine the 6 factors we reviewed, it looks like we’re entering a period of things slowing down. That means chances are higher you will have to work harder to earn a commission. Housing prices are still significantly higher than pre-COVID though, so each sale is worth more.
If you’re looking for an easy gig, this probably isn’t the right profession for you. However, if you’re committed for the long-haul (remember that real estate is cyclical), real estate can be a great profession.