By Alicia Biggs
(Created: Tuesday, January 15, 2008 10:31 AM EST)
From 2000 to 2005, the number of licensed real estate agents in the U.S. climbed from 700,000 to 1.3 million.
"There was a statistic recently from the National Association of Realtors that said by 2009, that number is expected to dwindle to the 900,000s," noted Sherry Wilson, owner of Sherry Wilson & Company, a part of RE/MAX, during a recent interview. Wilson's business serves Loudoun County and the surrounding 50 miles.
Most of the agents who entered the industry during the real estate boom over the past couple of years have not experienced a cyclical slowdown in the market and certainly not the challenging economic conditions resulting from the subprime lending collapse and the nationwide credit crunch.
"If you did not see this coming, or were not prepared for it, it will be very difficult to sustain a decent profit margin. I think that the agents that persevere in this market will come out on the other side, stronger than ever," says Wilson, a survivor of Northern Virginia's last major real estate recession in the early 1990s.
In Virginia, there are currently 45,000 active real estate agents. "That equates to only about one and a quarter sales per agent," Wilson said. "Year to date there were more than 56,000 units sold."
Wilson's 11-agent office sells about 20 per month, she said.
Different Credit Climate
The credit crunch is a new challenge for real estate agents. In the 1970s and 80s, buyers faced high interest rates. In the early 1990s, the real estate market was hard hit by a national recession. The recent boom was fueled by equity growth resulting from fast-climbing property values. Less stringent loan qualifications standards and the growth of loans without down payments or principal payment requirements were common-conditions that both permitted families to overextend their budgets and promoted real estate as a short-term investment option.
Matthew Custer, Listing/Buyer Specialist for RE/MAX, said the climate has started to swing back to what it was in decades past, as confidence has been stripped away.
"Now you have to have wonderful credit," Custer said. "The lenders are being careful, which is a big difference from past business cycles. The mortgage industry has provided different equity options. Interest rates need to be stable. With the stock market jumping up and down, it scares some people."
With decreasing equity, buyers find it more difficult to "buy up" into their next home. "People cannot make the move up, into the $500,000 plus price range [which represents a large part of the inventory]. We need to work through that inventory before we can stabilize and grow again. As long as inventory remains proportionately high, prices will continue to decline," Custer said.
Coming Out Stronger
Although rumors have circulated that Wilson may leave the area and move with her new husband to Florida, Wilson said that couldn't be further from the truth. She does admit having less involvement in the hands-on real estate part of her business these days, and assuming a more big-picture management role. She also travels around the country to give speeches on how to build a real estate business that carries the cohesiveness that Sherry Wilson & Co. offers its employees.
"I can't imagine giving up a business that is flourishing," Wilson said. "I've made my team my family. [competing] agents would love to see it happen, but too bad, it's not happening."
Wilson predicts that her company will be stronger and more cohesive because of the changes taking place in the market.
"The creative and unique ideas that have come from my team because of the changing market have been very effective. By pulling together and evolving with the market, they have managed to keep this business alive, and I have no doubt that the momentum generated will propel them forward to achieve their team and personal growth goals in the future."
The market has returned to "a professional's market," Wilson said.
"The Realtors who were simply hobbyists, or doing this part time for friends and family are getting out of the business. This is not a bad thing as buyers and sellers now have a more professional base to select a Realtor from."
In the spring and summer of 2007, Wilson and her team started to see some stability in the number of sales and amount of inventory.
"Even though inventory was very high, it stayed around 3,700 active homes on the market for five months," Wilson said. "We did not see the huge increases each month that we saw in 2006."
Home sales in Loudoun also remained consistent for six months of the year, hovering in the $400,000s, she added.
"We've seen a big drop countywide, the past two months, only 304 homes sold in October, and expect it will stay that way through the winter. If no additional homes were to go on the market in Loudoun, we currently have one year of inventory on the market. We need to work through that inventory before we can stabilize and begin to grow again. As long as inventory remains proportionately high to the number of sales, prices will continue to decline."
Population growth, which equates to housing needs, has been the single largest change in Loudoun County in the past decade.
"People and families flocked to Loudoun County," Wilson said. "Loudoun County experienced significant growth in a very short period of time. Developers and builders scrambled to take advantage of the opportunity to meet the growth needs."
Median home prices jumped from $273,000 in January of 2003 to a peak of $509,950 in December of 2005. Equity increases fueled continued upward moves by the homeowners.
However, the summer of 2005 began the market correction. Available active sales on the Multiple Listing Service went above 2,000 units and continued to increase until a peak of more than 4,900 in June 2006. Median prices have been falling since and are now back in the range of 2004 median prices.
"To sum up the residential market in the past five years: tremendous growth with a sharp peak and a major market correction," Wilson said. "2005 to 2006 would be a wake up call for sellers, and a huge adjustment period of paradigm shift."
Sellers had to understand that they could no longer get the price they expected in previous years, Wilson said. Sellers had to become realistic with respect to pricing their homes. The day of escalation clauses and competing contracts was about to end.
"This was a significant change in the residential market in a relatively short period of time," Wilson said.
Culture: What Makes Loudoun Different
"Loudoun is a very transient area with Dulles Airport at its heart," Wilson said.
"Loudoun's growth has been quick compared to other areas in Northern Virginia, due to the influx of technology-related companies. As these companies succeed, thousands may transplant here from other states creating a tidal wave of buyers."
As companies move or go out of business, the opposite happens in that an exodus brings a flood of listings on to the market in a short period of time.
"This volatile trend has aided in the sharp growth spike that shot housing prices up to a record high," Wilson said.
"I would expect to see the Loudoun County housing market level off, and continue to grow at a more steady pace over the next 20 years," Wilson said. "Markets that experience this kind of sharp growth traditionally have problems in the long run. Markets that experience slow steady growth can sustain, even when other neighboring markets are suffering."
Loudoun County will continue to grow if it continues to be a desirable place to live, Wilson said.
"It is important for our leaders to guide the county in the right direction to maintain the qualities of Loudoun that have attracted people to this county.
Responsible solutions to transportation, planning and housing will allow for our county to remain a fantastic place to live. The real estate market will depend on and react to the direction of our growth and the quality of life Loudoun offers."
Today, Wilson operates one of the county's largest and most visible real estate businesses. Sherry Wilson & Co has changed significantly from when Wilson first began selling 24 years ago as an independent agent and won rookie of the year. Her staff describes her as focused on her clients, responsiveness and keen at negotiation.
Her business has received top awards for RE/MAX for the region (DC, VA, WV, and MD) for the past nine years. Internationally, Wilson has been recognized by REMAX for the past eight years for top rankings among 140,000 organizations.
Wilson grew the team 10 years ago to provide her clients even better service with the systems that she developed herself.
"By training, continuously learning, and keeping great talented team members, the business has flourished," Wilson said.
Wilson moved to Loudoun County for the quality of life in 1977. After working as an elementary school teacher in DC public schools and then at Simpson Middle School in Leesburg, she decided to try real estate.
"I fell in love with Loudoun," she recalled. "In 1984, I got my real estate license. It just was magic for me. It was never a job for me. I couldn't wait to get out of school and help people with real estate. There are a lot of Realtors out there but I could see how to negotiate. When people talked to me about what they wanted I could find it for them."
In 2000, she opened her own RE/MAX office in Purcellville and is the broker owner as well as team leader for the Sherry Wilson Team.
She is most proud of the growth of her team.
"They never fail to pull together for the good of our clients in providing the best information and services possible to assist them in reaching their goals," Wilson said. "We take great pride in the positive impact we have in the lives of our clients."
One secret to success: she allows her staff to own aspects of the business as if it were their own.
"If I try to do everything myself, my service becomes diluted and has less impact," she said. "If I hire talented specialists and empower them with the ability to do their very best, I provide a higher level of service to all my clients."
Wilson said less business always means less profits, so her business has felt the effects of the slowing market. However, she has not reduced quality or quantity in her staff, her marketing or advertising.
"I haven't stopped speaking at conventions," she said. "Even though it costs money to be world known. I haven't stopped anything or reduced even though there are less profits."
Sherry Wilson & Co. RE/MAX Leaders | 1021 E. Main Street. Purcellville, VA 20132