Martin Luther King Day 2021

Today is Martin Luther King Jr. day 2021, which is a federal holiday. Banks and the post office and government offices will be closed but with so many people working from home these days, it may be hard to tell.   Public schools are closed today too. Look or virtual events and celebrations because yes there is still a raging pandemic and for most of us no hope of being vaccinated any time soon.

I have a dream that one day this nation will rise up and live out the true meaning of its creed: “We hold these truths to be self-evident, that all men are created equal.”

– Martin Luther King, Jr 1963

Minnesota and the Twin Cities are home to some of the worst racial disparities in the country. In metrics across the board—household income, unemployment rates, poverty rates, and educational attainment—the wealth gap between white people and people of color is significantly larger in Minnesota than it is most everywhere else. There is also a large gap in homeownership between people who are white and people of color.

Homeowners have a significantly higher net worth than renters have which is one of the reasons for the large wealth gap. Our neighborhoods in St. Paul and in most cities are still segregated.

The Twin Cities is also where George Floyd, an unarmed black man, was killed by police last May setting off protests around the country. It is clear that we have a lot of work to do. It doesn’t feel like we are making progress when it comes to equality and liberty for all.

Dr. Martin Luther King Speaking at the University of Minnesota
Dr. Martin Luther King Speaking at the University of Minnesota –

Photograph from the Minnesota Historical Society collection

Lowest mortgage interest rates

Mortgage interest rates are oh so low. Some homeowners have managed to refinance. Refinancing can mean lower monthly payments. For those who are facing unemployment now may be the best time to refinance.

Lower interest rates will provide a little relief for homebuyers who will be experiencing high prices and a strong seller’s market in 2021.

The rates in the chart are averages from FreddieMac and are available to people who have great credit scores and incomes that afford mortgage payments.

chart with mortgage rates
FreddieMac average mortgage rates for the week ending 1/7/2021

At one point I said that mortgage interest rates would not go below 3%. I am very happy to be wrong about this.

More Realtors in Minnesota

Minnesota Realtors® has seen a 30% year-over-year increase in new members since June 2020, with 73% concentrated in the Twin Cities Metro area. I know I wrote about this a week ago and cited a much smaller number which I will correct once I figure out how I got it wrong.

Many were attracted to real estate sales because of the busy housing market  (14%). For others, it was a layoff that was the reason for the leap into real estate (9%). 61% of the people who joined us had wanted to work in real estate sales and finally moved to it.

As I said last week 51% of the new members are over 50 which is typical. Full time 100% commissioned sales jobs do not attract all that many younger people. There is no health insurance except for what we buy for ourselves.

Most local REALTORS are 1099 independent contractors. I have been self-employed for almost 20 years. It isn’t an easy life but it can be very rewarding.

Real estate agents get better with experience. As they start out they don’t know what it is they don’t know but there is always business for new agents and they gain experience as they work with friends and family. Most new agents get paid as much as experienced agents.

During periods of higher unemployment, we often see an increase in the number of REALTORS. During the housing crash, we saw a decrease and the average age of members went down a bit as members retired.

There will likely be some retirements at the end of the year too. Retirements will show up when members do not renew their membership for 2021.

Looking forward into 2021

It is hard to get through a day without joining a virtual class, presentation, or meeting. Yesterday I sat in on a presentation from Lawrence Yun who is the chief economist for the National Association of Realtors.

Mr. Yun is almost always bullish on real estate. With that in mind here is a screenshot of one of the slides in his presentation.  Mortgage applications are up and interest rates are down. There is absolutely no doubt that there are a lot of people who want to buy a house and who are planning to do so in the coming months.

Rising real estate values mean that homeowners have more equity. I think we will see that “K” shaped economic recovery. Yun also notes that in states like Minnesota where there were was more of a shut down because of the pandemic unemployment rates are higher than they are in states that did not close as many businesses for as long. Yet the current unemployment rate in Minnesota is 4.6% and the national unemployment rate is 6.9%. (which sounds much better than 7%)

The numbers on the slide are from October and November. December is already shaping up to be a strong month for home sales. In a typical year, home sales are lower in the winter than in the spring. So far nothing about 2020 had been typical.

forecast for 2021 real estate
Early signs that 2021 is going to be a great year for home sales

Minnesota Realtors membership increases

In the last several months Minnesota Realtor membership has gone up. Over half of the new REALTORS are over 50. Some were laid off this year and decided to give real estate sales a try.

Usually, when unemployment goes up we do see an increase in the number of people who get real estate licenses.

Most real estate agents are independent contractors who work on a 100% commission basis.

All Minnesota real estate agents have to work under a broker. Real estate companies have brokers and most are always looking for more agents because agents sell real estate and generate revenue for the company.

Membership in the Minnesota Realtors® association has gone up 3.38% in the last year. There are 21,479 Realtors® in Minnesota.

There are more than enough real estate agents but there is always room for more.

There will be retirements this year too and people who quit. We normally see that at the end of the year when REALTORS pay their dues for the next year.

It will be interesting to see if there are more agents or fewer agents at the beginning of next year. I’ll go out on a limb and predict there will be more agents because there will probably be fewer jobs in other industries due to the pandemic.

New agents often start out at larger companies and then as they gain experience some move to smaller companies or they start their own company like I did.

New real estate agents usually charge the same amount as experienced agents charge.

Experience does matter, that is really all an agent has to sell. People without experience. They can ask for help but often they don’t know what they don’t know.

The best way to get experience is to work with another agent or on a team. When I started I was motivated to learn quickly and worked with an experienced agent as an assistant.

The hardest part of the job for a new agent is finding clients. Finding clients is a big part of the job for experienced agents too.

Also, see:

Getting a Minnesota Real Estate Sales License

What is a real estate broker?

How Many Realtors are there in Minnesota?

REALTORS are often older women

REALTOR isn’t a job title

What is in store for 2020?

I wrote this last December and never published I but saved it as a draft. The headline is what I originally wrote. Most of my predictions for 2020 were correct. I just missed the pandemic which changed just about everything except for the demand for housing.

Also, I didn’t expect interest rates to get below 3%, not this year or ever. Right now they are below 3%.

Here were my predictions:

2019 is almost over and as predicted the housing market was pretty much the same as it was in 2018 except we thought interest rates would go up, not down. 2020 is likely to be similar to 2019.

Home values will continue to rise but more slowly. The shortage of homes for sale will continue. During the last two years, we have set records for having the fewest houses on the market. In 2020 we may break those records.

People still ask why there are fewer houses on the market. There are two reasons. The first is that the demand for houses is high, and the second is because there is a lot of homes owned by older generations. Older people are less likely to move than younger people are.

Christmas decorations

We did hit an all-time low in St. Paul for the number of homes on the market in August of 2018. We hit a new all-time low for the Twin Cities region in November 2020 and we could break that record this month. I right about breaking the all-time low record in 2020.

My predictions for 2021 are going to be similar except I think we will see a surge (I hate that word) of activity in the second half of the year. During the first half of the year, those who survive the holidays may stay home until they can be vaccinated.

If congress doesn’t free up some relief money just ignore everything I wrote because we may end up in an economic depression.