Franchise businesses across all sectors were predicted to expand at a rate of 4.9% and reach $826.6 billion in 2022, according to the International Franchise Association (IFA). This growth rate exceeds pre-pandemic sales levels.
In the same IFA report, FRANdata estimates that total output across all franchise business lines grew 16.3% to $787.7B in 2021. FRANdata provides unbiased franchise information, research and analysis.
Overall, franchise establishments in the Real Estate sector are expected to grow at a rate of 2% in 2022 to approx 69,300 units. And franchise output is anticipated to grow by 2.2% in 2022 to $61.5 billion.
But Then Came the Fed Rate Hike this Summer…
To ‘curb’ inflation, the historically-high Fed rate hike has thrown a monkey wrench into the housing market predictions from a year ago.
Mortgage rates, following the Fed hike, are escalating weekly. In fact, as of September 22, 2022, a Forbes article reports that the national mortgage rates sit at a 52 week high… with the average rate on a 30-year fixed mortgage at 6.53% – up 0.29% from just last week!
Even values are starting to fall now, and builders are slowing down and making deals to entice home buyers. Some are even offering ‘mortgage buy-downs.’ Desperate times call for desperate measures.
In a September 22 updated article in MarketWatch, we read that The National Association of Home Builders (NAHB) monthly confidence index fell for the ninth straight month, down to 46. This represents the lowest since May, 2014. Just a year ago, the index stood at 76.
But wait, there’s more…
An article in Fortune sheds more light on the second stage of the housing market downturn. Rick Palacios Jr, head of research of John Burns Real Estate Consulting, tells Fortune that they’re forecasting home prices will fall by double-digits.
Moody’s Analytics thinks the price drop could range from 5% to 10%. But, if a recession manifests, Moody’s predicts those price drops would double.
But even if that should happen, it would still be below the U.S. home price decline of 27% that we saw between 2006 and 2012.
Some firms don’t think the home price correction will carry over into 2023, including Zillow, the Seattle-based home listing site. They say that 62% of housing markets should see falling home values in Q3, but predict only 28.5% of markets are headed for year-over-year declines (Aug ‘22 - Aug ‘23).
The housing downturn will soon spread beyond housing…
Year-over-year, the ongoing housing downturn has seen new home sales and existing home sales fall by 29.6% and 20.2%, respectively. Real estate firms like Realtor.com, Redfin, and Compass have already started layoffs.
As mentioned, homebuilders are calling off projects and making deals, while some mortgage lenders are teetering on bankruptcy.
The Fortune article wrote that Goldman Sachs recently released a paper, forecasting further drops in U.S. housing GDP through 2023… leading up to the Great Recession.
If Goldman Sachs is correct about a recession (as others are warning), we’ll soon see the broader economy hit hard, which we’re already feeling in our pocket books every time we fill up our gas tanks, pay electric bills, or buy food.
All of these economic pressures are by design, of course, as the Feds intend to ‘S.L.O.W.’ the economy, by making everything too expensive to buy.
So, as home shoppers pause their home searches, and as home builders pull back, there’s a decreased demand for lumber, windows, paint, refrigerators, ranges or new furniture.
In theory, these economic contractions should help reign-in runaway inflation. That’s the Fed’s idea anyway.
“It (housing) is not the target, but it (housing) is essentially the target,’ Bill McBride, author of the economics blog, Calculated Risk, told Fortune earlier this summer.
Sellers are Taking a Pause…
Sellers are catching on to the reality that buyers are not going to pay top dollar at double mortgage rates. And those who can afford it, are just waiting out the downturn.
Why would sellers, with historically low mortgage rates of 5% (or some even below 3%) want to give that up and replace a new home at a much higher rate? They wouldn’t.
We’ve been talking about the dismal retail housing market, inflation and predictions of a recession – all of which is extremely worrisome for many of us – in both our personal and business lives.
Is there a silver lining behind any of these clouds? Actually, there is one business model that continues to remain in a profit mode… even during times such as these. And that’s what I want to focus on for the rest of this article.
There’s a slice of the Real Estate pie that is not subjected to the market gyrations of the overall real estate market. And that’s the place I want you, dear reader, to focus your attention on because it could mean the difference between your success or failure in these trying times – if you’re looking for a viable business.
Wholesale real estate investing continues to thrive in up or down markets.
If you’re not familiar with wholesale real estate, it is a very simple business model to understand. You don’t need a college degree to be successful.
What you do need is a whole lot of common sense, an unstoppable work ethic, and a deep desire to be financially free.
At KeyGlee, we have generated 8-figure-years since inception, by seeing an opportunity and creating a winning model to implement our strategies.
Collectively, our founders have over 50 years of experience (and counting).They figured out a way to bypass all the FixNFlipping, which is especially tough with today’s high costs, due to supply chain issues.
They also figured out how to eliminate a LOT of marketing costs and how to stop schlepping over to look at properties that are often downright nasty to go into. We now have our own acquisition and disposition teams in place. Really slick.
We have perfected our systems and processes to the tune of 8-figures a year in revenue, as mentioned. And in April 2020, we started franchising.
Today we’re in 45 markets across the country, with 100+ franchisees – and still expanding. In just a few years, since our CEO started out on his living room floor, KeyGlee has become a nationally recognized and respected name in the industry.
What is The Economic Outlook for Franchising?
As the IFA said above, the franchising industry was predicted to continue an upward trajectory this year. And, while a lot of franchise businesses will feel the pinch of the insane inflation we’re in… wholesale real estate is poised for growth.
Why is that, you may ask?
Because, as the downturn in the economy is hurting everyone – even franchising – a franchise owner in wholesale real estate is able to capitalize on these hard times because wholesaling is not as adversely affected as brick and mortar franchises, like McDonalds, etc.
Desperate times call for desperate measures. And, while no one would wish that anyone would fall on hard times… it’s just an unfortunate reality.
Sellers will always want to sell at top dollar, naturally. But imagine homeowners, who find themselves in a ‘need to sell’ situation – due to illness, job changes, or other economic pressures – they often can’t wait for market corrections.
That’s where we can help. And by helping, I mean REALLY helping our fellow human beings to get out of a difficult situation, with their dignity in tact… and a fair price for their property.
Because of our incredible relationships with the investor community, we have buyers we work with all the time. This allows us to quickly find buyers for the properties we have under contract.
As mentioned, we have our own acquisition (finds sellers) and disposition (finds buyers) teams at KeyGlee. Our franchise partners get to participate in this well-oiled machine of matching sellers with buyers – all over the country.
KeyGlee is in an expansion phase, and we’re looking for experienced real estate agents, wholesalers, FixNFlippers, or business-savvy people, who may be interested in adding a franchise to their portfolio.
For more information (and to secure the FDD), we have a quick, simple way for interested, qualified people to evaluate our franchise business model.
Just schedule a phone call to kick things off. You’ll get the facts, so you can properly evaluate us, while we evaluate you. Sound fair?
Franchising with the right company is vital. And in today’s economically-challenging times, it’s more important than ever to get it right.
To your success,
Team KeyGlee
PS. Just below the blog section, you can sign up to be notified every time there’s a new blog post… and never miss one again!