In 2020, we saw wild changes in the costs of real estate ads on Facebook. As the pandemic dramatically changed the daily routines of people worldwide, ad costs plummeted. So now that life is slowly returning to normal in 2021, should we expect Facebook ad costs to jump back up?
Fortunately, we at Home ASAP are in a position to find out. Over the last several months, our TurnKey Suite account managers have run tens of thousands of Facebook ad campaigns on behalf of agents from every corner of the US. Looking at the real estate ad costs data, we’ve seen some intriguing changes over the first half of 2021.
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A Steady Recovery In Real Estate Ad Costs
First of all, real estate ads on Facebook do not exist in a vacuum. They compete for ad space with various other businesses that may want to reach those same customers. Since business has steadily returned to normal in most sectors of the economy, so has the competition.
This recovery has resulted in a steady increase in cost across all ad types, but some ad types have risen in price more quickly than others. Take the graph below for example. If you compare the trendline for traditional lead ads versus dynamic lead ads, you can see that traditional lead costs have slowly increased over several to reach pre-pandemic levels. Meanwhile, dynamic ads have seen a more gradual increase and are still trending below their pre-pandemic costs.
This trend means that individuals and companies that can offer these types of solutions will likely be able to get more leads with the same budget. You may also notice that the rise in real estate ad costs has spiked at different points in the year. This is especially true in other ad types.
Unusual Spikes In Real Estate Ad Costs
If you look at the graph of the cost per results below, the red line clearly stands out. This line shows ads designed to get people to like a page, and you can see two huge spikes in costs.
The first spike occurred in September 2020 just before the U.S. presidential elections. Around this time, several new pages were coming online to support different political positions, and Page Like ads would allow those pages to ramp up very quickly. Unfortunately, this drove up the cost of Page Like ads for everyone else, too.
The Effects of Federal Stimulus
Just before the election, the cost of Page Like ads normalized once again but shot back up in March and April 2021. So what happened here? We can only speculate, but this rise coincided with the passage of the third federal stimulus.
As many news outlets have reported, the unexpected cash infusion fueled a boom in entrepreneurship, and what do new businesses need to engage their customers? A Facebook Page. And what do new Facebook Pages need? Page likes. And what’s the fastest way to reach new potential followers? Page Like Ads.
The Effect of the Historic Sellers Market On Ad Costs
The past year has not only been unusual due to the election and stimulus. The shortage in housing inventory has also affected the cost of certain types of Facebook ads.
In general, seller lead ads tend to cost more than buyer lead ads. This disparity happens because the pool of potential sellers is smaller than the pool of potential buyers. Plus, it’s simply tougher to convince someone to sell a beloved family home than it is to buy a dream home.
The seller lead ads run by TurnKey Suite easily outperformed the industry average of $16.92 per action, but they still cost around 4 times as much as other lead generation ads. During 2021, this cost has continued to climb…just like the median home price.
The Return of Seasonality
The sellers’ market and federal stimulus may explain the rise in the cost of some Facebook ad types, but they don’t explain the cost jumps in every ad type. Fortunately, there is another simple explanation: seasonality. Experienced agents know that real estate is a seasonal business, and seasonality also impacts the cost of ads.
You can see this clearly in the graph below. It shows how much money it costs on average for 1,000 people to view a real estate ad of any type on Facebook. First, you see a jump around the Christmas holiday when retail advertisers are pouring money into the ad market. Unsurprisingly, we see this jump every year in all ad types.
The second big jump happened in May when the home selling season typically kicks into high gear. When the summer winds down, we typically see a decline in ad costs. This pattern is seen both at the beginning and the end of the graph, and, all in all, this is a great sign that life is returning to normal post-pandemic.
How Should Real Estate Agents Adjust to Current Conditions?
As we’ve seen, a mix of seasonality and current events greatly affects how far your dollar goes with Facebook ads, so what’s the smart play for real estate agents for the rest of 2021? First, agents need to create “a baseline ad budget.” Like other investments, advertising works best over time, and so it makes sense to always have at least a minimal amount devoted to ads at any given time to maintain your market presence.
Maintain a Baseline Ad Budget
A baseline budget keeps you open to opportunities that randomly arise throughout the year due to relocations, divorces, and so on. More importantly, your baseline ad budget will allow you to ramp up more quickly than your competitors during peak seasons.
Facebook ads use complex formulas to deliver the right ad to the right person at the right time. Having constant campaigns running makes sure Facebook has the performance info it needs to optimize your ad effectively at any given time. This strategy gives you an extra advantage over competitors who are starting and stopping campaigns throughout the year, which can be impacted by delays in Facebook’s ad review process (including possible rejection!) and the learning period as the ad ramps up.
Take Advantage of Late Selling Season Opportunities
Many agents concentrated their ad spending in late spring and early summer, but ad costs should continue to fall during the remainder of the year. Combined with many news outlets reporting that home prices have likely peaked, this situation creates a unique opportunity for smart agents to coax potential sellers to list their homes.
Ads showing that sellers have a limited time to cash in on record home prices will likely perform well in the coming months. Not only that, agents will be able to get more mileage out of that ad spend due to falling ad costs at this point in the advertising cycle.
Real Estate Advertising Trends to Watch
Unlike the latter half of 2020, we no longer face the hurdles of a contentious election or widespread Covid-19 lockdowns. So what factors should we be monitoring?
First, we will need to keep a close eye on the rapidly emerging Delta variant of Covid-19. If conditions worsen and lockdowns return, we may see another drop in ad costs and other business activities. On a related note, we will be watching whether a fourth federal stimulus package passes. As we’ve seen this year, that event will greatly affect the ad types agents should run.
Finally, we will also be monitoring the housing market closely. If the sellers’ market has peaked as predicted, then that will require a different strategy going into 2022. Fortunately, you don’t have to figure it out alone. Our TurnKey Suite advertising experts stand ready to help real estate professionals grow their business in any market condition.