Know the Market, Prepare for Opportunity

With shock waves rattling through the real estate industry in the wake of legal settlements, it’s a good time to remember SHIFT Tactic #1: Get Real, Get Right. Gary and Jay write “The … issues you face in a shifting market are really an opportunity.” Rather than getting ahead of reality by worrying about things that have not happened yet, it’s best to focus on the things that we can control and look for opportunities that the shift will inevitably create.

Part of being able to spot the opportunity in the coming market means you need to understand the current market. At Keller Williams’ Family Reunion 2024, Gary Keller, along with Jay Papasan, Jason Abrams, and Ruben Gonzalez, gave his annual Vision Speech. The group went over last year’s home sales, market volume, inventory, mortgage rates, and other important indicators that drive the real estate industry, housing market, and overall US economy.

It was clear that agents from all over felt the hardships of last year. So, Gary and the team answered lingering questions about the past year and what the upcoming year could look like. These are some of our top takeaways.

Home Sales

In 2023, there were a recorded 4.1 million home sales, which is one of the lowest numbers in recent history. This number is the same as it was in 2008, when the Great Recession, an economic downturn that began in late 2007 and lasted until 2009, was beginning to take place. Economists are projecting 4.3 million home sales in 2024, about the same as the period immediately following the recession, from 2009-2011. But Gary wasn’t as optimistic for 2024. “You are in winter right now, and it’s going to stay winter for a while,” he said. There won’t necessarily be relief from fewer sales this year, but they won’t continue to fall.

This isn’t great news, but it’s not horrible news, either. Agents have been fighting, and they will continue to use the tools and skills they’ve built to continue thriving in their businesses and earning their market share. Will they have to capture more leads? Yes. Will they have to work their database harder and more consistently? Yes. But people are still buying and selling real estate and need agents to help guide them in the process. A true fiduciary will always have value to their customers, regardless of the market. By focusing on the specialized knowledge and value that you provide, you’ll find opportunity. 

Gary and company went on to say that the main thing holding the real estate industry back is inventory.

Inventory

Inventory defines the state of the market. It changes how real estate is sold, as well as how fast it will sell and for how much. On a national level, there is a shortage of available supply in single-family starter homes in the United States. According to the National Association of Homebuilders, in the decade following the Great Recession, construction rates on new homes dropped by nearly half. This drop in construction in the previous decade, combined with a lag in building affordable housing, means that today, in the 2020s, there is a much greater demand for housing than there is supply. As many as 1.5 million homes are “missing” from today’s inventory because they simply were not built.

The weird thing about there being low inventory right now is that there is also “low demand,” caused by people not wanting to move and lose low interest rates. This in turn causes housing appreciation to be stale as well. All combined, it’s a time where most people seem hesitant to sell their homes.

Appreciation

Home price growth was at a record high during the COVID-19 Pandemic. But last year appreciation dropped dramatically. But, like Gary says, what goes up, comes down—and what goes down, comes up—because the market continuously adjusts for affordability.

One of the misleading media arguments in the wake of the NAR Settlement is that by changing commission structure, the cost of purchasing a home will go down. This conjecture is illogical. The prices of homes are tied to inventory and demand more than they are to any real estate compensation structure – with record low inventory, there will still be more people who want to purchase a home than there are homes available for them. Prices will likely remain close to where they currently are because of this demand, among other factors that will not be affected by the settlement (like construction costs).

Mortgage Rates

Historically, home price appreciation approaches zero when the Fed raises mortgage rates or banking crisis occurs. This graph shows that history tends to repeat itself.

“The Fed has to worry about the entire economy, not just one market,” Ruben says. “But we are exceptionally sensitive to mortgage rates. We’ve seen inflation come down a lot, the Feds might reduce interest rates. Into 2025, mortgage rates could improve.”

While mortgage rates are still high from what we’ve been dealing with in the last decade, it’s always important to educate your clients on what’s best for them when it comes to making any kind of financial decision. If you want a deeper dive into mortgages and how the Fed rate affects 30-year mortgages, check out our article here.

Overall, the market could start to look better if the government makes that loosening mortgage rates. But with homeowners sitting on good mortgage rates and being fearful of poor appreciation, it may take a while for things to get moving. If you’d like another perspective on the market and a recap of the FR 24 Vision Speech, Ruben and Jenn Lewis covered this in a recent Market Snapshot.

Remember: it’s always the right time to buy the right piece of real estate. Continue to educate yourself and your clients so that you are the source they turn to as the industry and market continue to evolve. Don’t let fear get in the way of you and your business doing the next right thing. When opportunity arises, being informed will help you be prepared to take advantage and thrive. 

What’s part of your strategy for the year to come? Let us know on our Facebook page! And subscribe to our newsletter for more informative articles.