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The real estate industry has taken a beating in 2023 — rising mortgage rates have frozen home sales, consumer confidence has hit new lows, several landmark lawsuits threaten buyer agent commissions, and the National Association of Realtors can’t get out of the way.
Agents and consumers have been eagerly waiting for the storm clouds of 2024 to clear as the Federal Reserve hinted at the possibility of multiple rate cuts, with the first now expected to come mid-year. While industry professionals may be ready to trade their raincoats for sunglasses, Keller Williams co-founder Gary Keller is bracing for another round of serious headwinds.
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Gary Keller | Photo Credit: KWRI
“It’s winter now, and it’s going to be winter for a while,” Keller said during his keynote address at the KW Family Reunion meeting on Tuesday. “If you were hoping there would be some relief this year, that’s not going to happen … the market isn’t going to give you anything for the time being.”
blame the fed
Keller said the Fed’s inflationary policies will continue to suppress the housing market, all in an effort to avoid broader economic fallout. He said that every recession in the past 59 years was caused by the government or the banking industry, and the real estate industry often had to bear the cost of bad decisions.
“The Fed hopes we’re on the verge of a recession. But right now, housing is in a recession,” he said. “You’re in a recession, but the economy is not in a recession. As long as they can get us into a recession and get the economy out of a recession, they’re going to keep interest rates high.”
While the goal is to pull the real estate industry out of recession, Jason Abrams, director of industrial and learning at Keller Williams, said the consequences could be negative.
“We could come out of a housing recession and then the entire economy could go into a recession,” Abrams said, drawing some nervous laughter from the crowd. “I didn’t take that into account because normally you go from hard times to good times. The idea now is that we all go from a hard time to an even harder time.”
Even as the industry lurches from one recession to another, Keller and his team say there are still plenty of opportunities for agents to thrive amid the headwinds. Although annual single-family home sales will decline sharply from 6.1 million units in 2021 to 4.1 million units in 2023, the 4.1 million unit sales volume is right on the 35-year trend line. Total market volume in 2023 ($2.09 trillion) is the third highest in 25 years, despite a decline in sales.
“Businesses and careers are really built in hard times, not easy times,” Keller said. “When the market pulls back, the market is flat. If you can hold your own during this period, then you’re set up for the next five to 10 years.”
“No matter what industry you’re in, you’re going to make money,” he added. “You have to find a way to keep yourself in shape during this time.”
While consumers still struggle with mortgage rates of 7 to 8 percent and a national median home price of more than $380,000, Keller said agents must help buyers and sellers understand the current market through a historical lens.
“If we allow (consumers) to wait for rates to come down, which may not happen anytime soon, I don’t think we’re doing our job,” said Jay Papasan, KW’s vice president of strategic content. “Forty percent of homes It’s mortgage-free. We have all these homes locked in at low interest rates. We need to tell them, ‘Well, why not?'”
“Keep your house and rent it out,” he added. “Perhaps the owner could finance your free and clean home (and) use that revenue to make up the difference in the new interest rate.”
beat inflation
For Millennials, Keller said, advice should center around tackling debt and strengthening savings accounts in the coming years to prepare for other financial goals like homeownership and retirement. Abrams said the average savings rate dropped from 11% in 1990 to 5.7% in 2023, marking a “major shift” in how Americans think about money.
“Millennials don’t buy because of the monetary cost. They don’t buy houses, they don’t buy cars. They don’t set aside money for retirement. They buy experiences rather than real estate,” he said. “I’m not saying you can’t spend your money, just don’t spend it now.”
“If we could reach the (1990) savings rate now, if everyone saved 10 percent of their income, all of our (economic) problems could be solved within a year,” he added.
While Gonzalez, Papasan and Abrams agree with Keller’s saving advice, they also acknowledge sticky inflation (a term that describes a period of inflation followed by a slow decline in commodity prices) and “greedy inflation.” (a term they coined to describe the business) problem. Continue to raise prices for no reason.
“I do think it’s important to remember that even though inflation is falling, that means prices are still rising, just at a slower pace,” Abrams said. “Because when you look around, to me That said, everything felt very expensive.”
“We know this from housing; prices go up. They rise like a rocket and fall like a feather,” Papasan added. “If you’ve already set a price, why lower it unless you want to crush your competition?”
Like the tug-of-war between the housing industry and the broader economy, a sudden drop in prices won’t have the positive impact most people want, Gonzalez said.
“We don’t want prices to go down,” he said. “If you think about it, if prices go down for everyone, every company’s revenue is going to go down, which means everyone’s revenue has to go down as well. That’s not ideal.”
aim at opportunities
While 2024 won’t be the settling down year agents had hoped for, Keller and his team say agents can still thrive in the storm. Keller emphasized that distressed sales are a point of opportunity because today’s distressed homeowners have a lot of equity they can use to get back on their feet.
“(Homeowners) have choices today, but if you’re not out there talking to people and having those conversations, how are they going to know?” he said. “Real estate is a contact sport. Hang out with five to ten people, sit down to a nice lunch or a nice dinner, and talk about the local market. Be fearless and talk to people about what’s really going on.”
Abrams said agents worry about looking like “ambulance chasers” when sourcing distressed sales, but he said it’s better than putting homeowners in foreclosure and risking being permanently priced out of the for-sale market The risk is better.
“I was hosting a meeting about people who were late on their payments and how to help them, and someone said, ‘This is a bit like ambulance chasers,'” he said. “I was a little surprised by that because I was thinking, ‘If these hands could do surgery and save people, I would chase every ambulance in town.'” I want to find the people who need help the most and then help them . “
Keller says that if agencies learn to view disruption — technology, changing industry practices, new business models, etc. — as their stepping stone to greatness rather than their downfall, they can find countless ways to succeed. .
“Look at the antitrust litigation. We tried to win; we didn’t win. And then we looked up and realized the right thing to do was to resolve the issue on behalf of everyone in this room. That’s what we did.” His words were met with thunderous applause. . “Please understand this is an ongoing lawsuit. It is ongoing, and therefore, you will not have any of us talking about it.”
“So our response to all of this was to create a course that didn’t talk about litigation but answered the question, ‘How do we go out there and run our business?'” he added.
Keller and Abrams say that as consumers push back against current commission structures, agents should focus on building a broad knowledge base, mastering the basics, and articulating their value proposition effectively. The duo said agents should strive to be the first to deliver a strong experience for consumers, be honest, trustworthy and have a good reputation – and if agents can do that, they win.
“If you’re not No. 1 or No. 2, you’re not in the game,” Keller said.
