Gary Keller \u2026The current market is ‘the most confusing I’ve ever seen\u2026<\/p>\n\n\n\n
There\u2019s a lot to worry about in today\u2019s market \u2014 coronavirus infections are near 2021 peaks, health officials are ringing the alarm about monkeypox and polio, inflation and mortgage rates are steadily climbing, home sales have slowed and the industry\u2019s biggest real estate companies are bracing for a possible recession.<\/p>\n\n\n\n
Even as strengthening headwinds pushing agents and consumers to the brink, Keller Williams founder Gary Keller encouraged agents at the brokerage\u2019s annual Mega Camp conference on Tuesday to take a more tempered approach to analyzing the current market.<\/p>\n\n\n\n
\u201cWhen times are good, understand at some point, they\u2019ll get tougher,\u201d he said matter of factly while sporting a black graphic tee that read \u2018Charge the storm.\u2019 \u201cAnd when times are tougher, at some point, they\u2019ll get good. That\u2019s just the way the world works.\u201d<\/p>\n\n\n\n
However, Keller couldn\u2019t help but acknowledge that today\u2019s market shift is much different than past cycles when it was easier to read the tea leaves and understand exactly what to do to survive. However, he said today\u2019s market is filled with \u2018mixed signals\u2019 that can make it hard to strategize.<\/p>\n\n\n\n
\u201cI would say this is the most confusing market I\u2019ve ever seen in my entire 40-plus years in our industry. It\u2019s confusing, and it\u2019s only confusing because you have mixed signals,\u201d he said. \u201cNormally, you would expect all the signals to aim in one direction. And that\u2019s not what\u2019s happening.\u201d<\/p>\n\n\n\n
Keller noted that although home prices are rising, average days on market are still at an all-time low, despite being longer than two to three-day timeline agents got used to at the height of the pandemic. He also highlighted the false alarm around rising mortgage rates, which, despite hovering near six percent, are also near historic lows.<\/p>\n\n\n\n
\u201cIf you\u2019re talking to individuals that don\u2019t understand mortgage rates, they do not realize that 2.9 percent was a gift from the gods maybe never to be seen again in your lifetime,\u201d he said of the past two years\u2019 trends. \u201cBut a lot of people remember, again, that when I got in real estate, and interest rates were below 10 percent. That was considered amazing.\u201d<\/p>\n\n\n\n
\u201cThen they rose to almost 18 percent, and I remember all of these experienced agents in the office where I worked \u2014 they all went, \u2018Nobody\u2019s gonna buy real estate at these rates, we\u2019re just gonna sit and wait for it to come back,\u201d he added. \u201cI don\u2019t think they lasted in the industry. Right?\u201d<\/p>\n\n\n\n
Keller directed agents to be attuned to the market, but resist falling into the belief their businesses can\u2019t continue to thrive even in such confusing times.<\/p>\n\n\n\n
\u201cI ignored the market and kept doing my activities,\u201d he said hearkening back to his first years in the business,\u201d he added. \u201cI just kept going on about my activities, and there were four or five months where I actually didn\u2019t have any closings\u2026 And by the end of the year, I hit every financial goal I set for myself and I even took December off.\u201d<\/p>\n\n\n\n
\u201cThe trick was ignoring the market and keep doing the activities,\u201d he added. \u201cThat\u2019s where you\u2019ve got to be real careful because some of you will see this data and go \u2018Oh crud, things really suck. The sky is falling and I can\u2019t do any better.\u2019 Don\u2019t fall into that trap.\u201d<\/p>\n\n\n\n
In 2020 and 2021, agents easily smashed their previous sales records as rock-bottom mortgage rates, remote working, a pause on student loan payments and several stimulus checks pushed buyers to battle each other for scant listings. However, 2022 ushered in a slower pace as inflation, rising mortgage rates and other socio-economic factors tempered buyers\u2019 ravenous appetite for homebuying.<\/p>\n\n\n\n
As a result, Keller said the industry will end the year with 5.1 million home sales, which falls in line with other predictions that place year-end sales around the 5.7 million mark. Although 5.1 million is a far cry from 2021\u2019s 6.1 million home sales, Keller said that\u2019s still a healthy number of transactions compared to the early 90s when annual home sales struggled to break four million.<\/p>\n\n\n\n
\u201cIf you look at 5.1 and you go all the way back to 1995, 5.1 [million] looks pretty darn good, so perspective really matters,\u201d he said. \u201cThere\u2019s plenty of real estate being bought and sold to build fantastic businesses and have fantastic income around that business.<\/p>\n\n\n\n
So why does the current market feel more like a drought than a monsoon of opportunity? Keller Williams Vice President of Strategic Content Jay Papasan said it comes down to one thing: more competition.<\/p>\n\n\n\n
\u201cThe last time we were at 5 million [transactions] there was a third of the Realtors that there are today,\u201d he said. \u201cSo there\u2019s just more people chasing the same transactions.\u201d<\/p>\n\n\n\n
With that in mind, Keller and Papasan said agents need to focus on mastering the fundamentals of real estate and focus on becoming better at handling hard times rather than wishing for easier ones.<\/p>\n\n\n\n
\u201cWhen interest rates went to almost 18 percent and the transactions really dropped off dramatically, my attitude every day was somebody\u2019s going to buy or sell a house and I\u2019m gonna go work with them,\u201d he added. \u201cEverybody else? Good luck.\u201d<\/p>\n\n\n\n
Rising home price growth has been the bane of homebuyers\u2019 existence for the past seven years, as homebuilders struggled to fix a worsening imbalance between supply and demand.<\/p>\n\n\n\n
That imbalance has worsened over the past two years as coronavirus-induced supply chain issues and rising labor and material costs slowed builders, and market headwinds encouraged a record-level of buyers to enter the market. As a result, home prices have continued their meteoric rise with national home price growth reaching around 18 percent in 2021, which Keller Williams Senior Economist Ruben Gonzalez won\u2019t last for long.<\/p>\n\n\n\n
\u201cFor some perspective, the last time we had a double-digit price increase, that was followed by seven years of single-digit price increases,\u201d he said. \u201cSo having multiple years of double-digits is very unusual and it\u2019s not something that\u2019s going to persist.\u201d<\/p>\n\n\n\n
Before homebuyers pull out their bullhorns in celebration, Gonzalez and Keller said a slow down in home price growth doesn\u2019t necessarily mean homes will become more affordable.<\/p>\n\n\n\n
\u201cWe don\u2019t believe we\u2019re going to see negative price [appreciation],\u201d Keller explained while noting it\u2019ll take at least four years for the market to reach the historic trendline of 4 percent home price growth. \u201cWe believe that we will simply see a reduction in the rate of inflation [for home prices].\u201d<\/p>\n\n\n\n
Keller said homebuyers are currently spending 25 percent of their income on housing costs, which albeit high, is still lower than previous decades when homebuyers spent up to 35 percent of their monthly income on a mortgage.<\/p>\n\n\n\n
\u201cI\u2019m so oriented towards my days of selling, that I go, \u2018Yeah, what\u2019s the big deal?\u2019 Keller admitted. \u201cBecause in 1979, which isn\u2019t on this chart, in 1979, I promise you that number was 32 to 35 percent and I thought that was normal.\u201d<\/p>\n\n\n\n
Keller said inventory is still at 3.3 months, which signals sellers still have the upper hand. However, if the United States market follows Canada, a true buyers market could be on the way.<\/p>\n\n\n\n
\u201cThe reality is that what we just came out of \u2014 and I can\u2019t say it enough \u2014 is unprecedented. And people are going to have to forget that. That was [about making hay when the sun shines,\u201d he said. \u201cCanada is experiencing exactly what the US is experiencing.\u201d<\/p>\n\n\n\n
\u201cSales are dropping at about the same pace, price appreciation a little less than what we\u2019re gonna experience this year, but almost right in line with that, and inventory? Same thing,\u201d he added. \u201cThey\u2019re moving into a buyers market rapidly.\u201d<\/p>\n\n\n\n
Although the past two years have been heartbreaking, Keller said there\u2019s still been plenty of opportunities as evidenced by record-low unemployment rates, robust home sales (until now), and relatively solid personal finances among homebuyers compared to the Great Recession.<\/p>\n\n\n\n
However, consumer sentiment is at a record low. Why? Inflation.<\/p>\n\n\n\n
\u201cThere is more money sitting out there in bank accounts than ever before. People are unemployed at one of the lowest rates in history and son-of-a-b \u2014 they\u2019re unhappy. Desperately unhappy,\u201d he said. \u201cIt\u2019s just a little weird, right? You\u2019ve got a job. You\u2019re just got a great pay raise. You\u2019re living a good life.\u201d<\/p>\n\n\n\n
\u201cI truly believe that gas is the number one determinant of how consumers feel about the economy, and the reason is an extra $100 to $200 a month just on gas, is the extra money \u2014 that\u2019s new clothes for the kids to go to school. That\u2019s just that extra money for that, that three-day or four-day vacation trip,\u201d he said. \u201cIt takes some of the little fun out of it.\u201d<\/p>\n\n\n\n
Keller said it\u2019s important for agents to help consumers properly process economic stressors, which will help them make better financially-sound decisions about homebuying and selling.<\/p>\n\n\n\n
\u201cIt\u2019s going to take through 2023, most likely, to grind through all of this,\u201d he said. \u201cBut the last three years have misled people to believe that buying real estate was like owning an ATM. \u201cYeah, I can buy it and tomorrow, I\u2019ll just flip it.\u2019 This real estate game is amazing, but that was a moment in time. That\u2019s not reality.\u201d<\/p>\n\n\n\n
Keller said agents must help homebuyers think about real estate in the long-term and that any<\/p>\n\n\n\n
purchase that\u2019s made with the intent of staying seven years or more, is a winning decision even in this market.<\/p>\n\n\n\n
\u201cIf your holding horizon is anywhere from seven to 10 years, the facts show that you\u2019re good to go,\u201d he said. \u201cSomeone says, \u2018Oh, you know, I don\u2019t want to buy right now. I\u2019m afraid prices go lower.\u2019 Well, institutional buyers are seizing opportunities.\u201d<\/p>\n\n\n\n
\u201cI remember reading the books when it was really hot and heavy about buying versus renting, and the investment world was saying buying a home is never good,\u201d he added. \u201cCall Blackstone and all the other institutional investors and say \u2018You shouldn\u2019t buy.’\u201d<\/p>\n\n\n\n
\u201cBut ultimately it\u2019s not your life, it\u2019s their life, and your goal is to give them the perspective and give them every chance to understand all the issues so they can make an informed decision.\u201d<\/p>\n\n\n\n
Even through the confusion of today\u2019s market, Keller said agents can still create some of the best years of their careers if they\u2019re willing to charge into the storm instead of running from it.<\/p>\n\n\n\n
\u201cBuffaloes are an interesting animal. When a storm occurs, they\u2019re the singular animal that runs into the storm. Somehow they figured out that if you face the storm and run into it, you get through it better and faster,\u201d he said. \u201cThat\u2019s how you win.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Gary Keller \u2026The current market is ‘the most confusing I’ve ever seen\u2026 There\u2019s a lot to worry about in today\u2019s market \u2014 coronavirus infections are near 2021 peaks, health officials are ringing the alarm about monkeypox and polio, inflation and mortgage rates are steadily climbing, home sales have slowed and the industry\u2019s biggest real estate […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1262","post","type-post","status-publish","format-standard","hentry","category-real-estate-market"],"_links":{"self":[{"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1262"}],"version-history":[{"count":2,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1262\/revisions"}],"predecessor-version":[{"id":1265,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1262\/revisions\/1265"}],"wp:attachment":[{"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nohasslelistingblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}