If real estate professionals have learned anything over the past decade, it’s the danger of making predictions based on past market behavior. Perhaps that’s why Tuesday’s Residential Economic Issues and Trends Forum at NAR NXT, The REALTOR® Experience, in Anaheim, Calif., combined observations and a forecast from NAR Chief Economist Lawrence Yun with a broker panel entitled “Nothing’s Normal.”
Forecast: A 2024 Uptick
After deep national sales declines in 2022 (17%) and 2023 (predicted to be 18%), Yun said, the market should pick up moderately in 2024. If the spread between 10-year Treasury bonds and 30-year mortgage rates normalizes, he added, borrowers will begin to see rates under 7% in time for the spring homebuying season. Yun said he expects a pickup of 13% in existing-home sales and 19% in new-home sales.
“What kind of support are we getting from the economy?” Yun asked. GDP growth of 4.9% in the third quarter of 2023 is strong—“3% would be average,” he said. “But if you look at the individual components, there are worrying signs.”
While consumer spending has been resilient, for example, business spending is flat. And although growth in the category of “goods/inventory” is considered positive, indicating manufacturing is on the rise, it can become a negative if too much unsold inventory piles up on shelves. In addition, although job growth has been consistent, it is “less strong with each passing month. Is it going to go negative?” Unemployment hit a trough in April at 3.5% and has modestly increased to 4% since then, the highest in two years.
At its November meeting, the Federal Reserve held steady on the federal funds rate, a change from the steady increases it has made since 2021.
Yun pointed out that despite the difficult market real estate professionals have faced in the past two years, many homeowners are upbeat because lack of inventory has continued upward pressure on home prices. The Federal Reserve recently released a new survey on consumer finance, showing the median net worth of homeowners was $396,200, a 34% increase from 2019, when the number was $295,500. By contrast, the median net worth of renters was $10,400, up 30% from 2019.
“There will be years when home prices don’t grow or decline,” Yun said. “But as a long-term homeowner, it is almost assured you will come out ahead in America.”
The Pros Weigh In
Following Yun’s remarks, Angie Tallant, broker-owner of Sotheby’s International Realty in Fairbanks, Alaska, and chair of the forum, led a panel discussion on how real estate brokers and agents are responding to market changes. Panelists included Tommy Choi, co-founder of Keller Williams OneChicago; Jennifer Branchini, associate sales manager with Compass in Pleasanton, Calif.; and Tom Hormel, an associate with RE/MAX in Spokane, Wash. Panelists said they’re educating sellers about the changing market and the importance of making their home ready for sale.
“There’s competition for listings that are perfect,” Hormel said, but the Spokane market has cooled considerably from the days when it was one of the hottest in the country. It’s good news for buyers, who are now asking for concessions, such as closing costs or an interest-rate buydown. In addition, he said, “your house better be priced right. If you’re more than 2% to 3% off on your price, the house could sit for months.”
“Demand is still outpacing supply,” Choi said, but unlike in the past, agents are having to negotiate with multiple buyers. “We can’t set a deadline and ask for the ‘highest and best offer.’ We’re having to be more strategic than before in negotiating.”
Branchini, who is 2023 president of the California Association of REALTORS®, called the conditions in California “a perfect storm.” There’s a shortage of 3 million housing units, and many longtime owners don’t want to move because their appreciation has exceeded the federal capital gains tax exclusion.”
All the buzz around real estate litigation is also putting pressure on agents, who may fear answering consumers’ questions, Branchini said. “Having that transparent conversation is so important,” she said.
Asked for one piece of advice, Branchini urged brokers and agents to be excited about what’s ahead. “We know things are changing, but we get to have a voice in that change. Have conversations with buyers and sellers; work with your associations and be engaged.” (At competition.realtor, find resources to help you have positive conversations with buyers and sellers about the value of your services, compensation and buyer representation.)