'Incredible distortions in our market': 45% of US real estate agents say they are struggling to pay rent – another bad omen for the real estate market. But 2024 could be better
Homeowners are staying put while new buyers struggle with continued high housing costs this year. Inventory is tight and home sales are at multi-decade lows.
But if you need another sign of unease, just ask the people whose livelihoods depend on the real estate market how they're doing.
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According to a monthly report from Alignable, 45% of real estate agents who own their companies said they had difficulty paying rent for their offices in November. That is 5% more than in October and 10% more than in September.
The numbers don't surprise Corey Burr, senior vice president at TTR Sotheby's International Realty, who points out that recent interest rate hikes have pushed up mortgage rates and stalled home sales.
“I think the Federal Reserve has put us in a situation where they have essentially frozen the housing market by keeping interest rates low for so long and then raising them so much so quickly,” Burr says.
“It has created incredible distortions in our market.”
Slow sales hurt real estate agents
Burr, who has been in the real estate industry for more than 36 years and first had his own company in Chevy Chase, Maryland, said he knows what it's like to experience the ups and downs of the real estate market when owning a small business.
“We are at a point in the real estate cycle that is most difficult for agents, particularly the smaller ones who have less market share and fewer assets than the larger agents, to weather the storm,” Burr says.
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As potential buyers balk at high mortgage rates and walk away from deals in record numbers, home sales were extremely sluggish last year, leading to more real estate agents being unemployed or seeing their incomes decline.
In October, pending home sales fell 1.5% from September and 8.5% from a year ago – the lowest level of pending sales since the National Association of Realtors began tracking statistics. It is even worse than during the 2008 financial crisis.
Burr also expects the number of real estate agents across North America to shrink as the market shrinks.
More than 60,000 agents left the industry in the six months leading up to May, according to NAR data analyzed by Reventure Consulting, which provides real-time data on the real estate market.
The market could improve next year
Although mortgage rates have fallen in recent weeks, they are not yet low enough to convince homeowners who had previously locked in rates of 2% to 3% to sell their homes and move, keeping inventory in a bind. says Burr.
He also notes that the period between early November and early January tends to be fairly slow, but expects it to pick up in the spring if mortgage rates continue to fall.
As inflation eases, many experts believe the Fed has reached the end of its tightening cycle and could even introduce some rate cuts in 2024. This could potentially lower mortgage rates even further and provide some much-needed breathing space to the real estate market.
Some analysts are actually predicting lower mortgage rates next year. NAR chief economist Lawrence Yun predicted in early November that mortgage rates could hover between 6% and 7% next spring and home sales could rise 13.5% in 2024
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This article is for informational purposes only and should not be construed as advice. The provision is made without any guarantee.