In the economic maelstrom within which we find ourselves thrashing around this fall, there’s been plenty of talk about the potential housing crash ahead and the future layoffs that could fuel it, but I’ve seen only a few passing comments on the job losses and pay cuts we’re almost certain to sustain within the real estate industry itself.
Kira Mason come to Prince William county, VA! Where the real estate market still thrives, unfortunately.
We moved here in JUNE 2021 and rented a home for $2850. One year later, (Aug 2022) our landlord panicked and put our house up for sale for $757k. We had no showings for a month, she dropped to $700k and we started getting showings. She gave up on October 1st and decided to wait until summer of 2023 to try again. Our rent went up to $3,500!
When our home was being sold, we got an experienced real estate broker in her 50's and started looking to buy in Aug,2022. There was nothing on the market under $600,000 to buy. Most homes were around $800k, up from $550k in 2019.
In October, we went to an open house for a 1950's stone farm house. We went because it was $501k. It was a house in bad need of extensive renovations. The tiny 70 yr old bathrooms were all original and very sad. The kitchen needed a complete overhaul. We left thinking they are going to have a hard time selling this crappy house. It sold that week, much to my chagrin. The higher interest rates have brought the sweet spot down from $800k to $650k in what I am seeing sell. But anything under $600k goes fast if it is not in need of major repairs. The inventory is starting to rise and there are definitely more choices now in late October than there were in August. But if I look at "Pending Sales" on the MLS Link that my realtor allows me to use, they are still selling in all price ranges, especially if it has 1-10 acres of land included. They just sold 3 pre-construction homes on Lake Front Lots for $1 million each. So the money is still flowing west of Washington DC. We are like a lot of buyers who have decided we will pay $3500 in rent and wait to see if the market continues to turn in our favor. In the meantime, we still go to Open Houses and watch what sales to get a good feel for the market. Our realtor told us that the market here never turned down in the 2008-2010 bear market. I thought that was usual realtor marketing blather, but now, I am starting to believer her. If mortgage rates just leveled off here, this market would be fine. Sure there are sellers, like 2 of my coworkers, who paid $550k in 2019 and have their homes listed for $775 now and they are not selling, but look how greedy they are. Those homes would sale at $650-$625k, no doubt in my mind. You have sellers splitting into different camps of "want to sale for last June prices" and "we have to sale and we are more reasonable about the current market conditions". My landlord I guess is in the 3rd camp of "I am pulling the house off the market and waiting for the FED to Pivot " camp. So there will be some extra inventory hiding in the bushes when mortgage rates do turn around. I wrote this because our whole life in Aug/Sept was a panic of we are losing our home and we are going to be out in the streets if we don't buy something. Thankfully, we could not find anything to buy before our landlord took our home back off the market. Now we are an opportunistic buyer. We hope the FED blows up the housing market just in time for us to purchase something.
Sounds like a rough ride! My aunt lives around there and bought in 2021 and she tells me it was no joke. I hope you're in a good position to take advantage when conditions improve. Thanks for sharing this insight...I love hearing about other markets. It's somewhat like what you're describing on the Main Line (ritzy suburban area outside of Philadelphia). Best of luck with everything.
I think you're spot on with your prediction, Kira. What I'm seeing is a palpable sense of desperation not only among real estate agents (among those who are in the know) but also real estate brokers, who most assuredly are working on their 2023 profit and loss statements and are seeing declining production numbers for the coming year. Heck, I've received 3 solicitations this week from brokers wanting me to "come to the other side". Additionally, you've also got mortgage lenders, who with their Instagram selfies and TikTok dance moves are promising low interest rates in 2023, so "just buy now and refinance next year". Horrible, horrible financial advice, when as we know rates will only go down when the Fed reverses course, stops the rate hikes, and goes back to quantitative easing. Another great article!
Oh big time from the brokers. The pain of losing agents to other brokerages is more acute than ever. And what are they supposed to do- offer better commission splits and more services when they're already tightening their belts? It's going to be tough. Thank you for the feedback!
Hi Kira/Robert - I'd love to hear your opinion on what type of brokerage models might be best positioned to gain agent share over the next year? (Franchises w/ experience but fixed costs, eXp type models with more favorable splits, or even the most barebone brokers like Real/Fathom)
Mr Baker what do you mean by "come to the other side"? If that means, become a broker, could you explain why they would want you to do that? I have always wanted to be a realtor when I am retired and can live on the occasional paycheck from real estate.
As in any profession, competitors recruit. In the real estate space, especially this time of year, brokers reach out to agents asking them to join their brokerages. If agents wish to switch brokerages, typically they'll do it around the turn of the new year.
Kira - would also add that with lower transaction volume for 23/24 and still alot of supply (brokers), I would expect a lot more competition - hence lower margins for whatever does sell.... JMO, been in and around RE lending for 20+ years, this is gonna be a very tough 2+ years (or more)... cheers to those who can withstand the coming pain and make it thru to see the light when it does get better
Hi Kira, great content. I heard a stat about RE brokers buying AirBnBs (before showing clients LOL) in prime spots/locations and this is starting to slow down. Do you think they will start dumping their AirBnB's to make ends meet?
It's possible. I've heard about AirBnB's becoming less profitable as the public realizes its cheaper and easier to just stay at a hotel. Some of those short term rentals will be converted to long term if the numbers work. And if they don't, yeah, I think an offloading is inevitable (agent owned and otherwise). That is, unless AirBnB can course correct with the insane add-on fees.
In Orange county NY residential transactions peaked with a dollar volume just over a billion dollars in 2006. By 2009 that handle had decreased over 70%. Multifamily, and condo deal flow was even worse as lenders went lights out on these markets with draconian lending standards.
A lot of agents dropped out and offices scaled back on advertising budgets and became very stingy on commission splits with agents. I expect this to repeat and I also think a lot of the "100%" commission broker business models to bring down the hammer and claw into the commission pie once again.
I'm in the business but I no longer am a principle broker and did not keep track of the transactions during the latest period.
I just checked. In 2018 sales volume reached the 1 billion dollar mark for the first time since 2006 in Orange county. It stayed there in 2019 and then broke to 1.3 Billion in 2020 when the covid madness drove migration out of the rotten apple. 2021 is about 1.7 billion and YTD 2022 is 1.25 billion.
I think we won't hit 1.5 billion for this year. Next year? If the reduced traffic we're seeing is any indicator I would anticipate maybe a 50% or more drop in volume.
Kira Mason come to Prince William county, VA! Where the real estate market still thrives, unfortunately.
We moved here in JUNE 2021 and rented a home for $2850. One year later, (Aug 2022) our landlord panicked and put our house up for sale for $757k. We had no showings for a month, she dropped to $700k and we started getting showings. She gave up on October 1st and decided to wait until summer of 2023 to try again. Our rent went up to $3,500!
When our home was being sold, we got an experienced real estate broker in her 50's and started looking to buy in Aug,2022. There was nothing on the market under $600,000 to buy. Most homes were around $800k, up from $550k in 2019.
In October, we went to an open house for a 1950's stone farm house. We went because it was $501k. It was a house in bad need of extensive renovations. The tiny 70 yr old bathrooms were all original and very sad. The kitchen needed a complete overhaul. We left thinking they are going to have a hard time selling this crappy house. It sold that week, much to my chagrin. The higher interest rates have brought the sweet spot down from $800k to $650k in what I am seeing sell. But anything under $600k goes fast if it is not in need of major repairs. The inventory is starting to rise and there are definitely more choices now in late October than there were in August. But if I look at "Pending Sales" on the MLS Link that my realtor allows me to use, they are still selling in all price ranges, especially if it has 1-10 acres of land included. They just sold 3 pre-construction homes on Lake Front Lots for $1 million each. So the money is still flowing west of Washington DC. We are like a lot of buyers who have decided we will pay $3500 in rent and wait to see if the market continues to turn in our favor. In the meantime, we still go to Open Houses and watch what sales to get a good feel for the market. Our realtor told us that the market here never turned down in the 2008-2010 bear market. I thought that was usual realtor marketing blather, but now, I am starting to believer her. If mortgage rates just leveled off here, this market would be fine. Sure there are sellers, like 2 of my coworkers, who paid $550k in 2019 and have their homes listed for $775 now and they are not selling, but look how greedy they are. Those homes would sale at $650-$625k, no doubt in my mind. You have sellers splitting into different camps of "want to sale for last June prices" and "we have to sale and we are more reasonable about the current market conditions". My landlord I guess is in the 3rd camp of "I am pulling the house off the market and waiting for the FED to Pivot " camp. So there will be some extra inventory hiding in the bushes when mortgage rates do turn around. I wrote this because our whole life in Aug/Sept was a panic of we are losing our home and we are going to be out in the streets if we don't buy something. Thankfully, we could not find anything to buy before our landlord took our home back off the market. Now we are an opportunistic buyer. We hope the FED blows up the housing market just in time for us to purchase something.
Sounds like a rough ride! My aunt lives around there and bought in 2021 and she tells me it was no joke. I hope you're in a good position to take advantage when conditions improve. Thanks for sharing this insight...I love hearing about other markets. It's somewhat like what you're describing on the Main Line (ritzy suburban area outside of Philadelphia). Best of luck with everything.
I think you're spot on with your prediction, Kira. What I'm seeing is a palpable sense of desperation not only among real estate agents (among those who are in the know) but also real estate brokers, who most assuredly are working on their 2023 profit and loss statements and are seeing declining production numbers for the coming year. Heck, I've received 3 solicitations this week from brokers wanting me to "come to the other side". Additionally, you've also got mortgage lenders, who with their Instagram selfies and TikTok dance moves are promising low interest rates in 2023, so "just buy now and refinance next year". Horrible, horrible financial advice, when as we know rates will only go down when the Fed reverses course, stops the rate hikes, and goes back to quantitative easing. Another great article!
Oh big time from the brokers. The pain of losing agents to other brokerages is more acute than ever. And what are they supposed to do- offer better commission splits and more services when they're already tightening their belts? It's going to be tough. Thank you for the feedback!
Hi Kira/Robert - I'd love to hear your opinion on what type of brokerage models might be best positioned to gain agent share over the next year? (Franchises w/ experience but fixed costs, eXp type models with more favorable splits, or even the most barebone brokers like Real/Fathom)
Mr Baker what do you mean by "come to the other side"? If that means, become a broker, could you explain why they would want you to do that? I have always wanted to be a realtor when I am retired and can live on the occasional paycheck from real estate.
As in any profession, competitors recruit. In the real estate space, especially this time of year, brokers reach out to agents asking them to join their brokerages. If agents wish to switch brokerages, typically they'll do it around the turn of the new year.
Kira - would also add that with lower transaction volume for 23/24 and still alot of supply (brokers), I would expect a lot more competition - hence lower margins for whatever does sell.... JMO, been in and around RE lending for 20+ years, this is gonna be a very tough 2+ years (or more)... cheers to those who can withstand the coming pain and make it thru to see the light when it does get better
Hi Kira, great content. I heard a stat about RE brokers buying AirBnBs (before showing clients LOL) in prime spots/locations and this is starting to slow down. Do you think they will start dumping their AirBnB's to make ends meet?
It's possible. I've heard about AirBnB's becoming less profitable as the public realizes its cheaper and easier to just stay at a hotel. Some of those short term rentals will be converted to long term if the numbers work. And if they don't, yeah, I think an offloading is inevitable (agent owned and otherwise). That is, unless AirBnB can course correct with the insane add-on fees.
In Orange county NY residential transactions peaked with a dollar volume just over a billion dollars in 2006. By 2009 that handle had decreased over 70%. Multifamily, and condo deal flow was even worse as lenders went lights out on these markets with draconian lending standards.
A lot of agents dropped out and offices scaled back on advertising budgets and became very stingy on commission splits with agents. I expect this to repeat and I also think a lot of the "100%" commission broker business models to bring down the hammer and claw into the commission pie once again.
I'm in the business but I no longer am a principle broker and did not keep track of the transactions during the latest period.
I just checked. In 2018 sales volume reached the 1 billion dollar mark for the first time since 2006 in Orange county. It stayed there in 2019 and then broke to 1.3 Billion in 2020 when the covid madness drove migration out of the rotten apple. 2021 is about 1.7 billion and YTD 2022 is 1.25 billion.
I think we won't hit 1.5 billion for this year. Next year? If the reduced traffic we're seeing is any indicator I would anticipate maybe a 50% or more drop in volume.
The Fed needs to run stable money and get out these boom-bust cycles.