Agent outlook: Do you know what the market did this summer?

We’re in a housing recession. There I said it. The data shows that the U.S. Housing Market is in a recession, and that recession looks nothing like what we, as real estate professionals, originally forecasted and feared. Falling demand and few new construction homes, coupled with double-digit price gains and little inventory relief, is leaving many of us disoriented. 

Despite historical evidence proving that rising markets benefit asset holders over time, all we have is the present moment. So, what do we do now? Do we shift tactics, make quick decisions, stay the course, delay decision-making, cut expenses, make strong investments, or something entirely different?

The truth is that the market doesn’t determine your outcome, it only determines your strategy.  It determines the conversations you have, the marketing you publish, and the focus you give.

Here’s what you need to know this week:

• According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.55 percent, which is a historically low rate, however, that same 15-year mortgage averaged 2.15 percent a year ago.
• The 5-year ARM remains the most attractive rate for buyers, averaging 4.39 percent last week.
• Despite options to secure a rate in the fours, the rise in prices and in interest rates means that homeownership costs are increasing at a pace that far exceeds wages, especially for low- and middle-income households.

When looking at showing traffic

• The number of buyers stepping foot into active listings remains nearly unchanged over the past few weeks. While consistency in showing traffic is good for forecasting seasonal demand — sellers are seeing 18 percent fewer showings across the nation — that’s a slight improvement from the 20 percent-plus trends we saw in July. 
• ShowingTime indicates that only three markets are experiencing more than 10 showings per listing.  This means unless you sell in one of three cities, you should expect to see fewer than 10 showings on your newly listed homes.  This is a vital stat for agents and for sellers, in order to set reality-based expectations for how the listing process is likely to unfold.  Stabilizing showing traffic is a good sign for avoiding an epic collapse; we’ll want to keep this data in context with seasonality as the market rebalances at the same time home shopping season is winding down.
• Current demand trends indicate fewer immediate sales each week – this is the byproduct of a dramatic slowing in both demand AND new supply.  Since early July, there’s been an abrupt change in new listing volume, while homes going into immediate contract are simultaneously slowing.  This duality of market slowing dynamics means those deal-seeking buyers may not get the bargains they keep waiting for.  At this stage, there is just not enough newly listed supply to knock the bottom out of pricing.

When looking at inventory

• In July, the number of new listings declined by 2.8 percent year over year.  This snaps a trend of sellers rushing to get their homes on the market as sentiment shifted.  Without significant inventory growth, those peddling messages about a market collapse are likely to miss on their predictions for the 11th consecutive year.
• We can see evidence of this flawed prediction by assessing the total housing inventory, which stands at just 1.3 million units at the end of July – while that’s an increase from June it remains unchanged from the previous year.
• Unsold inventory sits at a nearly 3-month supply at the current demand — this is an increase of half a month from this time last year.  To give you some historical perspective we typically see inventory between 2 million to 2.5 million and saw roughly 4 million homes for sale in 2007.
• According to NAR, total existing-home sales slipped by nearly 6 percent to a seasonally adjusted annual sales rate of 4.81 million. This is a significant decrease in total sales when compared to 2021.  Yet, when we zoom out historically, 4.8 million home sales is nearly in line with the market we experienced in 2018.

When looking at pricing data

• Home prices are holding steady in most of the U.S. the median price of single-family listings is $449,000.  Seasonal trends would lead us to forecast weekly declines in median pricing from here as we finish the year with double-digit home price appreciation.
• The initial shock and decline in demand seem to have subsided.  That’s evidenced by a slowing in the velocity of price reductions.  Nearly 38.4 percent of homes on the market have taken a price cut nationally, while some homes are experiencing much higher than one in two.

When looking at new construction home starts

• Homebuyers and inventory watchers aren’t getting any help from builders.  New home starts are down nearly 20 percent year over year.  Housing starts continued to slip while permit activity was mixed as builders shifted focus from single-family to multi-family construction. A near-record high of 1.678 million homes remained under construction in July. 
• Construction starts of both single-family and multifamily housing units fell in July. The decline in single-family starts to 916,000 annualized units is the lowest since the COVID-19 months of spring 2020.  The current rate of starts is in line with the annual production of 2019 before the pandemic. 
• Multifamily construction is on pace this year to reach the highest production rate in more than 30 years.  Rapidly rising rents are an incentive for new rental housing.

While the near-term direction of the economy remains unpredictable, you don’t have to feel lost.  The way to thrive in uncertain times is by knowing where you want your life and career to go — and then taking action towards that vision in spite of the uncertainty.  Ten minutes spent trying to predict the future of economics is ten minutes wasted that would be better spent on focused action towards your goals.

Focus on what you can control. Go focus on building relationships with the people in your database. Turn off the talking heads and go make real friends.  Be the voice of calm confidence while markets confuse consumers.  Control your controllables this week by being better today than you were yesterday and remember that the market never determines your success, it only shapes your strategy.

Eric Forney is the Director of Industry for Livian. For more information, visit www.livian.com.