The decade-long housing boom in the U.S. is over, and the market has gone eerily quiet.
Buyers are clearing out, but so are sellers. And the real estate agents who served them during the pandemic housing frenzy now are left scrambling for listings, or exiting into fallback careers as deals plunge.
As home prices slide in the frothiest locations and the economy teeters on the edge of recession, inventory is staying tight, preventing values from falling faster. But the upheaval caused by soaring mortgage rates — a consequence of the Federal Reserve’s inflation-curbing campaign — has thrown the industry into turmoil with the market signaling leaner times ahead.
Sellers listed 24% fewer homes in October compared with a year earlier, the fourth straight month with a drop, according to data from Zillow. At the same time, purchases sank and are now 17% below their levels in October 2019, before Covid hit.
With a typical home now only affordable to someone earning more than $100,000, brokers are struggling to find buyers. And try convincing a homeowner to sell, especially if it means trading in a 3% mortgage for a much more expensive one.
“This is Han Solo in carbonite: This is a market that could stay frozen for quite some time,” said Benjamin Keys, a real estate professor at the University of Pennsylvania’s Wharton School, referring to a character in the Star Wars franchise. “There really aren’t any forces to unthaw it in a rapid way.”
For the logjam to break, affordability has to improve, and that means a significant drop in either prices or rates. Borrowing costs have come down some after crossing 7% a few weeks ago, but they’re unlikely to fall much more in the near future, according to Mark Zandi, chief economist for Moody’s Analytics.
He expects prices to slip almost 10% from their June peak over the next two years — if the country avoids a full-blown recession. Even a moderate one, however, could push prices down twice as much, he said.
Pressure on Sellers
Homeowners holding back for now are hoping for a bigger decline in rates, which would make it easier to sell and cheaper to buy something else, according to Zandi. But divorces, job changes and children will keep coming, eventually leading to a steady increase in listings.
“Once the job market starts to turn — and it will — the pressure will intensify,” Zandi said of a potential economic downturn. “People will have to move.”
Any new listings will compete with homes that are already languishing on the market. In places such as Phoenix, so-called active listings have been piling up since buyers started retreating.
But the housing landscape is far different than it was after the 2008 financial crisis. Most of today’s homeowners are flush with equity from the decadelong increase in values. And 30-year, fixed-rate mortgages are the norm, allowing borrowers to ride out volatility.
Sellers could potentially remain on the sidelines for years if they have to, keeping the market stuck, according to Keys, the Wharton School professor. There are few eager buyers because many home purchases were pulled forward during the past couple years, so those who wanted to move to the suburbs are already there, he said.
With listings lingering in suburban Bergen County, New Jersey — a hotbed of deals earlier in the pandemic — real estate agents Yvette Miranda-Lee and Lamont Byrd are trying new strategies to unlock sales. They’ve convinced a couple sellers to act as a bank for their buyers, providing cheap, short-term financing to make the homes affordable.
“We’re helping sellers come to terms that they have lost out,” Miranda-Lee said. “They came to the party a little bit late.”
Knocking on Doors
Six months ago, the agents were flooded with business. Now they’re on a door-knocking campaign, searching for the most motivated of sellers: those on the cusp of losing their properties to foreclosure.
It was the dinner hour in Teaneck, a middle-class commuter town close to Manhattan — a good time to catch people at home, Miranda-Lee said as she sat in the passenger seat of a white Kia SUV. She and Byrd were driving around, working down a list of eight homes earmarked for foreclosure sale.
They approached one with a light on the front porch. A middle-aged woman opened the door just a crack.
“We found someone who bought my home,” the woman told them. “The auction thing isn’t happening because otherwise, I’d be sitting on a bunch of boxes.”
Back at the car, Byrd said that while they didn’t get the sale, they’re not going home empty-handed. The woman had asked for their cards, saying she needed to find a cheaper place quickly.
“We have business partners that are in upstate New York that we can connect her with,” Byrd said. “We’ll still get some sort of a referral fee, but we can at least help this woman relocate.”
In Las Vegas, the market has softened so much that Trish Williams, a Realtor with Keller Williams, has had to turn down some sellers who weren’t realistic about the price they could get. She has upfront marketing costs for every listing and can’t afford to have them just sit.
“The last couple of price cuts haven’t moved the bar at all,” Williams said. “We had an open house where one person showed up — just a nosy neighbor looking around.”
Dustin Holindrake, a Realtor with My Home Group, said half the agents renting space in his building in Chandler, Arizona, have left because they can no longer afford it.
Most Realtors now have side hustles to get by, he said. One is a schoolteacher, another is pedaling security systems — jobs that give them some flexibility to also show houses. Holindrake, who hasn’t sold a house in a few months, has started selling solar installations and plans to get his insurance license.
“I had a big fat savings account at the beginning of year but now I’m getting to the point of getting nervous,” he said. “The income has stopped coming in.”
