Above: Brian Buffini, left and Dr. Lawrence Yun
December industry predictions for the upcoming year can be fairly same-old, same-old. Forecasters will have mortgage rates rising or falling, while guesstimating sales and inventory to be strong or weak. Of course no one can say for sure what will happen within the residential real estate realm, as inflation patterns, Fed decisions and housing inventory can change month to month.
However, the result of the recent Burnett vs. NAR trial, along with many more problematic lawsuits filed this year, could make 2024 a year like no other, with buyer agents having to scramble like never before. So those making predictions must take that into account.
On Dec. 11, Brian Buffini, founder and chairman of Buffini & Company, and Dr. Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), offered their expert opinions during Buffini’s 16th annual Bold Predictions: 2024 Real Estate Market Outlook virtual event.
During the session, Buffini and Yun noted that despite a challenging year with falling transactions and high prices, there is huge buyer demand and a pent-up desire for sellers to move. They predict that interest rates will drop, leading to an increase in home sales.
Before getting to that, though, Buffini broached Burnett vs. NAR, in which a jury found that real estate power players conspired to inflate commissions in violation of federal law, awarding $1.78 billion to the plaintiffs.
“It’s been a crazy year for NAR,” Buffini said to Yun. “There’s been change at the top of the organization, there’s been all these lawsuits that have garnered lots and lots of headlines, and people don’t know what to do, and the way the media reports it, the real estate industry as we know it is out of business. Can you share your take on what’s happening within the industry, what’s happening with NAR, and what this lawsuit means for the average agent?”
Yun was blunt with his reply.
“Well, first, the lawsuit does not make any sense because it’s implying there is collusion,” he said. “I mean, consider 1.5 million agents out there with independent models. How would they do marketing? How would they recruit clients? I remember studying economics textbooks. If there are even three or four players, then collusion becomes very difficult. But to say 1.5 million members could collude? It is a competitive business.
“One great thing about America is that consumers have a choice. Consumers can do it on their own, if they want to, they can go to the iBuyer model, they can do a discount brokerage, they can do full-service brokerage. We allow consumers to choose, and what we find is that 90% of the consumers want to work with a trusted agent with whom they can find solid information and who can guide them through the home-buying process.“ Consumers who work with a specific REALTOR® have a very high satisfaction rating. They would recommend their REALTOR® to friends and business colleagues, and use the same agent again for their next transactions. Consumers are happy. There is competition in the marketplace. So I don’t understand the lawsuit result.
“There will be an appeal, and we anticipate that because of the competitive nature, judges will clearly recognize that this is a consumer-friendly model out there. Consider REALTORS® throughout the years, with millions and millions of home transactions, millions of new homeowners that have built sizable housing wealth in the process, and it’s been a good result for America. Let’s continue to have this competitive environment.”
Lamenting poor mindsets
Buffini then got back to the matter at hand, predictions for 2024, by first encouraging agents to overcome the negatives he said are permeating residential real estate.
“There’s a lot of emotion in the real estate business, especially right now,” he said. “And you just have to have a bigger perspective. My mother used to say be careful when you follow the masses because sometimes the ‘m’ is silent. So you’ve really got to know your stuff.”
He then punted to Yun, who said he sees mortgage rates lowering significantly in the near future.
“They are at 7.2% now, and I think it’s going to go down further,” Yun predicted. “Inflation is calmer, much calmer than before. It is time to cut interest rates. So I think the Federal Reserve is probably going to cut interest rates three or four times. Consumers have a new reference point. They saw an 8% rate, so when they compare 7% with 8%, this is an improvement compared to one year ago when the mortgage rates were hitting 7%. It’s going to go even below 7%, and I think 6.5% in spring is a distinct possibility.”
Regarding housing volume, Yun said that newly constructed homes will help create inventory, helping to offset homeowners who would normally consider selling but have not because they had lower mortgage terms than ones currently available. But times change.
“Over the past two years when listings were low, there have been many life-changing circumstances,” he said. “Seven million newborn babies, people needing to trade up, three million marriages, one and a half million divorces and seven million Americans turning 65 and wanting to trade down. Plus 50 million job switches. There are pent-up sellers waiting in the wings for the mortgage rate to be just modestly lowered before making a move.”
Buffini agreed with Yun about a rising demand for housing, eventually listing 10 reasons people would be moving and need to buy or sell a home. He said there would be an avalanche of action coming soon.
“What you’re going to see is a tight first quarter, but then a loosening,” Buffini predicted. “Second quarter rates are going to drop, and in the third and fourth quarters, we’ll be off to the races. There will be an extraordinarily strong finish to next year. I’m projecting around 4.6 million sales, about a 20% increase from this year. I think we’re going to have the biggest selling season in the spring of 2025 that we’ve had in 10 years, and we’re going to have a very, very solid 2025, with another 15% growth.”
Buffini then explained that agents must be ready to market properties 10 different ways for 10 different clients, each of whom have a different reason for moving.
“These are the motivations behind people,” he said. “These are the specific ways you have to speak to 10 different types of sellers. You have to be able to target market.”
Buffini’s top 10 reasons people will be moving in 2024 include:
- To be closer to family
- A need for more space
- May love the rate but not the house
- Want a vacation home
- To be in a nicer neighborhood
- Have lots of equity and choice
- Helping family members buy a home
- It’s time to downsize
- Out of area relocation
- Change of life