Key Takeaways:
– Ivy Zelman does not expect a housing bubble like in 2008, but the market will continue to be tough
– Commercial real estate could have a significant impact on the economy
– Sales volume in 2024 is expected to be similar to 2023
– High mortgage interest rates and low housing affordability will persist
– Demographic changes indicate negative housing demand
– Climate change may affect home prices and homeowners insurance
– Commission lawsuits could put downward pressure on asking prices
– Agents should emphasize honesty with clients in this tough market.
inman:
In an Inman Connect conversation with Kendall Bonner, Ivy Zelman said she doesn’t see the housing bubble bursting like it did on 2008, but she also doesn’t expect the market to get easier for anyone anytime soon.
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Ivy Zelman, senior vice president of the real estate investment research firm Zelman & Associates, earned herself the nickname “Poison Ivy” when she was the first to predict the imminent 2008 housing crash all the way back in 2005.
This time around, she doesn’t foresee the housing bubble bursting like it did in 2008, but she also doesn’t expect the market to get easier for anyone anytime soon, she said.
“This is going to be a tough market, the norm is tough,” Zelman said during an Inman Connect online session with Kendal Bonner of eXp Realty. “It’s not going to be an easy market.”
If there is any sector that could have a crater effect on the economy at large, it’s commercial real estate, she added.
Zelman predicts that 2024 will look remarkably similar to 2023 in terms of sales volume.
“We’re not forecasting any type of severe downfall,” she said. “In fact, we think that ’24 will look not dissimilar, in terms of volume to ’23.”
With 2023 marked by high mortgage interest rates leading to low housing affordability and low inventory due to most homeowners feeling the “lock-in” effect, Zelman says she expects the high interest rate environment to persist.
“We should be ready to be living in a higher for longer environment,” she said.
Current demographics also paint a grim picture for future housing demand, she pointed out. Some of the demographic changes that affect household growths — births, immigration, and deaths — are all trending in the wrong direction for more household growth, with the death rate accelerating, the birth rate slowing, and immigration growing at a slower rate after years of stagnation.
“I think the demographics are clearly negative,” Zelman said.
Zelman also said that climate change, and its potential impact on home prices and homeowners insurance, offers a compelling value proposition that agents should be discussing with their clients, especially in markets in the South and West that have seen major influxes of new residents.
The bombshell commission lawsuits currently playing out also have the potential to put downward pressure on asking prices, Zelman theorized, depending on the outcome. If buyers find themselves responsible for paying buyer agent commissions, what will likely happen is buyers will demand discounts on asking prices, possibly causing home prices to come down across the board.
“The person listing their home is going to have to reduce the price enough that the buyer is going to say ‘Okay, that just gave me the 3 percent that I didn’t have,” she said. “It’s going to put pressure on home prices.”
For agents faced with this new reality, Zelman offered one piece of advice: Emphasize honesty.
“My advice to agents is to be as honest with your clients as possible,” she said. “This is going to be a tough market.”
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Property Chomp's Take:
In a recent conversation at Inman Connect, Ivy Zelman, senior vice president of the real estate investment research firm Zelman & Associates, shared her insights on the current state of the housing market. While she doesn't believe we are headed for a housing bubble burst like in 2008, she also doesn't expect the market to become easier for anyone in the near future.
Zelman predicts that 2024 will be similar to 2023 in terms of sales volume. She believes that the high mortgage interest rates and low housing affordability seen in 2023 will persist, leading to a challenging market environment. Additionally, demographic changes, such as a slowing birth rate and immigration growth, are negatively impacting future housing demand.
One sector that could have a significant impact on the economy is commercial real estate. Zelman emphasized that this sector is particularly vulnerable.
Climate change is another factor that Zelman highlighted as having the potential to impact home prices and homeowners insurance. She advised agents to discuss this topic with their clients, especially in areas experiencing an influx of new residents.
The ongoing commission lawsuits could also have an effect on the housing market. If buyers are responsible for paying buyer agent commissions, Zelman theorized that they may demand discounts on asking prices. This could put downward pressure on home prices.
In this challenging market environment, Zelman offered one piece of advice to real estate agents: emphasize honesty with clients. She believes that being transparent about the market conditions and potential challenges will help agents navigate this tough market.
Overall, Zelman's outlook for the housing market suggests that it will continue to be a difficult environment for both buyers and sellers. However, by staying informed and honest with clients, agents can navigate these challenges and find opportunities for success.
