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Recession fears have intensified over the past several months as Americans crack under the weight of a higher cost of living, elevated interest rates, and a slight uptick in unemployment and underemployment rates. Although economists have embraced the idea that the U.S. is in more of a “vibecession” than an actual recession, Keller Williams founder Gary Keller said that’s not the case for the real estate industry.
“Look, we’re already in a freaking recession in our industry,” Keller told 4,700 agents during the franchisor’s annual Mega Agent Camp conference on Tuesday. “What are you talking about? Well, you realize that you fundamentally are the only group in the United States right now and Canada that is in a recession. Your industry is. The rest of the economy is not in a recession.”
Keller, VP of Content Strategy Jay Papasan, Head of Industry and Learning Jason Abrams, and Chief Economist Ruben Gonzalez said the U.S. economy is in a precariously solid place, as the gross domestic product (GDP) reaches an annual average of 2.1 percent and the Consumer Price Index (CPI) inches closer to the target of 2 percent. However, the unexpected rise in unemployment rates to 4.3 percent has cast a wide shadow on the U.S. economic outlook.
“By the way, the Fed now looks up and says, ‘Hang on a second. We want four [or] less. This looks scary to me,’” Keller said. “So when they talk about recession, remember recession is people [spending] less money. People who are unemployed spend less money. Okay. So the more people you have that are unemployed, the less collective spending there is in the marketplace.”
Beyond unemployment rates, Gonzalez said current Treasury rate trends signal the economy is at the highest recession risk in nearly 45 years.
“In the past, any time the Treasury yield curve is inverted, it’s predicted a recession,” he said. “Based off of yields on Treasuries, the probability we have a recession is at the highest it’s been right now since the 1980s.”
As the U.S. inches closer to a potential recession, Keller and his crew said real estate has been in a “solo industry recession” with eight months of consecutive negative growth — two months more than the widely accepted benchmark for recessionary status. However, a series of anticipated rate cuts by the Federal Reserve is poised to bring real estate out of that recession in 2025.
Gonzalez and Keller said a drop in rates is exactly what real estate has been waiting on as homebuyers seek to regain some of the buying power they’ve lost in the face of rising rates and home prices. A drop in rates would also offer freedom for homesellers who’ve feared letting go of a sub-3 percent rate for a mortgage with a rate of 7 percent or more.
“You’ve been waiting for that,” Gonzalez said. “We’ve been waiting for them to come around to the idea, right, that what we have is a shortage of houses, right, and not an oversupply of buyers.”
Although dropping mortgage rates is a large part of the equation, the panel said affordability needs to improve as well. Keller said the trendline for median home price growth is 4 percent. If the market were on the trendline, the median home price would be $357,000. However, median home prices are $427,000 — 19 percent above trendline growth.
Gonzalez and Papasan said median home price growth is moving towards the trendline, but it’s yielding wildly different experiences for agents and consumers in different markets. In some markets, like Austin, new listings are booming and home prices are coming down. Meanwhile, in others, listings are stagnant and prices are sticky.
“It really becomes the tale of a bunch of different markets,” Papasan said.
Abrams and Keller said the solution to inventory and affordability issues is largely local, as city legislators can craft zoning plans that bolster the level of single-family and small multifamily (e.g., duplex, triplex, fourplex) housing. The federal government also has an important role, as evidenced by the Biden-Harris Administration’s plan to take unused federal lands and reallocate them for affordable housing developments.
“By the way, if you want to be a real estate professional, go down and start talking to your council members, your mayor, and start getting in their ear that if they want to solve affordability in their town, they need to quit waiting for the national interest rates to solve the problem,” Keller said.
All four men said the agents have no control over most market dynamics; however, they can “zoom in and zoom out” on those dynamics, help consumers navigate challenges with greater dexterity and make sales.
“I have a different perspective than a lot of you, and my perspective is shut up and get to work,” Keller said. “We have a ton of people coming across this stage today and tomorrow who are crushing it, who are outperforming the market. They’re unbelievable what they’re doing … There are plenty of homes being sold. There are more than enough home sales in your market for every one of you to hit your goals if you do the right things.”
Outside of mastering the basics, the panel said agents will need to adjust to upcoming changes in commission procedures, per the National Association of Realtors’ buyer-broker commission settlement.
Abrams urged agents to eschew commission advice they see on social media and rely on their brokerage and MLS leaders to help them comply with the new rules. He reminded agents about the details around marketing cooperative compensation and crafting buyer’s representation agreements, noting that agents should stay away from workarounds.
“MLSs are working through these changes, and they’re going to be implemented, and what best practices will emerge still remain to be seen,” he said. “Many opportunists and you see this every day on social media; they’re going to jump in and make quick conclusions and provide their opinions disguised as knowledge. Please be aware of that.”
“Just remember, real estate agents got a pass on the first one,” Keller added. “Almost a billion dollars was paid on your behalf. The second one, you won’t get a pass. Just be aware of that. The next time, if you violate the law, you’re on your own.”
After warning agents, Keller advised them to lead with transparency. If they do that, he said, the commission will take care of itself.
“When you hear all this hoopla and all of this really scare tactics, to be candid with you, there’s a lot of people that want to make money on the back of trying to scare you,” he said. “Is this a big change? Yeah. It is a big change in that it’s now transparent, and the buyer has to decide what they’re going to pay their agent. Yes. That’s a big change.”
“Does it affect how much you get paid? That’s going to be up to you,” he added.
Despite market and legal challenges, Keller and the panel said the real estate market is still headed for a coming boom and reminded agents that they should be proud of the work they do.
“You should be damn proud to be real estate agents, and what you do really matters,” Abrams said.
Email Marian McPherson
