Gary Keller didn’t care about compasses at all. Or anywhere. Or Redfin. Or Rocket Mortgage. But he does care to some extent about Homes.com and Andy Florance, whom he “really likes” and considers “total competitors.”
“The Compass-Anywhere merger made a lot of news. It’s under a little bit of scrutiny right now because it was clearly the fastest approved mega-company merger in history, and they’re finding out that there was a rich relationship behind it…” Keller told a murmur from an audience of more than 10,000 agents at KW’s annual Family Alumni Conference on Monday. “Do we care? We don’t. I mean, I wouldn’t have done that.”
Commenting on other hot industry topics, Keller suggested he’s watching to see who wins in the battle between Homes.com’s parent CoStar and the company’s investors, but he said he likes CoStar CEO Andy Florence.
Regarding Rocket, Keller said the mortgage giant’s acquisition of Redfin is not about increasing Redfin’s sales volume, but rather “trying to convert leads into mortgages.”
Keller also weighed in on private listings, calling the battle “interesting,” but his opinion is: “The consumer is always right. The buyer is always right. The seller is always right.”
Otherwise, the current housing market is all that’s on the Keller Williams founder’s mind, and exactly how to guide the franchisor’s 157,000 affiliated agents through it.
Gary Keller |Credit: KWRI
“Historically, it is [sides per agent] The number will be around 9 to 10 [sides] “If you look at history, it’s just fluctuated around that. Up until COVID-19 hit, we were doing pretty well. And when you add in the increase in sales, we weren’t doing bad, right?”
“But in the last few years, we have reached new territory and the sides per agent are lower,” he added. “The more agents track significantly fewer transactions.”
The increase in resale inventory (which is expected to increase by 2% this year) is still not enough to quell the ongoing inventory shortage, meaning agents are looking ahead to next year, when all sales will struggle. Keller and panelists Jay Papasan, Jason Abrams and Ruben Gonzalez said pricing is often the deciding factor in whether a listing is boom or bust.
“We’re missing out on about 4.5 million new homes that weren’t built,” Keller said. “And this structural shift, with low interest rates, people don’t want to sell their homes, so they’re kind of stuck in inventory.” “In a market like the one we’re in, you’re seeing a decline in prices, but that doesn’t necessarily indicate poor pricing. It also just indicates a competitiveness to sell properties.”
The inventory shortage may ease in the coming years as Congress puts greater priority on improving housing affordability by reducing regulatory barriers, reforming zoning, and expanding financing options for homebuyers and home builders. KW Industry and Learning Director Jason Abrams highlighted two bills that have strong bipartisan support in the House and Senate: the 21st Century Housing Act and the ROAD to Housing Act.
“They are doing four things: Expanding access to mortgages under $150,000 and streamlining manufactured and modular homes to make them more acceptable. [and] “They’ve cut back on environmental reviews. And they’re even talking about withholding funding from these cities unless they cover more parcels,” he said.
But even if these bills become law, it could take years for the benefits to reach homebuyers, home sellers and other players in the housing market, Keller said. And these solutions may come a little too late for Millennials and Gen Z, who are struggling with large student debts and relying on inherited wealth to begin homeownership.
“By the way, I’m a baby boomer,” Keller said. “Baby boomers now control $85 trillion in assets, which is almost 50% of all wealth in the United States. But it makes sense from an age perspective. $19 trillion is in real estate, and the survey found that 73% of people over 55 say they want to gift some or all of their wealth to their children before they die. And on average, they want to gift 30% during their lifetime.”
While it may be tempting for younger generations to sit back and wait for market headwinds to blow, historical data proves now is a great time to buy given rising home values, Keller said.
“Look at the jump from ’19 to ’20 and ’20 to ’22. That’s amazing, isn’t it? And then you get to ’23 and you’re like, ‘Wow, we’ve jumped $100,000 overall in such a short period of time.'” And because of that, everyone has an inadequate perspective on what’s really going on with pricing, he explained. “They think we’re too expensive, but people are only 7.4 percent above the 4 percent trend line. Just 7.4 percent. That’s it. And you’ll notice that, except in the Great Recession, prices don’t actually go down. So the expectation that prices will go down usually doesn’t actually work out.”
Overall, Millennials and Gen Z are wealthier than their parents were at age 30, with just over $200,000 in wealth, about $53,000 more than their parents had. But KW chief economist Ruben Gonzalez said the problem was a widening gap between rich and poor, making it increasingly difficult for low-income earners to build wealth.
“A consistent theme over the years is people nagging the younger generation, saying, ‘Oh, they’re not doing it, they’re not doing it, they’re not doing it,'” he said. “But this pretty much shows that it’s kind of a washout. Most people do pretty much the same thing. But the difference is that within each generation there are haves and have-nots, and the difference gets bigger with each generation.”
Mr. Keller and Mr. Abrams urged agents to avoid the current doom and gloom and think about the market in terms of historical cycles, which show that home values tend to trend upward and create a solid source of wealth for homeowners, saying home sales are likely to be no lower than in 2025.
“Emotions, don’t look at those things,” Keller said. “Let’s work from the facts.”
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