The U.S. real estate market is currently experiencing significant challenges, as indicated by the struggles of a substantial portion of real estate agents. In a report by Alignable, 45% of real estate agents who own their firms reported difficulty in paying rent on their offices in November 2023. This situation marks a 5% increase from October and a 10% rise from September. The issue stems from a combination of factors including low sales, a shortage of inventory in the housing market, and high housing costs that discourage new buyers.
Corey Burr, a senior vice president at TTR Sotheby’s International Realty, attributes this trend to the Federal Reserve's monetary policy. He explains that by maintaining low interest rates for an extended period and then rapidly increasing them, the Federal Reserve has significantly disrupted the residential real estate market. This has led to a lull in home sales, impacting the income of real estate agents, especially those running small brokerages. The situation is further exacerbated by high mortgage rates and buyers backing out of deals at unprecedented rates. In October, pending home sales decreased by 1.5% from September and 8.5% from the previous year, even worse than during the 2008 financial crisis.
Despite these challenges, there's a potential improvement on the horizon for 2024. As inflation subsides and the Federal Reserve potentially concludes its tightening cycle, there could be some rate cuts, which might lower mortgage rates. This change could provide relief for the housing market. Forecasts suggest that mortgage rates might stabilize between 6% to 7% by next spring, with home sales possibly increasing by 13.5% in 2024.
This situation highlights the delicate balance in the real estate market between monetary policy, housing inventory, and the financial well-being of real estate professionals. The coming year may bring some relief, but it remains a challenging environment for those whose livelihoods are closely tied to the dynamics of the housing market.
