‘Incredible distortions in our marketplace’: 45% of US real estate agents say they’re struggling to pay rent — another bad omen for the housing market. But 2024 could be better
Homeowners are staying put while new buyers are grappling with persistently high housing costs this year. Inventory is tight and home sales have hit multi-decade lows.
But if you need yet another sign of turmoil, just ask the people whose livelihoods depend on the real estate market how they’re doing.
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According to a monthly report by Alignable, 45% of real estate agents who own their firms said they had trouble paying rent on their offices in November. That’s 5% higher than in October and 10% higher than September’s reading.
The numbers don’t surprise Corey Burr, senior vice president at TTR Sotheby’s International Realty, who points to recent interest rate hikes driving up mortgage rates and pushing home sales to a lull.
“I think that the Federal Reserve has put us in this spot where they essentially froze up the residential real estate market by holding interest rates low for so long, and then increasing them so much so quickly,” Burr says.
“It’s created incredible distortions in our marketplace.”
Slow sales hurting realtors
Burr, who’s worked over 36 years in the real estate industry and initially had his own firm in Chevy Chase, Maryland, said he knows what it’s like to experience the highs and lows of the housing market when you own a small business.
“We are in a spot in the real estate cycle that is hardest for brokerages, particularly the smaller ones who have less market share, and who have fewer assets than the larger brokerages to ride out the storm,” Burr says.
With prospective buyers wary of high mortgage rates and backing out of deals at a record rate, home sales have been extremely sluggish over the past year, putting more agents out of work or reducing their income.
In October, pending home sales were down 1.5% from September and 8.5% from last year — marking the lowest pending-sales figure since the National Association of Realtors began tracking that statistic. It’s even worse than during the 2008 financial crisis.
Burr also expects the number of realtors to shrink across North America as the market contracts.
Over 60,000 agents left the industry in the six months leading up to May, according to NAR data analyzed by Reventure Consulting, which provides real-time data on the housing market.
Market may improve next year
Although mortgage rates have been retreating over the past few weeks, they’re not low enough just yet to convince homeowners who previously locked in 2% to 3% rates to put their homes for sale and relocate, keeping inventory in a crunch, Burr says.
He also notes that the period between early November to early January tends to be quite slow, but anticipates an uptick in the spring if mortgage rates continue to decline.
As inflation subsides, many experts are predicting the Fed has reached the end of its tightening cycle, and might even introduce some rate cuts in 2024. This could potentially drive mortgage rates even lower, providing a much-needed reprieve for the housing market.
Some analysts are indeed forecasting lower mortgage rates in the next year. NAR chief economist Lawrence Yun predicted in early November that mortgage rates could hover between 6% to 7% next spring and home sales could tick up 13.5% in 2024
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
The Canada Mortgage and Housing Corp. says construction of new homes in Canada’s six largest cities rose four per cent year-over-year during the first half of 2024, but housing starts were still not enough to meet growing demand.
The agency says growth in housing starts was driven by significant gains in Calgary, Edmonton and Montreal.
A total of 68,639 units began construction, the second strongest figure since 1990, however the rate of housing starts per capita meant activity was around the historical average and not enough “to reduce the existing supply gap and improve affordability for Canadians.”
The report says new home construction trends varied significantly across the markets studied, as Toronto, Vancouver and Ottawa saw declines ranging from 10 to 20 per cent from the same period last year.
Apartment starts in the six regions increased slightly, driven by construction of new units for rent, as nearly half of the apartments started in the first half of 2024 were purpose-built rentals.
But condominium apartment starts fell in the first six months of the year in most cities, a trend which the agency predicts will continue amid soft demand as developers struggle to reach minimum pre-construction sales required.
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
