BrokerageReal EstateIndustry VoicesOpinion

Opinion: Steve Murray predicts when the housing market will recover

RealTrends has tracked significant data on housing, households, and mortgage rates since the late 1970s. It is a part of the data that has enabled us to track national average commission rates among other data sources.

Most brokerage leaders are focused on strengthening their companies to get through this downturn. Those who aren’t won’t be here in the years to come when the market recovers.  There is no sense worrying about a recovery should you not be here to enjoy it!

During the last downturn in housing sales, from 2006 to 2010, nearly 25% of all the brokerage firms ranked on the RealTrends 500 did not live to see 2011 when the true recovery took place.

Some believe that this sudden decline, which as of October data was down nearly 30% in unit sales year over year, won’t be as severe or durable as the last one. That downturn saw housing sales decrease by about 45% and took about 30 months from peak to trough. By comparison, the 1980 to 1982 downturn saw declines of 49% over 30 months from peak to trough of housing sales.

We looked at the data, but we also took a longer view

For instance, how long did it take for housing sales to get back to 1979 levels? Turns out the industry did not exceed the 1979 levels until 1996. That’s right, it took 17 years for the combination of new and existing homes to recover to 1979 levels.

Then, we looked at 2021 and asked the question, ‘When did we last see that level of housing sales in the past?’ We ruled out the ‘goofy’ years of 2003 to 2005 when anyone’s pet could have gotten a mortgage and bought a home.

It turns out that 2002 was the last “normal” year. It took 19 years for housing unit sales to recover to the levels of 2002. 

One contributing factor was likely the average mortgage rate dropping from 6.54% in 2002 to an average of 2.96% in 2021. During this 19-year period, the U.S. was also adding 20 million net new households. 

In 2002, the percentage of households that purchased a new or existing home was 6.05%; in 2021, it had declined to 5.30%, or a drop of about 10%. This happened even though mortgage rates were 55% lower in 2021 than they were in 2002.

Here are a few guesstimates about this housing market and the future recovery. 

Mortgage rates will not return to the 2021 levels for many years, if ever. 

Given the history of recoveries in housing sales, it could be many years before we see new and existing home unit sales recover to the 2021 levels. 

Among the challenges that brokerage firms of all models and brands face, in addition to restructuring the cost side of their businesses, is how will they grow their share of the business when the total business is no longer growing.