Housing market is getting closer to end of elevated interest rate cycle, says Re/Max Co-Founder

All right, let’s talk real estate because if you are a potential buyer, maybe seller out there, the state of the housing market is a little bit baffling and could be frustrating. According to data out today, new newly built homes are on the rebound, reaching their highest level since September of last year. But that’s that’s newly built homes. This data comes as buying a home though is getting costlier. According to one new study, you must now make at least $120,000 a year to afford a median priced home in the United States. But wait, there’s more. According to Redfin, nearly 40% of homeowners would not be able to afford their current home if they had to buy it today. Now, if you lived there 20 years, totally get that. But you know, recently that’s, that’s a little bit weird. So is the dream, the American dream of owning a home getting further out of reach? Joining us now is Chairman and Co founder of RE/MAX, Dave Lineker, who came in from Denver. We appreciate it. Dave. Thanks for joining us. Can you give us some good news on the housing market because even successful couples are looking at homes and going, we do well and we can’t afford anything. I think the only good news is we’re getting closer and closer to the end of this cycle to where it’s going to turn around. OK, what is the cycle? Well, the cycle is extremely high interest rates versus the 2 1/2 to 5% that we went through for almost 15 years. Naturally 50 years in re/max, the average interest rate 7.78%, as high as 17% in 1980. But homes were a lot cheaper then too. Oh yeah, right. So everyone says why are you used to pay 14%? It’s like, yeah, but you paid $48,000 for your home. That’s right. So right now the market is hurt because there’s more demand than there is supply. People that have two and a half, 5% mortgages, 60% of the people have mortgages are in that range. They won’t move up and pay the 7% that’s required today. Yeah. And that’s, that’s it. You’re almost the, you know, the, the, the business term golden handcuffs, right? Like you, you don’t like your job, but you make too much to leave it. That’s kind of where we are in real estate. Exactly right. You want to move, but you’re like, well, you know what? I, I can’t, I don’t want to pay 7 1/2 percent on a new mortgage. That will change. Right now there’s about 4 million resales a year. It should be closer to six to seven million. If the interest rates start coming back down, people will start understanding a normal interest rate is five and a half, 6%. And when that happens, I think you’ll see a lot of people sell. I have a number of friends and family members, some of whom are watching right now. Hello, That are real estate agents and they’re all kind of freaked out about this change this this. Do you need a buyer’s agent? What’s going to happen to commissions? You’ve been doing this half a century. Dave Co founded re/max, one of if not the biggest real estate agency firms. Congrats, by the way. Thank you. You paid a lot of mortgages yourself for your employees and put a lot of food on the table. Can you give them some words of comfort? You know, it seems chaotic in this market. Well, we’ve always been a cyclical business and if you look at the oil embargoes, you look at the 17% interest rates, you look at 2007 financial crisis, Realtors learn to adapt, change their sales and continue to succeed. Our buyers agents going away, I think it’s going to be a lot of pressure on buyer agents. We’ve had dual agency for fifty, 60-70 years. The buyer agency came about the thinking the buyer should have their own representative, nor set it up to where the seller paid the Commission and the seller’s agent shared the Commission. OK, that’s changing. Now they’ve decided that does not work and so the buyer agent is going to have to justify themselves and it’s pricey. Some people leave the business, but to your point, they will adapt.