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12 days ago

Something has been on my mind to write about for a while and I’ve got some time. I touched upon it on the Redfin thread but in a nutshell the residential real estate and lending industry is in deep trouble. Having been in the industry as long as I have I was always amused by people thinking the business was great when prices were going up and awful when the weren’t. I had my best years in the “worst years” and my worst years in the “best years”. To the industry home values are mostly irrelevant. The industry thrives on transaction volume.

I live and largely follow my local North County Coastal market closest. I ran these quickly without all the clean up of data I do in my weekly reports but order of magnitude is what is critical here. I could look at other or larger areas but the story would be largely the same. Closed sales in my 3 ZIPS for first 8 months

2015 – 951
2016 – 847
2017 – 899
2018 – 754
2019 – 764
2020 – 751
2021 – 878
2022 – 570
2023 – 493

Transaction volume has been steadily decreasing for a long time in an area with a growing population. In 2021 we had an outlier year, a boom with record low rates. But we pretty much should be selling between 750 and 800 single family homes in the first 8 months. Lets call that 100 homes.

Last year we had a very slow year and this year its much slower. We have about 60 homes selling per month.

That’s roughly 40% below what the industry built itself for. Now prices are high and when people get paid they get paid well but there’s a lot less paychecks being distributed among the real estate brokerages around here.

Whatever industry you are in, what would it look like if your employer lost 40% of its business? That’s what I think is coming to real estate.

And lending? That is far worse. The mortgages that are golden handcuffing people into their homes are not being refinanced and many if not most never will be! A couple months ago I had some mortgage volume stats and did some back of the envelope calculations. By my rudimentary calculation their business is down 75 to 80% from what it was. I could be off a bit but not off by an order of magnitude. Its bleak out there now in lending. Now some of that will come back eventually as transaction volumes eventually rise and those who bought with todays higher rates refinance but its gonna be a tough several years out there. Really tough!

Myself? I just look back and feel both lucky and fortunate to have lived the way I did. I spent the last 20 years preparing for something like this. Im fortunate it has no impact at all on me but I feel for my friends many of whom are unaware or unwilling to accept what is coming. I hope there are a lot of Plan B’s out there

12 days ago
Reply to  Rich Toscano

I would agree that it has to change but I think its gonna take 5 to 10 years to get back there. I’ve completed 60 laps around the sun now. I don’t have the inclination or need to wait for it to happen. I’ll keep doing my best for my past clients and those they refer to me. I’m sure I will continue getting my share and doing a great job at that. But the days of looking to aggressively build and expand this business are past for me.

12 days ago
Reply to  Rich Toscano

I don’t think that’s a bad call. My time period is not based upon any strong feeling other than this is not going to completely resolve itself in 2 or 3 years. We may see some improvement but I do believe we are looking at a greatly diminished market size for more than a short while. Maybe I’m just a grumpy old man yelling at clouds

John S.
John S.
11 days ago

Maybe it WILL be different this time:
comment image?itok=8b5yQQUW


What a run up, this time.

And, believe it or not, overall, things are unwinding faster, this time.

Faster, deeper fall?

Should be ‘interesting.’