PodcastNational Housing Market Outlook

Value Adding—How Resale Will Survive a Changing Market

Dean Wehrli

Dean Wehrli

November 20, 2023
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The real estate broker is the conduit between most people and the biggest purchase of their life—a home. Mark McLaughlin led Pacific Union International, one of the best upmarket brokerages in California, and now is the Chief Real Estate Strategist for Compass, one of the best and biggest brokerages in the nation. He is not just a broker. As the title implies, he is a strategic and visionary thinker who views the brokerage world from far above. On the latest episode of the New Home Insights podcast, Mark takes us through some key questions facing the brokerage community now and in the future.

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Featured guest

Mark McLaughlin, Chief Real Estate Strategist, Compass

At least for now, it is all about supply.

  • Everyone says it, but it is so critical you must repeat it—tight resale supply has an extraordinary impact on the housing market. Mark notes that a home with a 3% mortgage is an asset in today’s environment, so owners must be highly motivated to move.
 
  • As we have heard on the show, new home builders have gobbled up a historically outsized market share, fueled by mortgage rate buydowns and availability.
 
  • And though demand is stunted, supply is so low that the market supports pricing power as high as 1% a month in some markets despite the hurdle of high mortgage rates.
 
  • The obvious answer to boost supply is to lower rates. How much and how fast will make a huge difference, but Mark believes it would take a substantial drop in rates to result in the explosion of supply that some see coming.

Shifting strategies ...

  • With their access to massive tranches of lower fixed-rate 30-year mortgages, large builders have a clear advantage in the buydown game. But there is no reason a reseller can’t play too, shifting that price concession, for instance, to a buyer rate buydown if that is the hot button best pressed. Mark sees this uncommon tactic growing as long as rates remain elevated.
 
  • Another alternative to a high mortgage rate is to take a pass on a mortgage altogether. With generational wealth transfers and significant equity positions, all-cash purchases have soared to 28% of the market from about 20% in recent years.

... And shifting buyers

  • So, all-cash buyers are up, but the current housing environment has impacted other buyer types differently. Investors chasing yield are down, particularly in high-priced markets.
 
  • Despite only carrying a mortgage for a few months, fixers and flippers are also a bit less active. This is because high mortgage rates beat up the entry-level buyers they typically focus on.
 
  • Foreign buyers have maintained their presence at just under a 15% market share, fueled most recently by Chinese capital moving through Singapore. Money always finds a way.

Becoming tomorrow’s agent today

  • The best real estate brokers earn their commission through knowledge, trust, experience, and maintaining a close relationship with their clients. That won’t change and will be more important than ever.

  • Technology will continue to change how the brokerage relationship works and how brokers do business. Using AI and ChatGPT to eliminate the mundane can allow a closer focus on what’s important.

  • Over the next 5–10 years, Mark sees brokers offering increasingly targeted services to their clients. Luxury services, minimalist digital services. There will be an ever-expanding and evolving spectrum, but the key will always be the relationship and the value add.

  • Broker commissions have recently come under pressure. Mark sees the response to that being more transparency and more choice. So far, where changes have been made, such as in the Pacific Northwest, clients have chosen mainly the status quo.

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About The Author

Dean Wehrli
Dean Wehrli
Principal
Dean helps housing sector clients figure out not just what might work and what might not, but why.

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The Burns Real Estate Agent Survey gauges the pulse of the US resale housing market and drives the Burns Resale Housing Market Index (RHMI). The combination of data, sentiment, and commentary gives clients a clear view of resale market conditions each month.
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