It was an interesting 2024 to say the least. After doing this for over two decades, people who know me know that I am never afraid to make predictions and am usually near the bull’s eye because it’s typically more about pattern recognition than having any special predictive powers. However, this environment has become incredibly difficult to make any predictions with any broad strokes.
We’ve seen bi-furcated and even tri-furcated markets before, but historically they all tend to ebb and flow in the same direction at different levels. This year has shattered the notion that all real estate boats rise and fall with the same tide because macro factors are creating different cross winds that have spilled over from COVID and public policy.
Residential is vastly different than the commercial market. Within the commercial market, office and retail are completely different than hotels, apartments and industrial. Within residential, single-family homes are behaving differently than condominiums. Urban core is different than suburban and rural markets. Townhomes on one side of town are moving differently than the other side of town. Ultra luxury (+$8 million) is very different than regular luxury (+$4 million). All this is to say, when people ask me today, “How is the market?”, my immediate reply is, “Which one?”
One key thing this fractured market has made me reflect on is the move for the past 20 years away from being a generalist to a specialist. The conventional wisdom is this helps you differentiate yourself from your peers in an increasingly competitive landscape. The conclusion is that it’s best to be a condo expert, or new construction, or waterfront, or first-time buyer, etc.
I sense that the tide is shifting again. In an era where the consumer has access to so much information directly, feels empowered and even often times thinks they know more about their product type than their broker does, there is benefit to positioning yourself as a trusted advisor on all things real estate while being honest about where you’re expertise lies rather than branding yourself exclusively to a single product type.
What is often lost in the conversation about a sustained “low inventory” market is that also means it’s a low transaction market. When closed sales are down nearly 25-30% from their historical averages and down 40% from recent peaks, brokers need to expand their reach and potential client pool by broadening their scope through education and opening up to product types they wouldn’t normally focus on to try to make up that deficit.
My prediction for 2025 is similar to what it was for 2024, which is that it remains critical not to make any sweeping assumptions or characterizations about the market. Each house, each property, and each client will be completely unique for that moment in time. It remains important to understand recent comparable sales and speak to brokers in your peer group about what they are seeing, but two similar properties listed just two or three weeks apart can have vastly different results based on what would usually be thought of as very benign differences.
We will continue to see sellers frustrated that they don’t universally have the upper hand, especially if they were purchasers themselves from 2017-2022 because that’s their recent experience creating the lens they see the market through. We will also see obstinate buyers, frustrated there are so many factors suggesting downward pressure on prices such as higher interest rates, higher property taxes, higher insurance costs and even a slowdown in hiring. At the end of the day, absent of higher inventory and increased seller competition, the buyer’s negotiation position may still be very limited in many different market segments.
The industry remains strong and real estate in the United States remains the envy of the world. Our transparent transaction process, respect for private property rights, tax advantages and ability to build net worth through both appreciation and debt reduction means I would never bet against it. That said, there are many issues that will need to be reconciled over the next few years.
Some segments have been massively overbuilt while others have been massively underbuilt. That dichotomy will play havoc on headlines and overall sentiment. Our role as trusted advisors will be to sort through all the noise to be able to remind clients that each property and situation is as unique as our fingerprints or a snowflake. As we used to say in the Army, “stay frosty!”
Michael Orbino is the 2024 Seattle King County REALTORS® president, managing broker for Team Foster, builder + developer services at COMPASS.