Mid-Year Housing Market Update


Gary Keller and Jay Papasan, along with Ruben Gonzalez and Adi Pavlovic from KW Research, delivered the annual Market Update at Mega Agent Camp in Austin, Texas, on Thursday, Aug. 11. The conversation began with a look at the current state of the market and the numbers that drive the industry, and then explored other issues such as affordability, technology trends and industry regulations that are also impacting the market.



The housing market goes in cycles. During the growth portion of the cycle, prices are going up and inventory levels are typically low but growing. After the market shifts, prices begin to decline as inventory levels reach a peak and then start to decline. Where are we right now? “Trying to guess the market is a fool’s game,” Keller said. So, rather than trying to predict the cycles, he took the opportunity to give agents the information they need to outsmart the competition and provide even more value to their clients.



Home Sales

We are currently on pace to sell 5.6 million homes this year. There have only been three other times in U.S. history that we have been higher. However, sales are slowing in some markets as affordability becomes a serious issue.

Home Price

We are now seeing many markets split by price point. Entry-level homes remain in a seller’s market, while some luxury and move-up markets are showing signs of shifting.


Inventory is currently holding steady, and we are still in a seller’s market. But it won’t take much to push it into a buyer’s market.

Mortgage Rate

Currently, mortgage rates are one step away from being the lowest recorded interest rates in U.S. history. This is what is driving affordability as people aren’t earning more.

So as home prices continue to rise, mortgage rates remain low and price gains remain in the sustainable range for the majority of 2016, things are looking good for now. But Keller and Papasan reminded the audience that the last time we saw numbers like this, it was before the Great Recession. This is not the time to put it in cruise control if you want a business that will last for many years to come.


The three areas impacting the U.S. economy the most – gross domestic product (GDP), unemployment and inflation – were discussed next.

GDP is stagnant.

Unemployment is historically low.

Inflation remains low.


Affordability, new home construction and new home sales are special economic concerns that were also reviewed. With affordability declining since January 2016, home price continues to outpace wage growth.

Currently, new home construction is focused more on higher-end priced homes, which may have some impact in the future if there aren’t enough buyers who can afford to purchase.

This lack of new home construction in the entry-level price range is contributing to inventory shortages in many cities.


Advertising regulations are increasing. As restrictions on how real estate teams advertise are becoming more widespread, real estate agents should take some action and ask questions of their board.

Technology trends including predictive analytics, artificial intelligence, Upstream, instantaneous response time, showing innovations and transparent offer management are shaping real estate agents’ businesses.

Predictive Analysis is essentially an algorithm that when you put information into the software/program, it gives you detailed information that can help shape decisions. The area where agents are seeing this the most is in lead scoring, target marketing predictions and automated valuation models (AVM), such as those used to estimate home prices.

Increased competition in the predictive analytics space will drive accuracy, leading to higher conversion rates.

Artificial Intelligence is the theory and development of computer systems that are able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making and translation between languages. It takes predictive analysis one step further and may be able to help agents increase the customer service experience.

Upstream – the most interesting thing right now in home searching. Upstream is a simple idea that takes agents listings and places them on a central database, allowing the listing agent to control where that is.

Instantaneous response time is an area with great opportunity for agents. The real estate industry is beginning to leverage technology to improve a longtime weakness – response time. Based on a study conducted by the research department at Keller Williams Realty International in conjunction with The Keller Center at Baylor University, current agent response times are:

Text 30 minutes

Phone 1 hour 45 minutes

Email 5 hours 35 minutes

Agents should strive for a 5-minute or less response time if they want to increases their chances of converting a lead.

Showing Innovations

Showings are going through a period of innovation where different providers are offering users unique tools such as smart lockboxes and on-demand self-guided home tours. Keller challenged the audience to look for the real benefit to the buyer and seller when using self-guided tours. “One of the benefits of being there with your client is observing them and learning what they really want so you can help them,” he said. “If the technology doesn’t create more lead opportunity or better prices or service for your clients,” Keller asked, “What is the real benefit?”

Transparent Offer Management

New competitors are entering the real estate market offering “transparent offer management” solutions that allow consumers to place offers on homes online with or without an agent. Some are even making these offers visible to the public like the one below. “This technology is still in its infancy, and while they are trying to be agent-friendly, at their core, they really aren’t,” KWRI Sr. Research Analyst Adi Pavlovic said.


What to do with this Information

With the market at its healthiest in nearly a decade, now is the time to start shift-proofing your business. Remember, shifts are going to happen, but you can minimize your vulnerability by taking actions now that will help you thrive, not merely survive, when the next one occurs.

As with every presentation, a review of the Canadian housing market was also presented. For a detailed look at that information, see the presentation slides.

For more resources to help you shift-proof your business, visit KWUConnect.com.

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This post was written by Rumana Jabeen

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