Realogy is bracing for a market slowdown, according to the L.A. Times. Realogy is the parent company of:
- Century 21;
- Coldwell Banker;
- ERA;
- Sotheby’s International; and
- Better Homes and Gardens,
just to name a few. So yeah, they are a major player in the U.S. (and global) real estate market. Collectively, they represented 1.4 million buyers and sellers of real estate last year.
Realogy is in a unique position to predict future real estate market performance. Aside from the fact that they have considerable market share, they are also a publicly traded company. Thus they have the added pressure of telling a reasoned, factual story to their shareholders about the company’s expected performance. This is opposed to organizations like NAR and CAR, who unfailingly take the Pollyanna approach when it comes to reporting real estate market trends.
Realogy’s CFO was quoted in the Times as saying:
“2014 could be a challenging year, especially if transaction volume growth continues to slow throughout the prime selling season”
To translate that into non-C-level speak, he’s saying they are not selling as many homes as they hoped they would and that’s a bad sign. It’s really that simple.
Some continue to beat the drum of rising prices and tight inventory, which are indeed realities of our current market. But neither are causes of the coming market correction.
We’ve been predicting this trouble since it all began in mid-2012 when investors and speculators came on the scene and began bidding up property prices. We don’t need a $7 billion real estate conglomerate to read us the writing in the wall — but it helps when they agree.
Well, I’ve been a broker since 1971 and it is obvious to me that people (most of them) just do not have the funds to buy anything because jobs are not out there despite what the leftist government is telling you. The prices for homes are ridiculously high . . . just like what it was in 2006. You’re about to be punched in the schnozzola.
I have been in the real estate business for 32 years in California. The ups and downs are part of the business. However with each down there has never been a new low. Demand for owning a home is increasing. The value of our real estate when compared to others places in the world is very inexpensive. We have a strong economy which is improving despite the ever growing intrusion of taxes and regulation. This up cycle has just started. For those of you waiting until the next downturn, I wish you luck.
Scott: You say with each downturn there has never been a new low. This is because you are measuring highs, lows, and prices with an elastic accounting unit – the Federal Reserve Note. This accounting unit now represents about 1.5% of the comparative wealth that it once did. An interesting example is gasoline. In 1964 you could buy a gallon of gas with 3 dimes. They were silver then. If you still had those 3 dimes, you would get more than one gallon of gas today. In reality, the price of gas is actually cheaper today than it was back then. So are prices going up? Or is it the money going down? Its obvious. This is why there has never been a new low.
Coldwell Banker, by the way, had a bit of a downsizing in our area here in Rolling Hills Estates. They couldn’t wait to move into a prestigious brand new high profile building on Silver Spur drive and slap up their sign.
After all, how more prestigious can it get–a very visible corner on the main business street of the richest area in California? Yet, only months later, Coldwell vacated.
Why? The hard realities of the real estate market: agents fled for higher commissions and a better offer with another company. Result: Egg on Coldwell’s face.
Vanity of vanities, all is vanity. Now where have I read that?
Some believe a never-ending flow of large investor purchases will assure the sale of any available property, which will then be offered for rent at outrageous prices. They believe the investor class will continue to rake in the dollars at the expense of the renting public.
One factor that these persons do not consider is “the breaking point.” How high can property prices and rental prices go before it all “snaps”? With millions still jobless, a government feeding us absurd and fabricated unemployment figures, with a shrinking middle class, a cash-strapped group of elderly, and a flat broke and college-debt ridden young adult class, who, pray tell, will be able to afford the increasingly bloated California rents (the highest in the nation, by the way).
The breaking point will hit soon. People are bunching up in rental units creating health and safety hazards, sacrificing in other areas to pay rent, or simply moving out of state. This situation is untenable. It cannot go on much longer.
Anyone who believes the wealthy investors can continue their cash-cow renting policies indefinitely is, in my opinion, mistaken. If significant inflation or even hyperinflation strike, that will put the skids on rental fees mighty quick. A Black Swan event could have the same effect.
The investors have unlimited money and will continue to have unlimited money to buy homes for rentals for the next 10 years!
Since there are less homeowners there are less renters and this d=drives the price of rentals higher and higher and these higher rental prices will keep the rich investors making a huge return on investment and this in turn will continue to keep the rich buying rental properties.
It cannot be other wise. ( Think about it—–Why would the rich buyers go away when they are making a killing and have unlimited money to invest.????)
I disagree with your final statement that this cycle will continue.
Where were you during the early 2000’s.
Prices of property in California doubled in 4 years and all parties from the individual homeowner to mega corporations invested in everything creating a false illusion that what goes up does “NOT” have to come down, or that I will know exactly when to sell, before any bubble bursts. But, as humans we are naturally “GREEDY” and we have a short memory, so “d” will continue for some time, until the next bubble bursts and everyone including Mega Corporations with their fancy accountants and experienced analysts that have overextended themselves will suffer just like everyone else. The bright corporation and/or investor will diversify, but many if not most will have every dime in Real Estate.
Hi,
I have been a Broker in Los Angeles 34 years.
Real estate is not a commodity jumping up and down. It moves
in long cycles. It’s like an elephant.
We have many years of upside ahead of us. Young people don’t realize
just how long real estate can move up and keep moving up.
Baby boomers are cashing out of 401’ks and pensions in lump
sums. Tremendous amounts of cash are hitting the market
and will continue to hit the market for another decade.
There will be lots of cash and few decent houses to buy.
Realogy is a wonderful company. I worked for them for nine years before they were called Cendant and Cendant Mobility. I am now retired. The real estate market on a whole has been suffering off and on since 2009. As with real estate it has its ups and down cycles. Investors seem to be purchasing many homes for rentals leaving less inventory for buyers. I currently retain my license, but do not sell and wish all of those that do a prosperious year.
A major market correction is coming soon. The core reason for this is that the housing market (at least in SoCal) has deviated from a basic demand and supply relationship to an investment market. Home prices have been padded by foreign investors mainly from China fleeing their own bubble, national investors like Blackstone looking to get rich off of recovering home prices, and more recently, downsizing baby boomers. All these entities are paying all cash for housing, beating out average Joe American and simulating demand.
When this happens at the same time that real wages have stagnated, and the largest generation, millennials, do not have the money for homeownership to meet the demand of baby boomers wanting to downsize, it leads to a very precarious and unsustainable situation.
Mark is exactly right. It’s not sustainable at the current rate.