Bryan

Hello and welcome back to Change and the Market, your weekly look at the changing real estate market. I'm your host, Bryan, joined as always by the other host, Mr. Chris Masiello, our residential real estate expert. Not residential, our resident real estate expert. Chris, how are you doing today?

Chris

Hey, good Bryan. Good to be with you. Good to be with everybody. Yeah, we do commercial real estate too.

Bryan

See, I realized I was narrowing you down and putting you in a box that you don't necessarily belong in. So let's get right into it. Chris, how has the market changed over the past week? Where are we going and what's going on?

Chris

I don't know if it's about what's changed in the last week as much as it is a realization that certainly hit me in the last couple of weeks—and I think we're starting to see this surface more now in trade publications and economic publications—is that housing typically will go through 7 to 10-year cycles.

And I think that the cycle that we're in now—I think it got misinterpreted as a cycle. You know, the cooling down of the housing market, "is the housing market going to crash?", all those things. And of course, really none of that actually came true. The transaction volume slowed down a little bit, but sales prices continue to go up.

So here's the way I'm beginning to understand this. And I feel really, really comfortable about this—is that we're not in an economic housing cycle. We're really in a systemic change when it comes to housing. And a systemic change in that we're we've moved into—and I think this is an important distinction—it's not that we're moving into it. We've moved into a systemic change in housing where we're going to continually have low unit count, closed number of annual sales—because of inventory, lack of inventory—and also because of that low inventory, we're still going to see sales prices continue to go up.

So the National Association of Realtors just put out the report of course sales prices went up again. And of course, interest rates go up and sales prices are going up. Those two don't live together. Sales prices continue to go up and unit count goes down. Both those don't live together either, historically—but we've moved out of the old historical cycle paradigm into a new systemic change, where I think that we're going to have a lot more consistency in the market. I think that's really a good thing, where we're going to have a slightly lower unit count—and I'll give you some numbers comparatively in just a second—and we're going to have more consistent unit numbers. We're not going to have these big fluctuations as much, and sales prices are going to continue to go up modestly. They'll move around a little bit. You'll have different rates of appreciation one year over the next, depending on what happens with interest rates and things like that.

And so generally, when you take a look at housing unit count nationally—so I'll give national numbers; it's just easier to relate to. A good housing year might be 5 to 6 million closed residential units. This past year was like—low fours, like 4.2 or something like that. I think that's going to be more the norm. I think instead of 5 to 6 million, I think we're going to see more of that 4 to 5 million range, just because we don't have the inventory. Like we talked about last week, new construction's off 50% in the last ten or 15 years, which exacerbates that situation.

So I think we need to start to fully understand that this isn't just a cycle that's going to bounce back—we've moved into a systemic change of the market.

Bryan

Interesting. So kind of taking that, is there something … since we are kind of systemically changing the way—we're not doing it—but the market has sort of systemically changed in your opinion. Is there something that agents, that people in the business should be doing to adapt to this change? Is there a direction that they should be moving, or what is your advice for people in the industry?

Chris

That you're going to have a more consistent environment, which means from a business practices perspective, as an individual agent and as a company—that you're going to actually have the ability to kind of plan more and not be working at a lot of these frenetic paces that we're used to. Up markets, down markets, right? You're constantly having to adjust.

And I think the most important thing is to obviously always stay in touch with your customer base, because your customer base is really the lifeblood for an individual agent. I think it's going to allow us as an industry to work in a more consistent environment that has—like I said—a less frenetic pace to it, and that will allow us to maybe do a little more long-term planning, you know, and things like that. You know, where we're not constantly always reacting to these up and down cycles. So I think it actually has a lot of good to it.

Bryan

Yeah. It's kind of like embracing a new normal, as opposed to like constantly looking for and addressing the fluctuations of what you're seeing, I think is kind of what you're getting at there. Fantastic. And then wrapping that up, finally, your broader advice in general kind of applies to that new normal and looking at things going forward when we do face great change. So talk a little bit about that.

Chris

You know, one of the things that struck me was the fact that this isn't a cycle, but that we have moved into a new normal of systemic change. And I think we can see that in our lives, like how do we gain our awareness around when we moved from a cycle in our life, could be with family or personal, whatever the case may be. It could be business.

But how do we know when we have moved from a cycle to where we've moved into a new normal, when we've moved into systemic change? And I think once we sort that out and we have more awareness of it, then we're really better equipped to use whatever that change is to our advantage.

Bryan

Fantastic. And I think the main point that we were talking about going into it is not being afraid of new labels, or of using new labels and always applying old labels to what is currently going on. Can you expand on that a little bit?

Chris

I think when we start to label things, like we were just talking about—well, this is an old cycle, right? Or, this is a typical housing cycle. So we label it, then what happens is that we've given an old definition as opposed to understanding that maybe really it's a new definition.

You can't do new things in old ways and get a different result, right? So I think, just having awareness around that.

Bryan

Fantastic. That's going to do it for this week's episode of Change and the Market. Great advice, as always, Chris. As always, you can do us a favor by liking, subscribing, following us, whatever you can do on whatever platform you're watching or listening on. And then join us back here next week for another brand-new episode of Change and the Market.

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The Masiello Group is a second-generation family company that has been a trailblazer in New England real estate since 1966. With now more than 35 offices throughout northern New England, we're the largest residential real estate firm north of Boston to offer a complete suite of home services, including buying, selling, mortgage, title, insurance, relocation, and more.

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