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Keller Williams CEO explains that sometimes prices need to go down

by James McClister

Student Debt and Housing’s Future

HA: I’m glad that you bring that up, because those problems – student debt and low-end inventory – are problems that we’re kind of steeped in right now. From a purely speculative standpoint, do you see any way of solving those problems?

CH: I agree with you: the debt is the debt, and unless there is intervention, it’s not going to change. What could change, though, is inventory. I’m looking out my window at downtown Austin, and there are many construction cranes in the skyline. The vast majority of the construction that’s been taking place in Austin over the last 36 months has been high-rise apartments.

Rents are high right now, so developers have an incentive to build rental units. If there was more inventory being built for sale, that additional supply would put some downward pressure on prices or slow down the appreciation of prices, which again impacts – in a positive way – affordability. Maybe it’s because I was an economics major in college, but I see most things as cyclical. It’s the natural market forces that cause prices to go up and go down. Sometimes, prices going down is the absolutely right thing for a market. There are those who argue that in the last downturn, when the government stepped in and did things to slow down the decline of the market and help the market recover, that that was actually detrimental. We need to let nature take its course and, as painful as it may seem, have things adjust to their natural level. But that’s all in retrospect; we can’t do that.

Right now, the market, in some areas, needs to slow down, and prices need a correction. That’s a hard concept for people in our industry to talk about, but we should not view it as a bad thing. The reality, at least from our perspective as a brokerage company, is that even when the market slows down, there are still more sales happening than our company or our agents could ever handle. It does not necessarily have to impact a brokerage company. We know that because the last downturn didn’t impact us in a negative way. As an agent myself for 27 years, and having gone through several cycles in Southern California, my business went up even when the markets were going down, because there were still plenty of transactions taking place.

There’s no switch to flip to fix those issues. Some of them are just market forces that are going to happen. I think the important thing for companies, whether someone’s a homebuilder, luxury agent, or a brokerage, is to be aware of what’s going on and make the necessary adjustments.

 


Keller Williams CEO Chris Heller is one of the biggest names in real estate. A veteran of nearly 30 years, he’s served in a number of sales and leadership roles, including the Broker Public Portal’s Executive Committee and Board of Managers, and the National Association of Realtors Large Residential Firms Real Estate Services Advisory Board. In 2016, Heller was named among Real Estate Executive Magazine’s 100 Most Influential Real Estate Executives, and Swanepoel listed him as one of the 10 Most Powerful and Infuential Corporate Executives in Residential Real Estate.

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