35.4 percent: Home sales plummet
Sales of existing homes dropped 35.4 percent between November 2021 and November 2022, when the most recent data from the National Association of Realtors was available.
The rapid rise in mortgage rates has slowed homebuying activity dramatically across the country after it reached a fever pitch during 2021, with rates hovering around 7 percent at times during November.
$928 million: Opendoor’s stunning losses
The iBuyer Opendoor tallied jaw-dropping losses during the third quarter of 2022, racking up just shy of a billion dollars in losses at $928 million, finding itself a victim of the slowing housing market as it was forced to sell houses for less than it purchased them.
Shortly after its third-quarter earnings report, the iBuyer dramatically shook up its executive suite, removing founder Eric Wu as CEO while its president resigned. The same month saw Redfin shut down its iBuyer RedfinNow, signaling a shaky future for iBuyers.
$320 million: Compass’ savings pledge
New York Stock Exchange Twitter (@NYSE)
Executives at Compass promised shareholders they would find a way to trim $320 million worth of fat off their losses as it was revealed they lost $101 million during the second quarter of 2022.
One of the ways they promised to do this was by eliminating parts of the recruitment package that helped them grow to the largest company of their kind in the United States. In mid-August, the brokerage announced they would stop offering stock and cash options to new recruits, and that new agents would have to use a standard commission split.
≈ 18,000: Real estate layoffs galore
More than 18,00 workers were laid off by real estate companies during 2022, based on Inman’s monitoring of the industry.
With home sales dampened by high mortgage rates and recession fears escalating, a long list of companies decided to shed staff, including Compass, Redfin, Zillow and Blend.
The layoffs to attract the most attention — including from outside of the real estate industry — were those executed by the mortgage financing company Better, who first laid off 900 workers in a single Zoom call last December, attracting near-universal scorn, before laying off 3,000 more workers in March.
$888: Ownership costs soar
It cost $888 more per month to own a home than rent one by the end of 2022, according to data from John Burns Real Estate Consulting.
The price disparity was a dramatic jump from the beginning of the year when super-low mortgage rates made buying a home more economical than renting one in most cities. While rents rose at a breakneck pace as well, homeownership costs rose even more, thanks to sky-high interest rates.
8.4 percent: Rents slow their roll
Rents rose 8.4 percent on a year-to-year basis in November 2021 — the most recent month for which data was available — half the rate they rose at in February 2022, when they jumped 17.1 percent year over year.
Rents even declined 0.4 percent between October and November, according to data from Zillow, closing the door on a nearly two-year period that saw rents increase at an above-average pace every month.
10.1 percent: Price growth decreases
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Price growth for homes in the U.S. slowed to an annual rate of 10.1 percent between October 2021 and October 2022, a significantly slower rate than earlier in 2022, when they reached a peak of 20.1 percent growth in April, according to data from the real estate intelligence firm CoreLogic.
Tapered demand brought on by high mortgage rates has managed to slow home price appreciation significantly but has not yet caused a noticeable drop in values on a national level. CoreLogic economists predict that annual growth will slow to 4.1 percent by October 2023.
$1 billion: A game-changing lawsuit
A federal court’s ruling in April made it possible for hundreds of thousands of home sellers to ask to be reimbursed for more than $1 billion in commissions they paid to buyer’s agents.
The ruling was a result of a class action suit filed against Realogy/Anywhere RE/MAX, Keller Williams, HomeServices of America and the National Association of Realtors, which alleged that the sharing of commissions between listing and buyer brokers violates the Sherman Antitrust Act by inflating seller costs.
The case has since been subject to appeals by Anywhere, which is still listed as Realogy in court papers, and has been postponed to an undetermined date in 2023.
≈ 7.5 percent: Mortgage rates peak
Much, if not all, of the pitfalls of the 2022 housing market can be attributed to the steep rise in mortgage rates.
After reaching new lows of less than 3 percent during 2021 rates shot up in 2022, and in October, exceeded 7.5 percent — far above what most analysts predicted they would reach at the beginning of 2022 as the Federal Reserve waged war against inflation. Rates have since retreated slightly from their highs but remain double what they were at the beginning of the year.
54 points: A decline in homebuilder sentiment
Homebuilder sentiment plummeted a total of 54 points in 2022, according to the Wells Fargo/National Association of Homebuilders Housing Market Index.
While the index started the year at 83 points in January, it clocked 12-straight months of declines as builders dealt with low buyer traffic and high construction costs due to inflation, ending the year at 31 points.
The 31-point reading represented the lowest builder sentiment score since 2012, not counting the early months of the pandemic in Spring 2020.
37 days: Time on market increases
The typical American home spent a median of 37 days on market during November 2022, according to Redfin, a 15 percent increase from November 2021.
Homes spent more and more time on market during the latter half of 2022 as mortgage rates increased and the market transitioned away from one of the strongest seller’s markets in years.
$80 million: Offerpad’s profit streak ends
Beleaguered iBuyer Offerpad posted a net loss of $80 million during the third quarter of 2022, ending its three-quarter profitability streak as it struggled in the high-mortgage rate housing environment.
Its third-quarter losses were significantly higher than the third quarter of 2021, when it lost only $15.3 million, though its revenue increased 52 percent in the same period.
Shortly after its third-quarter results were announced, the iBuyer received communication from the New York Stock Exchange that it was in danger of being booted from the exchange due to its stock price remaining under $1 for 30 consecutive trading days.
17 percent: Anywhere’s revenues decline
Brokerage giant Anywhere Real Estate saw revenues decline 17 percent between the third quarters of 2021 and 2022, as the Madison, New Jersey-based company faced down a “deteriorating market.”
The parent company of name-brand brokerages, such as Sotheby’s International Realty, Corcoran Group and Better Homes and Gardens Real Estate raked in $1.8 billion during the third quarter, the second straight quarter in which its revenues declined annually.
As one of the biggest brokerage companies in the U.S., Anywhere’s revenue declines reflected the hardship faced by brokerages across the board as homeownership became unattainable for many due to high borrowing costs and its effect on the brokerage industry.
$88.9 million: A rare third-quarter profit
RE/MAX tallied $88.9 million in revenue and managed to stay profitable during the third quarter of 2022 during an earnings season in which most brokerages hemorrhaged money.
The company totaled $100,000 in profits, making it profitable by the skin of its teeth, yet down significantly from the $5.8 million it tallied in the second quarter, illustrating how quickly and how dramatically the housing market shifted in the latter half of the year.
RE/MAX attributed its ability to stay profitable to revenues from previous acquisitions.
Final Thoughts on what you “Need to Know”
Recognize that media outlets and social media influencers are competing for scoops and eyeballs. As a result, their reports sometimes exaggerate issues, don’t tell the whole story, or get it wrong.
What’s being said whether it’s true or not true, becomes the optics for the consumer. When interest rates started to rise, “you were hearing, ‘The sky is falling! Is this 2008 again?’—which was utter nonsense.”
Agents need to get back into the right patterns—not sitting around hoping. We tell people, Homes are still selling. Now more than ever it’s the fundamentals that matter. (See our Home Seller Plan Here) .”
“It’s easy to be influenced by dramatic headlines, but when you drill down on the facts, you discover that the market isn’t crashing. It’s just shifting toward a slightly less frantic pace,”
Housing is an essential necessity. People will still sell, and people will still buy. And we here at The Cascade Team are here to help you every step of the way!