2 weeks Ago By Tim Melvin
After decades of watching housing markets ebb and flow, I can tell you that today’s real estate market presents a fascinating mix of challenges and opportunities. Let us cut through the noise and look at what is really happening on the ground. First things first: This is not 2008.
The fundamentals and players are different, and most importantly, the risks are different. Freddie Mac’s latest data shows single-family housing starts up 35.2% year-over-year in February 2024.
That is a significant number that tells us builders see opportunity despite what the headlines might suggest. The housing market ultimately comes down to supply and demand—a principle as reliable as sunrise. What we are seeing now is a market where supply remains stubborn: Most people with a mortgage are paying less than 4%.
They have no interest in selling. More than half of all homes are owned by people over 55 with little to no interest in selling. Buyers are still on the sidelines because prices seem too high, and mortgage rates have risen from the lows of the past several years.
Buyers are taking some time to adjust to the new reality, but they will get there. When demand increases, prices do not just drift up—they climb significantly because supply cannot respond quickly enough. We are likely to see a gradual improvement in market conditions by 2025.
Inventory should increase slowly, and prices will likely remain stable in most markets. The smart money is focusing on areas with strong fundamentals—population growth, job creation, and sustainable demand patterns. Markets eventually find equilibrium, even if the path is not always straight.
The current challenges in housing are creating inefficiencies, and where there are inefficiencies, there are opportunities. The key is maintaining a clear perspective and focusing on fundamentals rather than market noise. Someone forgot to tell investors all of this.
The stocks of the leading brokerage firms are priced as if no one will ever buy a house again. They will. [Up Next: Get New High-Yield Stock Picks Every Month with The Easy Income Portfolio ] I promise you that right now, across America, there are young families in apartments who are more than ready to take the leap.
They need the space, the better schools, and the community that owning a house can give a family. Builders will build new housing for first-time and move-up buyers. They need a few tax incentives, and the affordability issue will be front and center on voters’ minds.
If conditions do not change, this will go from an important issue in 2024 to the central issue of the 2026 midterm elections. Investors who begin accumulating shares of beaten-down and depressed real estate brokers will make enormous amounts of money. The commission structure is changing thanks to lawsuits and FTC investigations, but the industry will survive and find ways to thrive in the new environment.
Shares of Re/Max Holdings (RMAX) , one of the most successful real estate brokers, have risen sharply since they collapsed due to the commission lawsuits. The company settled, and it will be in an excellent position to profit as the industry recovers. RE/MAX is one of the largest real estate franchisors and benefits from a resilient business model that generates steady franchise fee income.
This supports cash flow even during slower housing markets. Furthermore, the company’s investment in technology and digital tools should drive higher franchise adoption and retention rates. The stock is trading at about 25% of the 2021 highs, and the stock could recover most, if not all, of that decline as the housing market recovers and buyers move back into the stock.
It should be the same for shares of Anywhere Real Estate (HOUS) . With well-known brands like Coldwell Banker, Century 21, and Sotheby’s International Realty under its umbrella, Anywhere can leverage its expansive network to capture market share, even in a slower housing market. The company’s focus on innovation, particularly its investment in digital tools and platforms, may improve agent productivity and streamline customer interactions.
This commitment to modernizing its operations and enhancing agent support is crucial, as technology increasingly influences real estate transactions. With homebuyers and sellers seeking greater convenience and transparency, Anywhere’s efforts to digitize and optimize its services could be a valuable differentiator that bolsters growth. This stock could be the big winner.
It is not hard to see the price of this stock at five or even ten times the current prices when the housing markets have fully recovered and are roaring once again. That will happen. It always does.
Boom follows bust like day follows night and hippies followed the Grateful Dead. When it does, the beaten-down brokerages will go from unloved to market darlings rapidly. Unlock unlimited stock reports on ticker pages with Benzinga Edge.
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