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Keller Williams

Gary Keller says 2023 will be a ‘very, very hard’ year in real estate 

During KW's Family Reunion event on Sunday, Keller talked about the state of the real estate market — which, he says, may get worse before it gets better.

February 20, 2023
3 minutes

Key points:

  • While Keller expects 2023 to be challenging, he believes agents can have a great year if they put in the work.
  • One of his big predictions? Interest rates will remain elevated: “You’re not going to see 3% again in your lifetime.”

Gary Keller didn't mince words while speaking at KW's annual Family Reunion event on Sunday. He expects 2023 to be "very, very hard" for the real estate industry — but he also has some good news for those willing to put in the work.

In his state of the housing market presentation on Feb. 19, Keller first tackled the bad news: Things will get worse before they get better. After the second-highest drop in transactions ever in 2022, he's expecting another big drop that will put transactions at 2008 Great Recession levels.

"So everyone who says, 'Oh, it's going to turn around this year'.... How?" said Keller, who has been in the industry since 1979. "I truly believe that 2023 will be a really tough year. It will be very, very hard… and if you don't work hard to match the hard, your year is going to suck."

Real estate professionals will be able to put that theory to the test soon enough. The most difficult period in terms of home prices and transactions will likely be the first six months of 2023, said Ruben Gonzalez, chief economist at Keller Williams and a participant during Keller's presentation.

However, thanks to the strength of home appreciation in recent years, Keller also expects sales volume to be the third-highest ever. So while there are fewer opportunities to get a listing, agents should be focusing on maximizing their earnings per transaction.

"If you want to have a great year, you can have a great year," Keller told the audience in Anaheim, California. "Not everyone is going to have one. People reward unequal opportunities in this industry. There's plenty of business there."

Keller said that agents in this market should be focused on helping clients understand a few key points: what to expect as the year progresses, the value of investing in real estate, and perhaps most importantly, the likelihood that elevated interest rates are sticking around.

"You're not going to see 3% [interest rates] again in your lifetime. My guess is you will never see 4% in your lifetime," Keller said.

The ongoing shortage of inventory, according to Keller, is one reason that ultra-low mortgage rates will not be coming back anytime soon. With so little supply, Keller said the Federal Reserve knows that making financing less expensive will lead to a jump in home prices, something they don't want to see while trying to get inflation under control.

"There's 4 million homes missing that we never built coming out of the Great Recession," Keller said. "And because of that… we're not catching up. This is a problem." 

While the industry will start to work its way back to normal this year, Keller said there are still economic risks that could derail the recovery. An escalation in Ukraine, for example, could create more inflation issues and another spike in interest rates; federal government debt-ceiling brinkmanship, political tensions with China and continuing environmental concerns are also risks in 2023.

What happens with inflation will have one of the bigger impacts on real estate in 2023. Economists expect inflation will continue to go down, but "if something weird happens and it goes up… then all bets are off," Keller said.

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