Quick Read
- Gary Keller stated in his 2025 State of the Housing Market address that real estate is currently in a recession, potentially lasting until late 2026, despite the broader U.S. economy not being in one.
- The housing market struggle stems from stagflation, Keller said, where slowing employment coincides with rising inflation, creating a policy dilemma between raising or lowering interest rates.
- Keller urged agents to focus on lead generation and business fundamentals during this prolonged downturn, emphasizing opportunities remain for those willing to work through the challenging market.
Gary Keller’s 2025 State of the Housing Market address on Tuesday felt like déjà vu, as the Keller Williams co-founder explained the catch-22 that’s keeping the housing market in a recession.
“These are tough times. Make no mistake about it,” he said to a crowd of nearly 4,000 KW agents and brokers. “The United States, in particular, is not in a recession. Real estate is, and real estate has been, right?”
Gary Keller | Credit: KW
“Here’s the bottom line, and that is, shifts happen. They just do,” he added. “And for us, it always starts with tactic number one: Get real and get right. When you fall, get up and run. When you stumble, gather yourself and run. When you’re down, look up and run. When you’re scared, find your way and run. And when you’re happy, embrace your joy and run. And in a shift, run harder.”
Keller and his panel, which included KW Head of Industry and Learning Jason Abrams, VP of Strategic Content Jay Papasan, and Chief Economist Ruben Gonzalez, said the U.S. economy can be evaluated through gross domestic product, the cost of money (i.e., interest rates), tariffs, government policy certainty, employment, and inflation. The panel said the biggest concerns are employment and inflation trends, both of which have reignited fears that the US may be headed for a recession.
“When you look at history, and you look at times that you’ve seen the unemployment rate start to tick up, especially on an annual average. You can kind of see it here,” Gonzalez said while pointing to a chart of the past decade of unemployment trends. “It’s very rare that you have one year where it just pops up and then goes right back down to where it was. So that’s what [the Federal Reserve] is looking at right now.”
“They don’t want to see a trend in either unemployment going up or inflation going up, and they have to pick which one they’re going to battle if they’re moving in the same direction,” he added. “The policy you enact for one versus the other are opposites.”
The July Bureau of Labor Statistics employment situation showed a drop in payroll growth, with the previous estimates of hiring in May and June being revised down by a total of 258,000 jobs. The 73,000 jobs added in July were 30 percent below expectations, with the majority of losses concentrated in manufacturing, retail, trade, transportation, and logistics as they brace for the potential impacts stemming from President Trump’s tariff policy.
In a typical economy, the Mega Camp panelists said, slowing payroll growth would lead to improved inflation, as the public and private sectors would make adjustments — lowered federal funds rates and cost of goods — to stoke spending. Then, on the flip side, inflation would increase once employment recovered, reflecting increased demand from households who now have the ability to spend. However, they said, the U.S. is in an odd situation called “stagflation” where employment is slowing and inflation is growing.
“That’s the quandary,” Papasan said. “I can lower rates, or I can raise them. I can raise them to cool down the economy, or I can lower them to try to heat it up. And now they’ve got to figure out, ‘Am I going to try to fix jobs? Or am I going to fix inflation?’”
This quandary is impacting the housing market, the panel said, as the cost of borrowing needs to drop so more people can afford homes. However, increased borrowing power leads to more competition and higher home prices.
Gonzalez said the U.S. economy and housing market faced this catch-22 in the 1970s, when the financial burden of the Vietnam War, a burgeoning oil crisis, and increased manufacturing competition threw the country into a tailspin. Keller, who started selling real estate amid that economic crash, said mortgage rates skyrocketed to 18 percent — far above the current 6.71 percent average interest rate for 30-year fixed mortgages.
“I’ve got you beat on that,” he said, drawing laughter from the audience.
The panelists said current economic uncertainties have led to lower transaction sides; however, sales volume gains have remained solid, signaling the opportunity for agents to still “get their unfair share” of the market.
Abrams said there’s never a bad time to purchase, as evidenced by increasing investor activity. If a homebuyer can afford monthly housing costs and plans to hold onto their property for 10 years or more, he said, now is the perfect time to begin making deals, especially as inventory levels move toward five months of supply at the current sales pace.
“How many of you, if you could go back 20 years and buy up every piece of real estate in your town, would you do it?” he said. “You’re gonna say the same thing 20 years from now. The key is remembering that every day, so that you buy the real estate.”
Although the storm clouds are swirling, Keller encouraged agents and brokers to double down on lead generation and other business basics, saying that it could be another year before the housing market begins its rebound.
“My prediction was that by the third quarter of 2026, we would know whether we would be coming out of it or staying in longer,” he said. And we don’t know the answer to that yet. We don’t. It’s like Groundhog Day. We’ll wake up in the third quarter of 2026, we’ll come out, we’ll look around, and we’ll say ‘How are we doing?’”
“There are empires being built right now. This is called Mega Camp, not average camp,” he added. “There are empires being built right now off of the bones of the individuals who won’t get out of bed and do the work.”
Email Marian McPherson