Anne Hartnett
Hi, I’m Anne Hartnett. Welcome back to our 2025 Q3 Market Update with economist Matthew Gardner. It’s been a dynamic year so far for housing and as we move through Q3, agents are navigating a market defined by consolidation headlines, mortgage rates and shifting buyer psychology. In our Q2 discussion, Matthew projected modest improvement in affordability by late summer, but a lot has happened since then. Today, we’ll dig into what’s actually unfolding on the ground, what’s driving sentiment heading into Q4, and the key data points every agent should be watching.

Matthew, we’ve already seen consolidation headlines this year. What’s the sentiment among large brokerages and consumers heading into Q4? Is the M&A trend accelerating? How is this going to affect agents?

Matthew Gardner
Well, that’s a great question and one that’s on everyone’s lips right now, Anne. It’s pretty amazing if you think about it. Obviously everyone is still talking about the Compass-Anywhere deal. You know, $1.6 billion in stock and they took on about $2.5 billion in debt. But what it’s done, if you combine Compass and Anywhere, you now are looking at a company that’s got in total more than 90,000 agents. So then in recent history, that obviously is a massive deal. Some other ones have occurred, obviously — eXp did a couple of deals earlier on, and obviously Christie’s going to Compass. So a lot is happening. Will it accelerate? I mean, on face value, I wonder how, and I say that because, who’s got any scale left? By broker count, as I mentioned, you’ve got about 90,000 now between Compass and Anywhere. I mean, eXp’s running about 65,000 and we have a handful above ten. So what it says to me is that if we do see more, they are, I believe, going to be more strategic than anything else. So it would rather be picking up a geographic market or a niche part of a market, whether it be luxury or waterfront or whatever that may be.

So could more happen? Yes. I think it’s quite possible. Could I say or would I say that it’s probable? I don’t think so. So, we’ll have to wait and see. I think the Anywhere deal was a surprise to a lot of people, myself included. Why, and what’s the impact? Well, certainly, I’ve heard Reffkin and a number of other people talking and saying the benefits of scale. Big firms, they use these to gain market share, which obviously is the case, possibly to improve operational efficiencies. Sure. But the other part of it, which we do hear a lot about, is technology. And that is certainly, I think, a major part of this. When larger firms acquire smaller ones, in order to leverage their digital platforms per se, that is something which they will be able to sell to would-be incoming brokers as a significant benefit.

Are there challenges to the smaller independents? Well, sure. More competition. It could put pressure on profitability tech. We’ve talked about how larger companies have greater capacities in that respect, and they can also potentially handle market volatility a little bit better than smaller companies. But at the same time, if I think of the smaller boutique brokerages, that is what they are likely to be selling themselves on — a more personal experience. So I think there’s positives in, quite frankly, either side. Do I expect to see a lot more going forward? I think, again, as I mentioned earlier, I’d be a little bit surprised, but now time will tell.

Hartnett
With mortgage rates still elevated, how are today’s buyers adapting, and are we seeing creative financing solutions become more mainstream?

Gardner
Well, I mean, certainly without a doubt the market is not as robust as we’ve seen it for the last few years. Therefore, are we seeing seller concessions? Sure. And they can do that in different ways, obviously. Rate buy downs. Discounting points. Sure. And so I think those are things we’re seeing more of. There is still some interest, certainly, in looking at potentially short term moves, as in buying a home on an ARM or a FHA ARM or something like that, in order to hopefully get it at a rate which they’re okay with right now with. Ultimately, I hope that they will either refi into a 30, or rates will be better going forward, which means there’s not going to be so much of a sticker shock when that ARM becomes due. I mean, there are some weird ones, potentially with the rent-to-own, but very few of those that I see out there. Seller financing, which we obviously saw decades ago, you’ll see it in new construction. But there are 30 million homes in the U.S. today that have no mortgages on them, so I think that we could possibly see some more in terms of possibly some sellers being interested in doing it. But I think the big thing right now is that — creative, sure, but I think that we’re in an environment where people are just becoming attuned and quite frankly, accustomed to where mortgage rates are right now and the view that they may well not be coming down too much going forward.

Hartnett
Is zoning reform or new housing legislation having any real impact in key metros yet? Has the wait-and-see mindset shifted at all in Q3, particularly for move-up or first-time home buyers?

Gardner
Ah, the “wait-and-see.” We certainly had a lot of that, as you know, over the course of the last year or so, and this was, quite frankly, would-be home buyers, whether they be first-time homebuyers or repeat buyers. Looking at it one of two ways, either I’m going to wait for rates to drop very significantly, at which point I’ll jump in, or alternatively, they’re saying, okay, well, the housing market’s going to plummet. I’ll wait for prices to see a big contraction, and then I’ll get in.
I think if they were looking at either path, they’re probably still sat on the fence waiting. So I think the wait-and-see — yeah, I think for most buyers, they understand the fact that, well, one, we’re not going to head back down into the threes or 4% range, and we are still above six. And I think as I mentioned in our last quarterly chart, I expect longer term, we’re going to be seesawing either side of 6% — high fives to low sixes, and that’s going to be the terminal rate, the long-term rate going forward. So I think, yeah, when you become used to that, then of course, you can reset your own expectations for where you think the market’s going to go. And also resetting potentially your expectations as to how much you can afford.

So yeah, I think buyers are out there. However, understanding the fact that we had first time buyers’ share of the marketplace, I mean, according to the last stage we got through from NAR, remarkably low at 28%. I mean, that’s not the all time low. That was, I believe, 26% in the early part of 2024, I think. So, yeah, I think that the mindset there for a lot of people, a lot of buyers, is rates are where they are. I’ll start resetting my expectations as to what I can afford. But when you think about, how can we see, affordability improve, or prices in general come down, really come down, I think you have to look at the new construction world. And there, some of those zoning reforms and new housing legislation that you mentioned a few minutes ago, yeah, is that a good thing? Well, obviously here in Washington State, but we have for a while. But not just here — Oregon, California, Maine, Massachusetts, Montana, Vermont, have all seen significant zoning reforms. New York, New Jersey, Colorado, also making inroads in that respect.

So when you look at it for the density, you have to look at one of two ways. Either the traditional single-family or townhome or duplexes, four unit buildings, this kind of thing, and suddenly we suddenly see some interest in it. But more than that, it’s the ADU, the accessory dwelling unit, whether it be attached or detached. Certainly there is more permanent activity going on, but unfortunately it’s still, quite frankly, not very much. I mean, the city of Seattle, I looked at the numbers this morning, year-to-date we’re about 260 detached ADU units and attached, we’re about 250. So not a lot, quite frankly. So what do I expect the world going forward to look like? I’m glad to see that jurisdictions are looking at this as being very important because it is. However, two things: One, it’s not going to be a panacea. It’s not going to solve all our housing woes. And quite frankly, it’s still too early for us to look at the data. We haven’t got a long enough trend yet, but we still have a situation whereby material costs are remarkably high. It is expensive to build, and so given that, it’s nice to see efforts being made, but we’ve yet to really see that move into a more tangible change to the marketplace in terms of adding new supply.

Hartnett
What’s the biggest risk to the housing market as we head into Q4 in 2026? Is it policy-driven, economic or something else?

Gardner
All of the above. I’d say uncertainty, and that’s both from a policy standpoint as well as a personal standpoint. People are uncertain about the housing market. They’re looking at it being very expensive. They’re saying, you know, if I get it now, could we see prices correct on the downside? But I think that, as I mentioned, I think we’ll see borrowing costs move modestly lower from where they are today. But I do believe that we’re gonna have some more clarity as to where rates will be in the longer term. We’re gonna start to see that in the early part of next year.

But also from the political standpoint, again, it is also uncertainty. We’re still seeing persistently high inflation. Obviously, right now the government is still shut down. So what do we do when we are uncertain about our own place, how we view the world? Maybe we could be a little bit concerned about our own jobs. We now know that new job openings are falling. We’re seeing layoffs continue to occur, certainly in markets with a high exposure to the tech sector.
So all these things in concert tend to make us do one thing, and that’s nothing. We tend to freeze in place. But ultimately, and as I said, a minute or so ago, as we get into the spring of next year, I do expect that we’ll start to see less opaqueness and more clarity. And because of that, I still believe that transactions — total transactions in the resale market this year — will be up modestly from last year, but I do expect to see a fairly decent jump in 2026. We’re not going to get back to 5 million transactions, but we certainly should get closer to it than we were both in 2024 and where we will end up this year.
So, I’d say that risks are pretty much general, but they’re not all massive ones. But when you combine them all together, it’s enough to make people just think more about hanging out on the sidelines for a little bit longer. And that obviously, through the course of this year, is what’s holding down sales. That’s likely to be the case for the balance of 2025 — going to get better, however, next year.

Hartnett
And Matthew, my favorite closing question: What’s the one metric or data point you’re keeping a close eye on right now that others may be overlooking?

Gardner
Oh, you always ask me about one and there’s never one. I’ll have to repeat from the ones I’ve talked about before in our last chats: seller asking prices. People tend to overlook what people are asking for of their houses and tend to focus far too much on what they sold for. I think what people sell their homes for, that’s a lagging indicator. That was the market three months ago, both from a mortgage standpoint, as well as just an overall view on the market historically. So, I tend to look more at what’s going on in terms of how much people are asking for their homes. But also, I think that, keep a close eye on the new construction market. If you are in an area in the country which has a significant amount of new construction, we are seeing more and more markets now where new homes are competing with resale homes on a price point basis. So the premium you used to get isn’t, in some markets, it’s just not there anymore.

But those are the old ones. I know you asked me for some new ones, and I wish I had one, but I’ve got two.
One: I’m watching the urban markets, across the country. They were hit particularly hard through Covid with that migration out into the suburbs. Prices dropped very significantly. I think they’ve bottomed out in a lot of markets, and therefore I think there is going to be probably a significant upside potential. And so, watch your downtown markets and see what’s going on there. That actually could be a pretty good indicator. Not saying it’s the canary in the coal mine, but it could be a fairly good indication as to where your market’s going to go.

But really, I think that especially given what’s going on with the federal government right now, I am hearing some people, and certainly Treasury Secretary Bassett mentioned in passing in an interview and it kind of made me jump up and listen because he was saying about the potential for the government getting involved in order to try and help the ownership market. And he didn’t offer any details, no surprise there. But other things that they could do to impact the housing market? Sure. They can look at tariff-related costs. How can they bring those down? Certainly that would help the new construction world. First time buyer incentives, grants, down payment assistance — we’ve done it before. It happened under President Clinton, under President Bush two. And finally land, obviously, there’s a lot of federal land out there. I’m not too big on that one because most of it is so far away from infrastructure, so it’s not going to really make too much of a difference. But when the Fed is talking about how they can help the ownership market, that’s something worthwhile. Just keeping an eye on — or for me, an ear on. I listen to the radio a lot.

Hartnett
Matthew, as always, thank you for joining us and helping our audience make sense of what’s ahead. I look forward to our 2026 predictions interview in December.

Gardner
I’m looking forward to that as well.