Gary Keller warns of unpredictability in the housing market

Gary Keller, Jay Papasan and Jason Abrams took to the stage at the KW Family Reunion on Tuesday to discuss the housing market and current economic trends as they do every year. But while the three Keller Williams executives did their usual forecasting for the year, they also acknowledged far more room for unpredictability in 2025.

As the Trump administration has swept into the White House — announcing layoffs among large portions of the federal workforce and cutting spending at agencies like the Consumer Financial Protection Bureau (CFPB), Papasan said that 2025 is ushering in an era of great change within the federal government. 

“We looked back in history and there’s two times in the U.S. that we’ve seen the government really remade substantially,” said Papasan, Keller Williams’ vice president of content strategy. “Under FDR, we had the New Deal, and then under Eisenhower there were a lot of changes as well. So, it is not unprecedented, but it does create unpredictability. And do businesses and investors like things to be predictable or unpredictable?”

According to the KW executives, they expect that unpredictability will lead to some people holding back on major investments, such as buying a house, unless their life circumstances dictate that they must make a move. 

“We know people move because they’re getting married, they get divorced, they have babies,” Papasan said. “I think that there’s the timeless stuff that motivates people even when the market is not favorable, and that’s where we need to focus. Those sales are still going to happen.” 

Despite the uncertainty, KW is predicting that 4.2 million existing-home sales will occur in 2025, up slightly from the roughly 4.1 million sales in both 2023 and 2024. 

“What’s fascinating about this is that it’s not getting progressively better right now, and what’s interesting is that people keep expecting it to get progressively better,” said Keller, the brokerage’s co-founder and executive chairman. “But here’s the thing: If you go back and you look at history, you’ll understand that when you get into a trough like this, it typically takes three to four years to get out of it.”

Keller believes that both 2025 and 2026 will be slow for home sales, but he anticipates that things will eventually pick up in the ensuing years. Papasan also noted that while market conditions may be challenging, things are not getting any worse. 

“I also don’t want to jinx it on the other side, but it hasn’t gotten worse than this in over 25 years,” Papasan said. “When I look at 2008, when it was just horrible, it was still around the level it is today.”

Keller added: “There is a bottom to the market and it isn’t zero.” 

But while Keller Williams is predicting that the median home price will continue to rise in 2025 — and that mortgage rates will stay near 6.5%, further constraining housing affordability — executives have told agents that it is still a good time for consumers to buy and sell real estate.  

“You might be buying at the top of the moment, but you’re never buying at the top of the market, because it always goes up,” said Abrams, KW’s head of industry and learning.

“Don’t wait to buy real estate — buy real estate and give it time,” Papasan added. 

With this in mind, Keller said that many in the industry are expecting home-price appreciation of 2.5% in 2025, but he warned that nothing is certain.

“We definitely could see appreciation if nothing happened but interest rates dropped, but they aren’t motivated to drop rates right now,” Keller said. 

Part of the issue that KW executives see with interest rates is tied to inflation, which edged higher in January. But it’s also due to a lack of housing inventory and the fact that rates continue to hover around the historic average of roughly 7%.

“When we started Keller Williams in 1983, look at where rates were, in the teens, and we thrived,” Keller noted. 

He and other KW executives believe that consumers are adjusting to higher rates. Based on historic trends, they expect to see more prospective buyers lean into the market if rates begin to come down, even though rates are still well above the post-pandemic levels of 2020 and 2021.

Abrams also stressed the importance for agents to provide clients with historic perspective on mortgage rates. They should consider discussing possible solutions to mortgage challenges, such as rate buydowns or the ability to refinance in the future. 

But while Keller and the KW team are expecting the market to continue chugging along more or less as it has been, they also see the potential for some major disruptions in the near future. 

“It would take a black swan event for home prices to drop,” Abrams said. “When we ask the question of what would it take to drive prices lower, it turns out that it is something crazy.” 

But that “something crazy” may be on the horizon. 

According to Keller, if the Elon Musk-helmed “Department of Government Efficiency” accomplishes its goal, that would add another 2.2 million jobless claims and drive unemployment up to 5.7%. 

While Keller acknowledged that this typically leads to an uptick in housing supply as unemployed people look to sell homes they can no longer afford or are forced to move for new work opportunities, he noted that 5.7% is very close to 6% unemployment, which is an indicator of “disastrous economic times.” 

The KW team also dove into other risks facing the U.S. economy in 2025. These includes things like unpredictable policies and natural disasters. 

“You think about immigration,” Keller said. “In Texas alone, 25% of the construction industry are undocumented workers. If they were to leave tomorrow, all bets are off because there’s no replacement for them at the prices they are willing to work. I’m apolitical on this, but we have to be aware that we’re moving into a very economically risky period in America.”

It remains uncertain about how things will shake out this year, but Keller acknowledges that things may turn out very well. He also sees the confluence of various policies such as tariffs, mass deportations and government cuts to be the potential catalysts for an economic event that causes home prices to drop.

“This could be the economic event that the real estate industry was waiting for to create high unemployment, to create excess supply and drive prices back down,” Keller said. 

In the meantime, however, Keller said it is important for agents to focus on lead generation — especially seller lead generation — as the number of new listings rose in January, indicating that more homeowners may be interested in listing this year. 

“Making the choice to sell no homes is silly,” Abrams said. “The reality of it is that you aren’t competing with 1.5 million Realtors, but far fewer. At the end of the day, the volume is there.”