Monthly report · No.5
SUNDAY, AUGUST 25, 2024
the state of the market
The Housing Factor
By Ehsan Habib
This July through early August we saw the average 30 year fixed mortgage rate move down from 7% to below 6.5%. Not only did this help buyers who made their move over the past month, but I believe we can see an increased number of transactions in the data as well.
We saw a 25% increase in contracts written between July 2023 and July 2024. This uptick bucks seasonal trends. Last year there were 58 fewer transactions between June and July. This year we had 32 more transactions between June and July.
With prices higher than ever, and inventory still fundamentally undersupplied, many buyers have felt discouraged from participating in the market. However, there are reasons to be encouraged. 6% of active listings have experienced a price cut (as compared to 4.4% last year), and there were 15.6% more listings brought to market this July as compared to last July. We are at the highest level of months of supply of inventory than we have seen in years. While the market is still a challenging one, there are favorable deals out there for dogged buyers who are willing to compromise.
If you would like to discuss what is going on in your neighborhood, or would like to see custom data reports, please don’t hesitate to reach out.
Mortgage news
Are We There Yet?
The Fed Signals Readiness for Rate Cuts
By Evelyn Freitas | VP of Mortgage Lending at Guaranteed Rate NMLS 247578
On August 23rd at the Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell’s remarks were closely watched by financial markets and economic analysts. Powell acknowledged signs of softening in wage growth and hiring rates, with the big news this month being the downward revision in the Bureau of Labor Statistics jobs reports, eliminating 818,000 positions reported over the last 12 months. Although Powell’s speech did not provide explicit information on the Fed’s next move, his words suggest that a more dovish monetary policy is around the corner. “The cooling in the labor market conditions is unmistakable…. The time has come for policy to adjust”.
Based on these remarks, the financial markets predict the Fed will lower their benchmark Federal Funds rate by.25% to .50% at their September meeting. These dovish statements are having the effect of solidifying the downward trend in mortgage rates, which tend to follow the yields on long-term Treasury bonds. With inflation clearly moderating, mortgage rates have dropped to their lowest level in over a year, presenting a timely opportunity for anyone thinking of purchasing or refinancing a home.
For more information, please contact me at evelyn.freitas@rate.com and let's chat!
industry news
The New Era Of
Real Estate Practice
Declan Spring
Starting August 17 we entered into a new era of real estate practice in terms of how the buyer's broker gets compensated for the hard work of the individual buyer’s agent.
I’m going to keep strictly to the facts as they exist currently, and It will take several months at minimum for each State, each region, each metro, each city, and possibly even each neighborhood to find their new normal. In addition, there will likely be changes over the coming months to the following information as the industry evolves.
I can only discuss the situation in California since this is the State I hold my license in.
Beginning August 17, the National Association of Realtors requires that all Realtors working with a buyer enter into a Buyer Representation and Broker Compensation Agreement (BRBC). It must include the rate of compensation the buyer's broker will receive. The BRBC, in other words, makes the buyer responsible for compensation to their broker, and asks the buyer directly whether or not they can afford to pay the buyer’s broker compensation, and it must be signed by all parties before any property can be toured. In short, it establishes a client relationship and rate of compensation for which the buyer is ultimately responsible.
Does this mean that sellers are no longer responsible for compensation to the buyer’s broker? Yes, but this does not mean that a buyer can’t ask for this amount to be covered by the seller when the buyer makes their offer using a Residential Purchase Agreement.
The buyer, when they write their Residential Purchase Agreement, can request a concession from the seller to cover the buyer's compensation to their broker at closing. In other words, buyer’s can make a direct ask for the compensation to their buyer’s broker to be in the Purchase Agreement in the form of a seller concession. It becomes part of the negotiating process.
Okay. Here’s where it gets a little tricky and we need to pay attention. Remember, the buyer, in order to begin touring property with their agent, has already signed a BRBC with their broker, stating that they are responsible for compensation to their broker upon the successful purchase of property, but the buyer has no guarantee that the seller will cover the cost of compensation. The buyer might have signed a BRBC with their broker agreeing to the conventional compensation amount of 2.5% of the purchase price. If the buyer fails to receive the 2.5% from the seller in the form of a concession then the buyer is responsible to pay the 2.5% directly to their buyer’s broker, out of pocket at the successful close of the transaction. Or, the seller might make a concession for only 1%, in which case the buyer would need to pay the deficit of 1.5% out of pocket at the successful close of the transaction.
These are the facts as they stand today and as clearly as I can state them. For additional information from the National Association of REALTORS® please click here.
We would love to hear your questions, comments, thoughts or concerns about the changes.
Please reach out to us via email: declan@thehomefactor.com or ehsan@thehomefactor.com are standing by for you!
The Home Factor • DRE#01398898 • Powered by Keller Willams • 2089 Rose St, Berkeley, CA 94709 • Declan@TheHomeFactor.com (415) 446-8591