How does our market keep trucking along with sky-high prices AND mortgage rates 2x higher than they were three years ago? How does pricing levitate when money is so much more expensive – shouldn’t prices adjust downward?
We know that the generational wealth transfer of $70 to $80 trillion dollars is underway, and this is where some of it is showing up – purchases of quality real estate.
There have been 115 closings between La Jolla and Carlsbad this month, and 47% of them were all-cash. It’s the highest percentage we’ve seen so far, and it’s likely to continue.
Those who aren’t paying all-cash have big down payments to help cushion the higher rates. Payment too high? Put more down!
For the downsizers, it’s the best way to justify giving up the 3% mortgage too – sell the long-time family estate and buy the next one all-cash.
Last month’s 200 sales will probably be the highest monthly count we’ll see in 2024, so the market will have to endure less volume, and more listings sitting around unsold.
It means that the percentage of all-cash buys will probably be increasing. I think it could get up to 66% by the end of the year!
Think of the monumental change needed in the listing agent’s psyche to get them to stop scolding the buyer-agents and give some respect – but instead they are shorting the commissions too. If you blow off the buyer-agents, then you’re on your own – and the vast majority of agents will have no clue how to find their own buyers.
From the confidential remarks in recent MLS listings:
Buyer did not perform! Seller wants it gone. Seller is going to request your EMD deposit released upon receipt! $25K No games! This home will not go VA, or FHA because of the state of repair. Seller has unfinished work do to other buyers wanting him to stop work because they were buying AS-IS. Sellers are not going to do any repairs. Enter house thought side door do not open front door, BE VERY CAREFUL! Very unsafe! Good luck!
Broker/Agent does not guarantee accuracy of permits, square footage, lot size, zoning, rent control, use codes, schools, and/or other information concerning the condition or features of the property provided by the seller or obtained by public records. Buyer is advised to independently verify the accuracy of all information through personal inspections, the City, and with appropriate professionals.
Please confirm with the listing agent (via text) that the front door is locked properly before leaving property.
Be timely, turn off lights and lock all doors behind you.
Do not contact agent to hold open house or ask to market the property online or through Social Media.
I have tried to be available to everyone for showings and conversations, however I am finished answering questions on what the seller’s want. Thank you for your hard work.
Seller accepted an offer prior to coming to market. There is not a bedroom on the first floor. Please do not request a showing if your clients need a downstairs bedroom. Please do not request to hold open, we hold open houses internally with our team.
NO MORE SHOWINGS OR OFFERS ! MULTIPLE OFFERS RECEIVED!
new double pain windows
Photos along with offer instructions coming soon. Do not contact agent to hold open house or ask to market the property online or through Social Media.
Must provide POF / Lender letter for showing. Only qualified buyers. Listing agent at all showings. No lockbox. Dog on property.
Strictly showing by appointment only.
Only selling 1/2 of the building. No HOA has been formed for the building. 1 bedroom is tenant occupied with lease ending 7/31/24. A/C only in 1 bedroom. Tenant interested in staying.
Home has video cameras inside and out. Seller will be removing Lutron Casseria smart home (switches) and replacing with standard. Security cameras, wine fridge and outside fridge do not convey.
Multiple generous offers already received, all are due by noon, Monday 4/29. You must register your showing using the Sentrilock box or physically attend the open house on Sunday 1 to 4, 4/28. DO NOT USE SHOWING TIME. Touring the property will be a condition of acceptance along with loan cross qualification by (the listing agent’s lender). Please send in your best and highest offer with POFs and loan letter. Offers that do not have all the requirements or are sent to the wrong email, will not be considered. Seller reserves the right to select the best one offer or send out multiple counter offers. Seller to select services.
You’re open? Sure gives the feeling that they plan to work you over on the buyer-side commission.
How about 3%? Oh, you want to negotiate – make it 4% then!
The locked-in effect has been bandied about for the last couple of years as the reason why the inventory remains thin. But it’s not stopping those who want to pay cash and avoid a mortgage altogether – every area is showing increases in the all-cash purchases.
If you don’t want to leave your local neighborhood, then yes, you’re locked in – the higher prices and rates make it prohibitive to move. But for the homeowners who don’t mind leaving town, they can take their winnings and pay cash for their next house!
Don’t let higher rates stop you. Thirty-eight percent of the homes in America are paid in full – join the club!
On Friday, the Plaintiffs’ counsel filed a Motion for Preliminary Approval of the commission-lawsuit settlement agreement with the federal court, so the two new rules will go into effect in late July, apparently. The plaintiffs have requested a hearing on final approval of the settlement by the court to be held on November 22, 2024.
The second rule about buyers having to hire a buyer-agent before touring a home is a done deal, mostly because nobody is objecting. At least not yet. It will become a major headache for all.
The first rule about home sellers not being required to pay a buyer-agent commission will be affected by the overall market conditions. Red-hot markets like Silicon Valley will likely be seeing zero percent (or close) being offered as a reward to buyer-agents. The demand is so strong there, the inventory is so thin, and the buyer-agents are so desperate that the sellers will get away with it. How much will buyers be willing to pay to hire a buyer-agent there? Not much – 1% tops – but the entry level there is $3,000,000.
But other markets will have different challenges – especially those that are slowing (or buckling under) from a heavier load of unsold listings and stingier demand.
The conversations will go like this:
Seller: It’s been thirty days, how come my house isn’t sold?
Listing Agent: I feel good, and it should be selling any day now. People are looking.
Seller: What are you doing to sell my home?
Listing Agent: I’m showering every day now in case someone wants to show your home.
Seller: Are you advertising in SF, LA, and NYC where all the rich people live?
Listing Agent: We are advertising world-wide.
Seller: Then what do you suggest we do?
Listing Agent: You should lower the price and pay more commission to the buyer-agents.
Seller: The last thing I’m going to do is lower the price. Aren’t I paying 4% commission already?
Listing Agent: Yes, because you saw in the news that realtors imploded, so commissions are less now.
Seller: You’re saying 4% isn’t enough?
Listing Agent: Correct, because I work for 3% and that leaves only 1% for the buyer-agents. You should increase it to encourage more buyer-agents to show it.
Seller: It sounds like you’re backing into a 6% listing.
Listing Agent: I’m sorry you feel that way, but yes. But hey, you got to try out lower commissions!
Seller: Well, I guess you got me because I want to sell. Knock off $5,000 off my price too.
Listing Agent: Off your $3,000,000 listing?
Seller: Ok, ok, knock off $10,000, but that’s it. I’m Not Going To Give It Away!
Realtors will still be holding all the cards, and will game any system you throw at them. I said this will blow over quickly, and a softer market will help keep the status quo. Listing agents may appreciate buyer-agents (finally), though paying them more won’t be an obvious solution for many. Expect a slower market instead.
Pardon the casual presentation. I’m used to working with this same basic graph format but it’s limited to 50 datapoints – we’d really like to take these back a few years to see the long-term trends.
But in early 2023, the active listings in the $3M – $4M category were range bound between 1,170/sf and 1,342/sf, so there is some normal optimism in springtime. But not like this pop in 2024 (above). These two subsets are the meat of the market, and aren’t swayed by radical outliers that would tweak the averages.
Starting right after the Super Bowl, there was a huge swing from $1,252/sf to $1,515/sf in the $3M – $4M category, and it has stayed elevated until the last couple of weeks. The reason for pricing to relax a little?
The number of unsold listings are starting to stack up now:
There isn’t any reason for home buyers to think mortgage rates are going to drop significantly this year. If there were one or two Fed cuts, it would only cause mortgage rates to get back into the 6s which isn’t enough to compensate for the sky-high prices that buyers are seeing today.
Then we have the changes from the commission lawsuit, which will have a clunky start over the next few months as buyers grapple with hiring a buyer-agent in writing just to tour a house. All we need is the Padres to go on a run this summer and we will have all the excuses we need for a very sluggish rest of the year.
While the benefits of buyer-agents may be obvious, will anyone stop their demise? Probably not.
Will it become easier or harder to buy a home?
The answer is unclear amid widespread confusion over what’s happening to real-estate agent commissions. On April 5, a federal court determined that the Justice Department can reopen its investigation into the policies of the National Association of Realtors, indicating that the association’s March settlement in a separate case may not be the final word on this issue. Yet in their effort to deliver lower costs for home buyers, federal officials and courts may inadvertently undermine consumer protections without addressing the root causes of high home prices.
The settlement is a positive development: It could lower real-estate agents’ commissions, benefiting home buyers. It also increases transparency and negotiating power for home buyers who use agents for representation. The settlement will also increase professionalism among agents, who will now sign an agreement detailing their services before showing a buyer a home. These policies should put downward pressure on commission prices, which currently average 5.3% and are split between buyer’s and seller’s agents.
Despite these wins, federal officials seem to want a more aggressive solution. In a February court filing, the Justice Department noted that U.S. commissions are “two to three times more than” those in “other developed countries,” a point the media frequently repeats. That gives the impression that federal officials want to cut commissions at least in half as quickly as possible, and the department appears to be pursuing this goal. Yet dramatically slashing commissions can be achieved only by reducing the use of buyer’s agents—a move that would be unwise for a few reasons.
Consider the pitfalls that home buyers face in countries where buyer’s agents aren’t commonly used. In Australia, where I grew up, home buyers typically work directly with listing agents, who have a fiduciary duty only to the sellers. In some Australian territories and states, if a buyer looks at a home on a flood plain or in a region prone to bush fires, the seller’s agent isn’t necessarily obligated to tell him about the risks.
The U.S. model provides lower overall costs and better representation for buyers and sellers alike. Americans chose this model for good reasons. Before the 1990s, few people in the U.S. used a buyer’s agent. Yet home buyers began to demand representation, especially low-income and first-time buyers who needed help navigating the process. Consumer-rights advocates championed this development. As buyer’s agents became more popular, eight states even banned the old model of a single agent representing both parties. Americans effectively gained two agents for the price of one, and that price has fallen from over 6% to closer to 5% today.
Discouraging the use of buyer’s agents would reverse this progress. Although it would likely lower home buyers’ costs, it would do so at the price of sacrificing their interests. Without a buyer’s agent, no one would be legally required to help buyers understand their risks and options. There would also be nothing to stop seller’s agents from increasing their commissions to match what previously went to buyer’s agents.
There are better ways to help home buyers save money, policies on which state lawmakers should take the lead. Most U.S. states have transfer taxes, which can add thousands of dollars to the cost of a home purchase. Lawmakers should either cut these taxes, leading to lower costs and more home sales, or reduce property taxes after windfall gains post-pandemic. State and federal lawmakers could also ease burdensome licensing, zoning and environmental regulations, all of which add nearly $94,000 to the cost of a new single-family home and lead developers to build fewer homes. The best way to decrease housing’s cost is to increase its supply.
The alternative is to erode the hard-fought victory that American home buyers have achieved. While the U.S. system is far from perfect, it serves home buyers better than any other arrangement, and it’s moving in an even better direction after the recent settlement. As federal officials and courts weigh whether to push further, they should remember that some cures are worse than the disease.
Mr. Eales is CEO of Move Inc., which operates Realtor.com. Move Inc. is owned by News Corp, which also owns The Wall Street Journal.
The first quarter of 2024 is the only 1Q in recent history to have increases in BOTH the number of listings AND the median list price. Previously, increases in pricing had a corresponding dip in the number of listings available for buyers to consider.
If you are like me, you’ve seen a noticeable surge in seller optimism in 2024. It’s not just the median list price that is up 8%, doesn’t it seem like everything is $200,000 higher than last year?
This is as far east as you can get in Oceanside, so it’s not really much a coastal home when it’s 4-5 miles away. But this is a great example of what is happening at the entry level of every market today!
San Diego Case-Shiller Index, Non-Seasonally Adjusted
Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan 22
384.13
+2.5%
+27.2%
Feb
401.44
+4.6%
+28.9%
Mar
416.45
+3.8%
+29.9%
Apr
425.90
+2.3%
+28.5%
May
427.80
+0.5%
+25.2%
Jun
424.83
-0.7%
+21.6%
Jul
414.03
-2.6%
+16.5%
Aug
402.48
-2.8%
+12.7%
Sep
393.80
-2.1%
+9.5%
Oct
390.61
-0.7%
+7.6%
Nov
385.40
-1.5%
+4.9%
Dec
380.09
-1.3%
+1.6%
Jan 23
378.79
-0.4%
-1.3%
Feb
384.46
+1.6%
-4.1%
Mar
394.05
+2.5%
-5.3%
Apr
401.90
+2.0%
-5.7%
May
409.32
+1.9%
-4.3%
Jun
413.72
+1.1%
-2.3%
Jul
416.68
+0.7%
+0.6%
Aug
419.08
+0.5%
+4.1%
Sep
419.35
+0.0%
+6.4%
Oct
418.82
-0.1%
+7.2%
Nov
416.36
-0.6%
+8.0%
Dec
413.45
-0.7%
+8.8%
Jan 24
421.34
+1.9%
+11.2%
It has felt like prices have been surging this year, and here is more evidence. The record high was 427.80 in May, 2022, and it should be back to that level by the next reading.
We’re in the midst of all-time record-high pricing today!
My only thought when seeing thas property was whether Kellen Winslow Jr would affect the outcome or if whether we are beyond that now. He bought his new for $2,871,000 in 2015 and had to cheap sell it for $2,850,000 in 2019 when he got into trouble.
But even his house resold for $4,800,000 last year, so no lingering after effects, apparently.
