It looks like June was a blip, and we’re back to both YoY and MoM price increases. This year continues to defy logic, and when you add what’s happening with the stock market, expect this unpredictable year to continue. Throw in a brief moment of rapidly decreasing interest rates, economic instability, and a new way of how agents get paid; the remainder of the year will remain too hard to predict.
|
Year-over-Year (YoY) |
Month-over-Month (MoM) |
|
|---|---|---|
|
Homes for Sale |
+28% |
+3% |
|
New Listings |
+14% |
-2% |
|
Homes in Escrow |
+8% |
-3% |
|
Closed Sales |
+14% |
+8% |
|
Median Sale Price |
+5% |
+2% |
Just when we thought the summer break had started early, July saw a noticeable increase in sales compared to June. Ask any agent, and most will tell you July was incredibly slow. Given that most of the July closed sales opened in escrow in June, I’m curious about what the August numbers bring.
Interest Rates
The big news everyone is going to be talking about is mortgage rates. As expected, the Fed didn’t raise interest rates last week, and even though they didn’t confirm they will cut rates in September, they certainly implied they will. However, what happened in the 2-3 days after the announcement shocked everyone. Multiple data sets showed the economy slowing down much faster than expected, including unemployment increasing much quicker than expected. Throw in Japan increasing interest rates, which impacted a popular strategy with investors borrowing against the Yen, and the stock market had its biggest single-day loss since 2022. This caused the bond market to crash and, in turn, reduced mortgage rates. I made a video just after the Fed announcement to explain how we won’t need to wait until September to see mortgage rates drop, but what happened in the days after the Fed spoke was unexpected.
How Will the Market React?
If we were to assume with a logical mind, with rates dropping, buyers would jump off the sidelines and back into the market, snapping up whatever they can get before rates fall further and even more buyers enter the market. However, we’re in a logic-defying market. So, it’s not as easy to jump to that conclusion. The stock market tanked partly because of fears of a recession on the horizon. Even though I believe that’s unlikely to happen, it will still put the thought of a recession into buyer’s minds. And if we do go into a recession, there will, unfortunately, be people who lose their jobs. Throw in an election and a high amount of tension amongst countries, and I don’t know if buyers will be clambering into new debt all that quickly.
Change Starts Next Week
The new rules surrounding agent commissions start next week. Beginning with the requirement for all buyers to have signed Buyer Broker agreements with an agent to engage in buyer/agent activities. These agreements are similar to what sellers have always signed with their agents. Now, there is one for buyers, too. You will need a signed agreement to view homes privately. However, anyone can still go to open houses without an agreement. You aren’t required to sign anything to enter an open house. Some agents might try to convince you to, but you don’t. It will be the same as it is now with open houses. If you want to sign in, you can, but nobody can force you to. Buyer agent commissions will be removed from all listings. In its place will be a check box stating whether the seller is open to offering a concession to paying the buyer's agent commission (now called compensation). Unlike the misinformation out there, buyers won’t be instantly on the hook to pay their agents, as the buyer's agent compensation will become an added negotiation. We expect most sellers to continue offering compensation for buyer's agents as they see the value in doing so. However, there will be some sellers who won’t, and in that scenario, there’s a straightforward way to structure the offer so most of the buyer's agent compensation is financed. So, as it is already now, the buyer with the best terms will be the buyer who the seller accepts. I’ve spent many hours educating myself on how this change will affect myself and my clients, and I have to say, despite all the negative headlines, it’s going to be okay. There will be a lot of misinformation over the coming weeks and months. So, if you have any questions, just ask. I’m sure I can quickly put your mind to rest. This will be an evolving matter that will ebb and flow over the coming months, but it will settle down to be business as usual, and people can go about buying and selling homes like it’s not a big deal. I have an email template explaining the new Buyer Broker agreement, so reach out if you want me to send that to you.
