On March 15, 2024, the National Association of Realtors® (NAR) announced a $418 million settlement with a nationwide class of plaintiffs in an antitrust lawsuit. The lawsuit, which was not filed in California, centered around claims that Realtors® conspired to artificially inflate commission rates by not being transparent about how buyer’s agents are compensated.
What will it mean - What could be changing about how buyers’ agents are compensated?
Today, when a seller’s agent lists a home on a REALTOR®-owned Multiple Listing Service (MLS), they are able to include an offer of compensation to the buyer’s agent as part of the listing. If the proposed changes are approved, this compensation will no longer be advertised on the MLS. This will encourage agents to have more in-depth conversations with their clients around compensation, promoting greater transparency across the industry.
Additionally, if the proposal is approved, buyers will be required to sign buyer’s agency agreements to ensure they fully understand the buyer-broker relationship, obligations between broker and client and how their buyer’s agent is compensated.
It’s too soon to tell exactly how or if the proposed rule changes will impact the housing market. What we do know is that there are too few homes and too much demand — even with current mortgage rates — for home sellers to worry about competing on price, generally speaking.
Speaking of mortgage rates, the Federal Reserve held rates steady at the March meeting, which was in line with expectations. With the information from Fed Chair Powell, we are now expecting rate reductions after the June or July Fed meetings. The Fed’s dual mandate aims for stable prices (inflation ~2%) and low unemployment. Employment has shown its persistent strength, and inflation is coming down, but the Fed wants more good data before lowering rates because they want to avoid raising rates once they’ve started lowering them.
Overall, the market is starting to heat up, which is what we expect and want to see this time of year. Mortgage rates have been elevated for long enough now that buyers and sellers are less hesitant to enter the market. And rate cuts will come in the second half of the year, allowing for refinancing in the near future. As a result, we are expecting far more transactions than last year and a healthier market.
Local Lowdown
In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced larger drops due to higher mortgage rates. Month over month, in March, the average home price rose 8% in Alameda and 6% in Contra Costa counties. In Q1 2024, the average sale to list price ratio was 4% higher than last year. Year over year, prices were up 16% in Alameda and 10% in Contra Costa.
High mortgage rates soften both supply and demand, but at this point rates have been above 6% for 16 months, and rate cuts will likely occur sometime this year. Potential buyers have had longer to save for a down payment and will have the opportunity to refinance in the next 12-24 months, which makes current rates less of a limiting factor. However, high demand can only do so much for the market if there isn’t supply to meet it.
Since the start of 2023, single-family home inventory has followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings have slowed the market considerably. The little inventory growth in 2023 was driven by softening demand but more new listings came to the market in 2024.
The market is already looking healthier, and we expect more new listings and sales to come in 2024. Prices in the East Bay should remain slightly below peak until the early summer, but prices could reach new highs in the second quarter and sellers to receive a higher percentage of the list price throughout all of 2024 than they did in 2023. Low, but rising inventory is only increasing prices as buyers are better able to find the best match.
As always, Arrive Real Estate Group remains committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.
