You’ve probably heard about the big NAR settlement that could completely change how real estate works going forward.
But if you haven’t, or are unsure of what’s changing, there are two new rules set to go into effect August 17th, 2024.
The first is that offers of compensation will be prohibited on Multiple Listing Services (MLSs).
In other words, listing agents won’t be able to say they’re offering 2% or 3% to the buyer’s agent on the MLS.
The logic is that this type of co-op commission leaves the buyer out of the conversation, which isn’t fair if the buyer ultimately pays for it.
While they may not pay it directly, a pre-determined commission might result in a higher sales price.
In addition, there’s also not much transparency about the fee, nor do consumers know such fees are negotiable.
Simply put, this move is intended to boost transparency and ideally lower fees for consumers by letting buyers negotiate with their agents separately.
But there might be some unintended consequences as a result, which I’ll get to in a moment.
The other major change is that buyers must sign a written agreement before they can tour a property. At that time, compensation will also be discussed.
Real Estate Agent Fees May Drop, However…
Now about those unintended consequences I alluded to. While the standard commission might go down thanks to these new rules, from say 2.5% to 1.5% or even 1% on the buy-side, there’s still the question of who pays it.
As noted, the seller can continue to offer buyer agent compensation, it just can’t be included on the MLS.
So hypothetically this could be conveyed in other ways, such as on their own brokerage website listing, via phone call, text, etc. At least that is what some think for now.
That too could change if this evolves into a situation where co-op commission is completely banned and decoupled.
But as of now, many real estate agents assume they can still make offers of compensation via channels other than the MLS.
In theory, this means nothing might change in some transactions. For example, a seller could tell their listing agent to offer 2.5% to a buyer’s agent. And a buyer’s agent may ask for 2.5% from their buyer.
The logic here is that they want to move the property quickly, and being stingy could backfire.
If they only offer 1%, or offer nothing at all, a buyer’s agent may need to make up the shortfall with the home buyer.
At that point, the buyer may balk or simply be unable to come up with the out-of-pocket funds to pay it.
When all is said and done, the seller might lose a buyer and kick themselves for not just offering compensation and getting a decent sales price.
On the other side of the coin, a buyer might be OK with getting nothing from the seller and paying their agent themselves to sweeten their offer (assuming multiple bidders).
So there are a lot of scenarios here and still a lot of uncertainty about how this could evolve.
But some things I’ve seen thus far are a real estate sign that makes clear the seller will offer buyer agent compensation, buyers forgoing an agent and contacting the listing agent directly, and some even signing a form that says they won’t tour homes that don’t offer compensation to the buyer’s agent.
It’s going to be very interesting. And like I said, it’s still very fluid and there’s a lot we still don’t know.
How Will Home Buyers Pay for Buyer Agent Compensation?
Beginning August 17th, 2024, home buyers will have a few options to pay the buyer agent compensation.
They can maintain the status quo and hope the seller offers it, with the buyer’s agent fee coming out of the sales proceeds.
They can go direct to the listing agent and request a dual agency, where the listing agent represents both buyer and seller.
They can hire a real estate lawyer and have them guide them through the process for a flat fee, assuming such a setup is permitted.
Or they can foot the bill themselves by simply paying it out of pocket.
Some folks seem to think buyers are going to increasingly pay the buyer’s agent commission themselves.
While I don’t fully agree, given the fact that most Americans can barely scrape together their down payment and closing costs funds, it’ll likely happen more frequently.
And if and when it does, it could burden some home buyers, especially the aforementioned who don’t have deep pockets.
That brings us to the original question in this post. If they’re unable to pay cash, can real estate commissions be financed instead?
Real Estate Commissions Can’t Be Financed
At the moment, real estate commissions can’t be rolled into the loan amount, aka financed.
This goes for all major loan types, including conforming loans backed by Fannie Mae and Freddie Mac, along with FHA loans and VA loans.
The same is true of USDA loans for that matter as well, as seen in the screenshot above.
However, it’s important to note that real estate commissions aren’t considered in the maximum interested party contribution (IPC) calculations.
So you can get the seller to pay your buyer’s agent and still get the full amount of seller concessions for other stuff like lender fees and third-party costs, including title insurance and home appraisal.
Both Fannie Mae and Freddie Mac issued letters to confirm that real estate agent commissions won’t count towards the IPC limits if they continue to be customarily paid by sellers.
And the VA released a circular because their regulations specify that a veteran cannot pay for real estate brokerage charges.
In light of the settlement, veterans will be permitted to pay it, assuming buyer-broker charges are not included in the loan amount. In addition, it won’t be considered a concession.
As for why real estate agent commissions can’t be financed, for one it never really came up since the seller would typically pay the buyer’s agent via sales proceeds.
This was essentially a non-issue prior to the landmark NAR settlement.
The other wrinkle is loan-to-value ratio (LTV) restrictions. If the borrower had to add an additional 2-3% of the purchase price in real estate agent commissions to their loan amount, they might no longer qualify.
This is especially true when putting down 0% to 3.5%, which is quite common these days. The homes simply won’t appraise and the max LTVs will be exceeded.
Could this change in the future? It’s possible but not necessarily probable for the issues mentioned above.
What About Using a Lender Credit to Pay Real Estate Commission?
Now let’s talk about a potential solution if the seller won’t offer buyer agent compensation and you don’t have cash to pay it out of pocket.
One viable option could be the use of a lender credit, which technically can’t be used for real estate agent commissions.
However, if the lender credit were used for other costs, such as lender fees and third-party fees, it would free up cash to be used elsewhere.
For example, say you’ve got a $500,000 loan amount and the buyer’s agent wants you to pay them 1%.
A 1% lender credit frees up $5,000 in cash to pay those other costs, allowing a buyer to compensate their agent with the freed up cash.
It’s still very early goings and unclear if such an arrangement will be permitted. After all, co-op commission might be on the chopping block next. But it’s something to consider.
Ultimately, it will likely be best for most home sellers to continue to pay the buyer’s agent via the sales proceeds.
This should maximize the number of eligible buyers/bidders and not shut out first-time home buyers, who are most at risk due to limited funds.
The good news is these real estate agent fees could come down as a result, saving both buyers and sellers some money along the way.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
June’s housing market data shows a mixed bag for prospective homebuyers as prices hit a new all-time high but monthly mortgage payments decreased, a report from Redfin said.
U.S. house values reached a peak in June with the median home sale price coming in at $397,954, the biggest increase since March. This led to a 5% decline in pending sales, the real estate brokerage reported.
With the new record, affordability is even more out of reach for many potential homeowners. The affordability crunch is unlikely to change by the end of 2024, according to First American Data & Analytics’ Real Home Price Index.
“Unfortunately, inflation has proven stubborn and led to the Federal Reserve’s ‘higher-for-longer’ stance on interest rates, contributing to an elevated outlook for mortgage rates, while house prices have once again demonstrated their ‘downside stickiness,'” said chief economist Mark Fleming at First American Financial, First American Data & Analytics’ parent company.
Redfin found that June’s pending home sales posted their biggest decline since February, as the median sale price rose 5% from last year.
The good news for prospective homeowners, however, is that more new listings are on the market for them to choose from, Redfin reported. Also, monthly housing payments decreased by nearly $100 from their peak in April.
New listings jumped 10% in June, the biggest increase seen in two months. Over 100,000 new listings landed on the market, a 9.9% increase year-over-year.
As of July 2, the daily average 30-year fixed mortgage rate sat at 7.13%. The latest metric is up from a three-month low of 6.97% that was seen three weeks earlier. Fortunately, the current number is still a ways away from a five-month high of 7.52% in early May.
“While affordability is likely to remain constrained for the remainder of 2024, mortgage rates are expected to come down in 2025, which would be welcome news for potential home buyers,” Fleming continued.
Last night’s presidential debate disappointed some trade groups by only briefly touching on how the two contenders will address housing affordability, even though other indicators suggest there could be stark differences in their approaches.
Upon being asked about the strain of rising home prices, President Biden said actions he’s taking in line with that aim include his efforts to lower broader inflation, something former President Trump also said he’d tackle.
In addition to fighting inflation, Biden said he plans to increase housing supply by “making sure we build 2 million new units” and capping rents.
The candidates also faced a question about the still-wide homeownership divide between Black voters and white households, with both candidates calling the concern a product of inflation and Biden saying he’ll continue taking steps to narrow the gap.
“For example, I provided the idea that any Black family first-time homebuyer should get a $10,000 tax credit,” Biden said, also pointing to broad efforts he’s made to prevent discrimination. President Trump, in contrast, rolled back fair lending rules during his term.
Although Realtor.com reported that the scant mention of housing wasn’t entirely surprising as it was in line with past debates between the two candidates, the omission was out of line with voter interest.
A recent poll from online real estate brokerage Redfin found that 53.2% of households said their election decision will be influenced by housing affordability. The candidates did face some questions about it, but only President Biden addressed the topic directly.
Also, a national survey from the University of Michigan and the Financial Times found that Americans’ financial ability to afford a home ranked as a top concern by a nearly equal 70% share of Democrats, Republicans and independent voters alike.
In light of that, Ralph McLaughlin, a Realtor.com economist, said he had hoped for, “more discussion about your house, and less about the White House.”
Similarly, Carl Harris, chairman of the National Association of Home Builders, issued a comment following the debate stressing a need for the presidential candidates to address the housing supply shortage and implement solutions.
“The housing affordability crisis is a top national concern and Americans will take notice why the presidential candidates said very little on how to make homeownership and renting more affordable,” Harris said in a press release.
Builders are looking for efforts that would increase inventory, Harris said.
“With a nationwide shortage of roughly 1.5 million housing units, the only way to bring down rising housing costs is to put in place policies that will allow builders to increase the housing supply,” he added.
Harris also suggested some other strategies the presidential candidates should work with lawmakers on to alleviate stresses on housing construction and affordability challenges for consumers.
“The administration and Congress must address excessive regulations, support trades education to alleviate a severe labor shortage in the construction industry that is delaying home building projects, and oppose restrictive, mandatory building codes that significantly raise housing costs and provide little energy savings to consumers,” he said, referring to some items in a set of recommendations the NAHB has.
Newfi Lending will begin working with a California real estate investment originator, allowing it to provide funding and help develop the company’s business over time.
Newfi’s strategic agreement and investment in Los Angeles-based BARH Dunmore, which was established in 2021, opens up “substantial funding capacity” for the latter, as it seeks to build its presence in the residential-transition loan space. Among the offerings of the latter company, which operates under the name Dunmor, are bridge funding, fix-and-flip loans and ground-up construction financing in both single-family and multifamily sectors and are aimed at small real-estate investor businesses.
“We are now set to embark on a new growth phase,” said Dunmor founder and CEO Franck Ruimy, in a press release. “These partnerships position us to continue delivering the high level of service our clients expect from us, complemented by even more robust funding solutions at highly competitive rates.”
The deal also puts into place a number of goals structured to strengthen cooperation between the two businesses over time.
“We are excited to partner with Dunmor,” added Newfi CEO Steve Abreu. “We continue to be impressed by the leading technology Dunmor has created for the RTL industry.”
In a separate agreement reached with an undisclosed offtake partner, Dunmor also said it will be able to secure hundreds of millions of dollars worth of funding capacity to expedite growth.
Newfi, the multichannel lender based in Emeryville, California, touts its “unique product development” that includes bank-statement and non-QM mortgages. It also offers a debt-service coverage ratio loan option aimed at investors, where potential rental cash flow is taken into consideration in underwriting. It introduced a shared-appreciation second-lien late last year as well.
Recent research conducted by RCN Capital and CJ Patrick Co. found housing investor sentiment improving this spring, with 42% of businesses in the space expressing optimism about market conditions over the next six months. In its winter survey, the same researchers found only a 39% share with an optimistic view.
Fix-and-flip investors appeared more content with current and anticipated future conditions than peers offering rentals. Approximately 43% of home flippers believe that the market will continue to improve compared to 32% of rental property investors.
The high cost of financing ranked as the top concern among investors surveyed, with 71% noting it as a major challenge.
But the real-estate investment community also saw some good news emerge in the first quarter, as new purchases increased annually for the first time in two years after a period of subdued volume, according to separate research from Redfin.
While fix-and-flip investors may seem more optimistic currently, the single-family rental market may offer more revenue potential, the real estate brokerage said.
Fathom Holdings, the parent company of cloud-based real estate brokerage Fathom Realty, appointed Jon Gwin as chief operating officer.
Gwin brings a wealth of experience to the role, having previously held executive positions at American Financial Network, Wachovia Bank, Wells Fargo and Accredited Home Lenders. A licensed real estate broker since 2006, he managed a brokerage in San Diego and he also played a crucial role in establishing some of the first compliance management systems in the mortgage industry. Gwin also serves on the board of directors for LendersOne, a network of more than 400 national lenders, where he shares his extensive industry insights.
“Jon’s extensive experience and proven track record in the real estate and mortgage industries make him an invaluable addition to our leadership team,” Marco Fregenal, CEO of Fathom Holdings, said in a statement. “Jon’s strategic vision and innovative mindset will help drive our continued growth and success across all of Fathom’s brands. We look forward to the exciting contributions he will make in his new role.”
Based in Cary, North Carolina, Fathom Holdings is a national, technology-driven real estate services platform that integrates residential brokerage, mortgage, title, insurance and software-as-a-service (SaaS) offerings. The company’s brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title and Cornerstone.
SVP/General Manager Southern Region for William Raveis Matt Lane said the addition of CR to its business will help in strengthening its position throughout the Southern region as it adds to the brokerage’s current 4,500 sales associates in 140 offices from Maine to Florida. The acquisition will give the brokerage a significant increase in its … [Read more…]
The recent rise of the average long-term U.S. mortgage rate, which poses a new obstacle to aspiring homeowners hoping to purchase a property during this homebuying season, could have dramatic consequences on the country’s housing market.
The national weekly average for 30-year mortgages, the most popular in the nation, was 6.88 percent as of April 11, according to data from the Federal Home Loan Mortgage Corp., better known as Freddie Mac. That was 0.06 of a percentage point higher than a week before and up 0.61 compared to a year before. The national average for 15-year mortgages was 6.16 percent, up 0.1 of a percentage point compared to the previous week and 0.62 compared to a year before.
Read more: How to Get a Mortgage
On Monday, experts monitoring mortgage rates on a daily basis noted that the national average for 30-year fixed mortgages reached 7.44 percent—the highest they’ve been so far this year and close to the 23-year weekly record of 7.79 percent reached on October 25, 2023. On Monday, the 15-year mortgage rate was 6.85 percent. At its peak on October 25, 2023, it had reached 7.03 percent.
“Big one-day jump,” commented journalist Lance Lambert on X, formerly known as Twitter. “The average 30-year fixed mortgage rate ticks up to 7.44 percent. New high for 2024.”
Aerial view of homes in desert of Adelanto, Southern California. Rising mortgage rates could have a chilling effect on one of the busiest times of the year for home sales. Aerial view of homes in desert of Adelanto, Southern California. Rising mortgage rates could have a chilling effect on one of the busiest times of the year for home sales. Visions of America/Joe Sohm/Universal Images Group via Getty Images
The rise in mortgage rates comes as homebuying season, a time when the number of homes listed for sale increases, is heating up. This climb in inventory starts in spring and normally peaks in summer before declining as the weather gets colder, marking one of the busiest times of the year for home sales. But higher mortgage rates could have an early chilling effect on the market.
Read more: Compare Top Mortgage Lenders
The median monthly U.S. housing payment hit an all-time high of $2,747 during the four weeks ending April 7, up 11 percent from a year earlier, according to a report from real estate brokerage Redfin last week. It noted that the average 30-year fixed mortgage rate, then at 6.82 percent, was more than double pandemic-era lows.
There’s not much hope that mortgage rates will come down soon, as the U.S. Labor Department said last week that inflation has risen faster than expected last month, at 3.5 percent over the 12 months to March. That was up from 3.2 percent in February.
“For homebuyers, the latest CPI [consumer price index] report means mortgage rates will stay higher for longer because it makes the Fed unlikely to cut interest rates in the next few months,” said Redfin Economic Research Lead Chen Zhao. “Housing costs are likely to continue going up for the near future, but persistently high mortgage rates and rising supply could cool home-price growth by the end of the year, taking some pressure off costs.”
Jamie Dimon, CEO of JPMorgan Chase, voiced concern last week over “persistent inflationary pressures” and said the bank was prepared for “a very broad range of interest rates, from 2 percent to 8 percent or even more, with equally wide-ranging economic outcomes.”
While the jump in mortgage rates appears modest, it makes a huge difference for borrowers, who might end up paying hundreds of dollars a month more on top of what’s already one of the most significant expenses in their lives.
Many might decide that they can’t afford to buy a home—which is what happened when mortgage rates suddenly skyrocketed between late 2022 and early 2023 as a result of the Federal Reserve’s aggressive interest rate-hiking campaign.
Between late summer 2022 and spring 2023, a drop in demand caused by the unaffordability of buying a home led to a modest price correction of the housing market. But prices have since climbed back due to the combination of pent-up demand and historic low inventory.
While the Federal Reserve doesn’t directly set mortgage rates, these are hugely influenced by the central bank’s decision to hike or cut interest rates. The Fed left rates unchanged in March and is considered unlikely to cut them this month considering the latest data on inflation.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Daily average mortgage rates jumped to their highest level since last November after last week’s disappointing inflation report
SEATTLE, April 18, 2024–(BUSINESS WIRE)–(NASDAQ: RDFN) —The median U.S. home-sale price increased 5% from a year earlier during the four weeks ending April 14, bringing it to $380,250—just $3,095 shy of June 2022’s all-time high. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.
The average daily mortgage rate this week surpassed 7.4%, the highest level since last November, after a hotter-than-expected inflation report and the Fed’s confirmation that interest-rate cuts will be delayed. The combination of high mortgage rates and prices have brought homebuyers’ median monthly housing payment to a record $2,775, up 11% year over year.
There are signals that buyers are out there touring homes despite rising rates. Mortgage-purchase applications are up 5% week over week, and Redfin’s Homebuyer Demand Index—a measure of requests for tours and other buying services from Redfin agents—is near its highest level in seven months. Chen Zhao, Redfin’s economic research lead, said some house hunters are hoping to buy now because they’re concerned rates could rise more, and others have grown accustomed to elevated rates and pushed down their home-price budget accordingly.
“Home sales are slower than usual, but there are still people buying and selling because if not now, when?” said Connie Durnal, a Redfin Premier agent in Dallas. “I’ve had a few prospective buyers touring homes for the last several years, since mortgage rates started going up, and they wish they would have bought last year because prices and rates are even higher now. My advice to them: If you can afford to and you find a house you love, buy now. There’s no guarantee that rates will come down soon.”
For more of Redfin economists’ takes on the housing market, including how current financial events are impacting mortgage rates, please visit Redfin’s “From Our Economists” page.
Leading indicators
Indicators of homebuying demand and activity
Value (if applicable)
Recent change
Year-over-year change
Source
Daily average 30-year fixed mortgage rate
7.41% (April 17)
Up from 7% one month earlier; highest level since November 2023
Increased 5% from a week earlier (as of week ending April 12)
Down 10%
Mortgage Bankers Association
Redfin Homebuyer Demand Index (seasonally adjusted)
Up 8% from a month earlier (as of week ending April 14)
Down 11%
Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents
Touring activity
Up 33% from the start of the year (as of April 14)
At this time last year, it was up 23% from the start of 2023
ShowingTime, a home touring technology company
Google searches for “home for sale”
Unchanged from a month earlier (as of April 14)
Down 17%
Google Trends
Key housing-market data
U.S. highlights: Four weeks ending April 14, 2024
Redfin’s national metrics include data from 400+ U.S. metro areas, and is based on homes listed and/or sold during the period. Weekly housing-market data goes back through 2015. Subject to revision.
Four weeks ending April 14, 2024
Year-over-year change
Notes
Median sale price
$380,250
4.7%
Median asking price
$413,225
6.4%
Biggest increase since Oct. 2022; all-time high
Median monthly mortgage payment
$2,775 at a 6.88% mortgage rate
10.6%
All-time high
Pending sales
86,086
-2.3%
New listings
93,332
10.8%
Active listings
832,748
9.6%
Months of supply
3.3 months
+0.4 pts.
4 to 5 months of supply is considered balanced, with a lower number indicating seller’s market conditions.
Share of homes off market in two weeks
42.6%
Down from 44%
Median days on market
35
-1 day
Share of homes sold above list price
29.2%
Essentially unchanged
Share of homes with a price drop
5.9%
+1.6 pts.
Average sale-to-list price ratio
99.2%
+0.2 pts.
Metro-level highlights: Four weeks ending April 14, 2024
Redfin’s metro-level data includes the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.
Metros with biggest year-over-year increases
Metros with biggest year-over-year decreases
Notes
Median sale price
Anaheim, CA (24.8%)
Providence, RI (14.6%)
Nassau County, NY (14.3%)
West Palm Beach, FL (13.5%)
New Brunswick, NJ (13.1%)
San Antonio, TX (-1%)
Declined in just 1 metro
Pending sales
San Jose, CA (25.6%)
San Francisco (11.2%)
Oakland, CA (7.1%)
Columbus, OH (6.7%)
Seattle (6.4%)
Nassau County, NY (-14.9%)
Atlanta (-13.6%)
Houston (-11.6%)
Riverside, CA (-10.8%)
Fort Lauderdale, FL (-10%)
Increased in 14 metros
New listings
San Jose, CA (46.6%)
Sacramento, CA (27.6%)
Phoenix (27.4%)
Jacksonville, FL (27.2%)
Dallas (22.9%)
Newark, NJ (-12.4%)
Providence, RI (-6.3%)
Milwaukee (-4.6%)
Chicago (-4.5%)
Detroit (-3.1%)
Declined in 9 metros
To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-home-prices-mortgage-rates-increase
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country’s #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we’ve saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin’s press release distribution list, email [email protected]. To view Redfin’s press center, click here.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240418348073/en/
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Housing Market Forecast for 2024
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
How Will the New Rules Impact the Buying and Selling Process?
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
The Changes Will Impact These Home Buyers Most
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
Existing inventory is showing signs of loosening as impatient buyers and sellers have begun to accept the reality of mortgage rates oscillating between 6% and 7%.
Home-builder outlook also continues to get sunnier, trending back up amid declining mortgage rates and better building conditions.
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Residential Real Estate Stats: Existing, New and Pending Home Sales
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-Home Sales
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
New Home Sales
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
Pending Home Sales
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Ongoing Affordability Challenges Could Throw Cold Water on Spring Home-Buying Hopes
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Pro Tips for Buyers and Sellers
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Pro Tips for Buying in Today’s Real Estate Market
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. A real estate agent can help with this.
Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.
Pro Tips for Selling in Today’s Real Estate Market
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
Work with a local real estate agent. A real estate agent or team with a strong local marketing presence and access to major real estate portals can offer significant value and help you land a great deal.
Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.
Will the Housing Market Crash in 2024?
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
Will Foreclosures Increase in 2024?
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
When Will Be the Best Time To Buy a Home in 2024?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Frequently Asked Questions (FAQs)
Will declining mortgage rates cause home prices to rise?
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
What will happen if the housing market crashes?
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
Is it smart to buy real estate before a recession?
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
Older Americans who own their home are financially incentivized to stay put, which is likely to worsen the ongoing inventory shortage, two Redfin studies found.
In one recent survey, Redfin found that over three-quarters (78%) of older American homeowners (ages 60 and up) are planning to stay in their current home as they age. Meanwhile, about one in five baby boomers (19%) are considering moving into a community with older people or have already done so. Smaller shares of baby boomers are considering moving in with an adult child, moving to an assisted-living facility or moving in with friends.
The inertia of baby boomers is making it harder for young Americans to find a family home, according to a Redfin analysis. In fact, empty-nest baby boomers own 28% of three-bedroom homes in the U.S., while millennials with kids own just 14%. Furthermore, nearly 80% of boomers own the home they live in, compared to 55% of millennials.
Additionally, 54% of boomers carry no mortgage, and for those who do have a mortgage, nearly all of them have a much lower interest rate than they would if they sold and bought a new home today.
According to the April 2024 Mortgage Monitor report from Intercontinental Exchange (ICE), homeowners who took out mortgages with near-record-low rates in 2020 and 2021 face much higher monthly payments even if they move to an equivalently priced home. A “lateral move” of this type would cost 60% more per month, ICE reported.
There are now 517,000 single family homes on the market, up by 26% from a year ago, according to data from Altos Research. Inventory has been expanding steadily for 20 weeks in a row but still remains at historically low levels. Mike Simonsen, founder and president of Altos Research, forecasts that there will be 700,000 homes on the market by August or September of this year, the most homes available since 2019.
“Older Americans are aging in place because it makes financial sense, but also because it’s human nature to avoid thinking about challenging scenarios such as needing help as you get older,” Redfin chief economist Daryl Fairweather, said in a statement. “In reality, many homeowners and renters will need to move somewhere that better meets their needs as they age, like a senior-living community or a one-story home in an accessible neighborhood.
“But the government isn’t prioritizing building housing for seniors, which is further encouraging older Americans to stay put, exacerbating the inventory shortage. Politicians should focus on expanding housing stock that meets the needs of older Americans, which could help with housing affordability and availability for all.”
In certain states like California or Texas, tax systems make it advantageous for people to stay in their homes as they age. Medical and technological advancements have also made it increasingly easy for people to stay in their home as they get older.
More than half (51%) of baby boomers who don’t plan to move say that they like their home and see no reason to move, according to Redfin’s survey. The real estate brokerage conducted this survey in February 2024, collecting 838 responses from baby boomers (ages 60 to 78) and 62 responses from members of the Silent Generation (ages 79 and older).