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How the NAR Settlement is Impacting Agents So Far
Weekly Mortgage Market Update 10.21.2024
Hello Everyone! We’ve got a lot happening this week in the real estate world, with everything from housing affordability to the latest effects of the NAR settlement and the upcoming election. Let’s dive in and see how these shifts might impact your business and your clients.
Read time: ~4 minutes
Rates ended SLIGHTLY HIGHER compared to last week, and volatility was LOW. Rates are in the mid 6’s for most loan types without paying discount points. Paying discount points can get you in the high 5’s to low 6’s.
How the NAR Settlement is Impacting Agents So Far
We’re a couple of months into NAR’s new guidelines, which include written buyer agreements and the removal of compensation offers from the MLS. So, what are the agents in Las Vegas saying?
The general vibe? It’s been pretty smooth. Most agents report it’s business as usual 🙏, though there are a few noteworthy changes.
One of the main issues has been confusion from buyers. With all the media buzz, some clients are feeling unsure. Just last week, I got a call from a well-educated buyer moving from California to Nevada, asking for advice on a buyer agreement. It’s clear that buyers need more clarity on these changes. But agents who are confident and well-trained are handling it without any issues.
In fact, some agents are even using the buyer agreement as an opportunity. They see it as a way to “interview” with potential clients upfront, building stronger, stickier relationships that prevent buyers from ghosting after a solid consultation.
As we shift more toward a buyer’s market, sellers are still offering strong compensation to buyer agents—sometimes up to the traditional 3%. But there have been a few unexpected twists:
Some buyers, especially investors, are trying to bypass buyer agents by going directly to the listing agent, trying to avoid the commission fee. Unfortunately, that means they could miss out on the representation they need.
We’re also seeing a few sellers and listing agents offering reduced commissions. While this is rare, it could lead to more “steering” behavior, which is something to keep an eye on.
In general, things are steady, but the market is shifting. Keep your eyes open! 🗡️
Key Takeaway: Overall, the NAR settlement hasn’t been as disruptive as expected. The added transparency is generally seen as a positive shift. The agents who are embracing the changes, educating their clients, and adapting to the new rules are coming out ahead.
However, not all feedback has been positive, with some agents noticing an increase in 'steering' compared to before the settlement.
Proposed Housing Policies from Trump and Harris
We’re about two weeks away from the U.S. presidential election, which means we’re just two weeks away from finally being able to move forward with our lives. Regardless of who wins, the sun will rise the next day, and hopefully, we’ll see some buyers return to the market— Many seem to be holding off until after the election to resume their home search.
Kamala Harris’ Housing Proposals
Build 3 million homes over four years.
$40 billion “innovation fund” for new construction models.
$25,000 in down payment assistance for first-time homebuyers.
Tax credits for developers who build starter homes
Key Notes: Harris’ goal of 3 million homes would require a 50% boost in production, which seems like a stretch. The innovation fund could lead to some exciting new approaches, but it’s unclear where that funding will come from. As for the $25,000 down payment assistance, it sounds great on paper, but with limited housing supply, this could lead to higher home prices and inflation.
Donald Trump’s Housing Proposals
Deport 11 million immigrants to help housing available for U.S. citizens.
Push for deregulation to speed up construction.
Lower interest rates.
Open federal land for more development.
Key Notes: Immigrants tend to live in high-density housing, and as a lender, I can tell you we aren’t doing loans for undocumented immigrants. They usually pay in cash or through ITIN programs, which are rare. Deporting them likely won’t have much impact on housing supply. Deregulation might help builders, but the details aren’t clear.
Lastly, keep in mind that the president doesn’t directly control interest rates. That’s up to the Federal Reserve, which makes decisions based on the economy’s needs.
Ways We Can Tackle Housing Affordability 💰
The Federal Reserve Bank of Atlanta just released an analysis on housing affordability, and the outlook isn’t great.
Yes, buying a “starter home” may be cheaper now than it was a year ago, but when we look at overall affordability since 2020, the gap has widened significantly. In January 2020, the median household income in the U.S. was $65,925, and the income needed to buy a median-priced home was $64,257.
By August 2024, median household income rose to $85,255, but the income required to buy a median home has soared to $119,870!
So how do we bridge this gap?
Wages could increase, but that’s a slow process. Alternatively, we could focus on bringing down the cost of homeownership.
With the Fed pivoting to rate cuts, we should see improvements in interest rates over the next few years.
Another potential solution? The government could introduce a tax deduction for sellers who provide buyer credits to help buy down their interest rates. This could encourage more sellers to list homes, while making payments more affordable for buyers.
To bring down home prices, we need more inventory. Many homeowners have enjoyed significant appreciation in recent years and are running into capital gains tax limits. Raising the capital gains tax exemption to $500K for individuals and $1M for couples could incentivize more people to sell, adding much-needed supply to the market.
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