The DOJ Showdown

Here we go!

This week, we’re going to find out more about the DOJ’s stance on home sellers paying commissions to the buyer-agents. Finally!

Everyone agrees that sellers can choose to pay NO commissions. Heck, you don’t have to hire an agent to sell your house – go stick a for-sale sign in your front yard and see what happens.

But sellers should not be prevented from paying an incentive if they believe that is what’s best for them, and that it will get them what they want.

This is where NAR has failed miserably, and the big brokerages have no other choice but fight for what’s right. It’s anti-American to forbid people from spending their money however they want – especially when commissions have always been negotiable.

If the DOJ forces home buyers to pay for their own agent, how much will be comfortable? Maybe one-half percent? Or maybe 1%? The job is too tough and it takes too long to work for 1%. Good agents won’t do it, and it will force buyers to go direct to the listing agent instead.

Unrepresented buyers will be the worst thing that ever happened to home sales. But nobody sees it coming, and by the time it becomes obvious, it will be too late.

Hopefully somebody will intervene with an auction format instead!

Brokerages vs. NAR

Our president of the western United States was at our regional sales meeting on Friday. At the end, he announced that Compass has joined with all of the other brokerages who were identified in the NAR settlement as having over $2 billion in sales volume – a group that employs so many agents that it makes up 86% of the total NAR dues.

They have all hired the same law firm, and they are going after NAR. I think it means that the settlement that forced the big brokerages to pay $400 million will get litigated, and hopefully the lawsuit will get appealed too.

Hopefully, it isn’t just a delay tactic. The lawsuit should get appealed because the defense put on by NAR was pathetic and very arrogant – it was like they thought that they just had to show up to pick up their automatic win.

I don’t think any agent will mind if the buyer-agent commission isn’t required to be inputted into the MLS – we will live with that. We’ll probably live with having a required written contract with our buyers too.

But sellers should have the right to incentivize the buyer-agents. Because the DOJ won’t come out and state that clearly – they only hint at it – we will be living in purgatory until someone forces the issue. The brokerages should help defend the practice, and see it through to the end.

Some sellers may not agree with me now, but the market slowdown is coming and you will want additional tools to help sell your house in the very near future. If you don’t want to offer an incentive to buyer-agents, no problem.

Also mentioned on Friday is that they are going after the Clear Cooperation Policy too – the NAR mandate that a listing must be inputted into the MLS within one business day after any public marketing. We’ve come to live with that policy too, but I think it shows that they are bringing all the firepower to destroy the National Association of Realtors and build anew.

The president didn’t say anything about this being quiet, so I would think that there should be an announcement any day now. If this blog post disappears, then it might be a while?

Inventory Watch

June is half over, and there have been 74 NSDCC closings so we might get close to last month’s total of 185 sales – though it feels like the market could fade away the rest of the year.

Will sellers adjust?

Probably not – or at least not adjust fast enough. But they might get lucky if the new listings slow down, and leave the OPTs (over-priced turkeys) as the only choice for those buyers who really want to get something done this summer.

Will buyers make low offers?

Sellers can’t count on that, so the likelihood of a summer standoff is pretty good, especially over the next 30 days. No one will panic – heck, summer just started!

(more…)

More Locked-In Talk

Boy are these guys going to be surprised if rates come down and nothing changes.

The difference in rates might have the least to do with being locked in!

Here is more of the psycho-babble – and this guy is a chief economist:

Switching from a lower mortgage rate to a higher one can lead to significantly increased monthly payments. For many homeowners, the cost of selling their current home and purchasing a new one with a higher mortgage rate is financially unfeasible.

What could ease the lock-in effect going forward?

    • Life events: Over time, life events such as having an additional child or receiving a big promotion might prompt homeowners to sell their current homes and move, despite their ultralow mortgage rates. These personal changes could outweigh the financial disincentives for some.
    • Falling mortgage rates: If mortgage rates decrease, improved affordability could entice more homeowners to sell and buy new homes. While homeowners might not trade in their 4.0% mortgage rate for a 7.0% rate, they might consider moving if it means taking on, say, a 5.5% mortgage rate. This reduction in rates, if it occurs, could lower the switching cost and make moving a more viable option.

And odds are, the lock-in effect could take years to fade away.

“Mortgage rate trends aren’t likely to bust the lock-in effect until at least the end of the year, and possibly well into 2025, as the Fed holds fast on fighting inflation,” predicts Realtor.com senior economist Ralph McLaughlin.

“We’ll likely need to see a 150 to 200 basis points drop in the 10-year yield to get there, and at current spreads, this could require three to four rate cuts by the Fed. As of now, the market is pricing in just one to two cuts by the end of the year and two to three cuts in 2025,” he adds.

What are they missing? How hard it is to move.

You have to be willing to grind for months in search of a better home (one that makes it worth moving), juggle the sell-first-or-buy-first equation, pay six figures in capital-gains taxes, pay six figures in closing costs, and then fix up the new house like you did the old house. Sill want to move?

Hat tip to Carl for sending this in:

https://www.realtor.com/news/trends/home-sales-lost-by-mortgage-rate-lock-in-effect/

Zillow Predicts Decreasing Values

Here is the first report in the next cycle of local Zillow forecasts.

At the beginning of the year, they predicted that all of the local areas would appreciate 3% to 4%, and by March they raised their optimism into the 5% range.

All of those gains must have already happened?

They think that values will go negative from June to May, apparently.

These look like they will flatten out too:

It’s Friday – here is their next offering:

Summer Rally?

Yesterday, we saw a 6-handle again on the 30-year fixed rate mortgages, and it should come down a little more today.

With there being virtually no upward pressure on pricing – the quartiles just turned slightly lower than last year – we could see the sales momentum pick up if rates can just settle in the sixes.

Lower rates AND prices used to mean something. We’ll see about this year!

Frenzy Monitor – June

Almost all areas are bursting with active listings. Encinitas has joined La Jolla and Rancho Santa Fe in the “List ‘Em High And Let Them Fly” category. The median list price in the 92024 is $2,998,000!

Will buyers be affected? Will they notice?

La Jolla and Rancho Santa Fe don’t allow for-sale signs in the yard so you won’t notice just by driving around. The City of Encinitas is 20 square miles so having 75 signs probably won’t look like a glut. The average DOM is 40 days in Encinitas – once it gets up to 71 like it is in the Ranch, then buyers might take notice.

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