By the smallest of margins, mortgage rates are back up to levels last seen in July. That means we’ve gone from being fairly close to 6% in mid-September to being nearly as close to 7% today when it comes to top tier 30yr fixed scenarios for the average lender.
Today’s jump was particularly quick and frustratingly lacking in satisfying explanations. It’s not the explanations make bad news any more palatable, but it’s always more frustrating to be confronted with unpleasantness that seems to be happening for no good reason.
There are several theories, but nothing as obvious or demonstrable as a surprise result in a key piece of economic data. These include things like shifting election odds coupled with assumptions about policy impacts, arcane calendar issues surrounding the options market, and one of several research notes regarding U.S. deficits that have been making the rounds.
It’s unlikely that any of these factors could exclusively drive the pace of weakness seen in rates today. There are limited examples of several such factors teaming up to cause days like today, but just as often, something else comes to light in the following days that helps flesh out the explanation.
Explanations aside, it was one of the bigger jumps seen in the past few months, and by far and away the biggest jump seen on a day without a big economic report or other scheduled event.
The activity this weekend was about what I expected for the middle of October, 2024.
Happy to report that the political circus has been less of a distraction recently, and hopefully the real estate market will feel a bit of a boost from those who are motivated to move by the election’s result!
It would be natural to expect the number of active listings to be declining by now, but sellers are still hopeful. Of the 470 actives, there are 113 of them that have been on the market for 90+ days too (24%).
Those don’t have much chance of selling this year without a drastic price reduction, so we should see them again next year. Let’s expect about 100+ more listings than last year to carry over into 2025, which will be my first category of why I think there will be a surge of inventory in the next selling season!
Reader Jim G. made a couple of friendly comments on how Compass is handling our objection to the Clear Cooperation Policy. It followed what a big-mouth in L.A. said this week when he called the Compass explanation, ‘disingenuous’.
We’re all struggling to describe the new world of home sales.
It’s mostly because we liked the old way and it sure seemed to work just fine – at least until an attorney in Missouri made our life miserable. It’s a new world now because attorneys will keep suing us until we run out of money.
The main reason that the Clear Cooperation Policy needs to end is because it’s a mandatory requirement. The government is the only entity who can make things mandatory. If we force sellers and agents to put their home on the MLS, then it is inevitable that one of them won’t like it and they will file another class-action lawsuit.
Let’s replace the CCP with a simple description of the choices, and have the seller pick one:
The Three Ways To Sell Your Home
Open-Market Sales – This is how to reach the maximum number of buyers. If a home has the ideal combination of selling features (good condition, preferred location, attractive list price, and sold by a competent salesperson), then it should sell quickly – probably in the first ten days on the market. The tradeoff is if the home doesn’t sell right away, then buyers assume something is wrong with the price, and they expect the home to sell for less.
Will waiting longer will improve the chances of selling? Yes, but only when prices/values are appreciating, and they eventually reach and exceed your price – making the home the best deal in the marketplace. In a flat or depreciating market, time is the enemy. The longer it takes, the bigger the discount expected. This buyer sentiment happens in all markets and price points. The pricing trend in your market, and the current market conditions, should play a vital role in your decision here.
Off-Market Sales – The seller’s advantage here is that a buyer is pressured to pay your price, otherwise the home goes on the open market. There isn’t the full exposure to all buyers, but you only need one. Sellers with no time constraints and a preference for privacy can empower their listing agent to explore their off-market resources, and if a buyer isn’t found and/or the anxiety mounts, then the home can always be put on the open market later.
Auction – Homeowners willing to sell their home for what the market will bear on a specific date may want to consider an auction of their home. There is full market exposure, and the animal spirits can take over and drive the price above market value. In many cases, the commissions and closing costs get paid by the buyer too.
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The key advantage of selling on the open market or by auction? It instills urgency in the buyers. They know that if they love the home, they need to step up now and buy it before they lose another one!
This urgency isn’t required to sell a home, and it is regularly wasted when sellers and their listing agent don’t use it wisely.
But it is invaluable to the listing agents who know how to exploit it.
Before making your choice, know that the hassle factor is real – especially if you are living in the home. Getting the home ready to sell costs time and money, and then having strangers roaming through your home with little or no notice is inconvenient, to say the least. Going on vacation for a month, or moving out altogether, is worth considering.
End of sellers-choices form
Until, and unless, the industry is willing to educate the masses on the fine details about selling homes, we will keep having results all over the map. Have you noticed how some homes sell right away for retail or retail-plus, and others don’t sell at all? It’s because we allow the marketplace to be a perfect mess with little or no education, guidance or understanding. There are no rules or standards about selling a home and making a bad/wrong choice can be costly.
Let’s start with a basic description of the choices available to sellers.
Here’s our new listing in Starboard by Davidson Communities – San Diego’s best builder!
7618 Circulo Sequoia, Carlsbad
5 br/3.5 ba, 4,000sf
15,314sf private corner lot
LP = $2,500,000
Davidson’s Starboard neighborhood is known to be among the finest in Carlsbad, and for most the Residence Two is the favorite floor plan. Its 4,000sf surrounds the private 700sf courtyard which extends the indoor/outdoor living area all on a whopping 15,314sf lot.
Five larger bedrooms include a bedroom/full bath suite downstairs which is sequestered off by itself for maximum privacy. The lushly landscaped backyard is a tropical oasis waiting to provide the new owners the perfect place to relax and enjoy the good life, plus it’s just a short walk to the community clubhouse, Olympic-sized pool, and fitness center. Hardwoods, stainless, dozens of big windows for plenty of natural light, four fireplaces, 3-car garage, and dual-zone central A/C.
Either walk the dog around the neighborhood’s 1.2-mile loop or hike/bike the miles of trails nearby! Top-rated Encinitas schools too – wow! If you are looking for an upscale luxury experience that matches your active lifestyle, check this out!
Davidson homes tend to sell for a premium – 7302 Calle Pera closed for $3,025,000 on 9/19! Other comps include 6643 Halite that closed for $2,925,000 on Aug 30th…6626 Halite that closed for $2,475,000 on Aug 30th….7290 Sitio Lima closed for $2,580,000 on 5/23/24 (backed to RSF Rd.)…smaller 7558 Circulo Sequoia on a smaller lot closed for $2,444,000 on 7/3/24…..3056 Via Romaza 3,174sf closed for $2,700,000 on May 28th.
For two months we’ve been settling in with the new arrangements for paying the buyer-agents.
I haven’t heard of any buyers yet who got stuck having to pay their buyer-agent because the seller refused to pay. Undoubtably, there are buyer-agents who were paid a partial fee by the seller and then the buyer made up the difference – that’s the intent of the buyer-broker agreement being required now.
Some buyers (especially cash buyers) may prefer to pay for their own agent and take a lower purchase price instead, but that has always been the case.
Strangely, the CRMLS – which provides the MLS for the North SD County Association of Realtors – cannot allow any mention in the active listings of seller-paid commissions being offered to buyer-agents. But now when marking the escrow as closed, they REQUIRE the listing agent to disclose the commission amount the seller paid to the buyer-agent.
Agents who are members of the competing San Diego Association of Realtors are exempt.
I culled this data from the NSDCC sales closed between August 17 and September 18, and between September 18 and October 15 from those that did mention the specific commission amount:
There has been erosion this year. It’s because some agents are weak and desperate, as I mentioned in April.
Is that who you want in your corner?
It is much more important to sell your house for retail, or retail-plus, than save a point on the commission.
Same on the buyer side. If your agent can make a strong case why they are worth it to the seller and listing agent, they are also making a good case for them to take your offer too.
This isn’t the world we wanted. This isn’t the world we asked for. This is what 12 jurors in Missouri thought you deserved (as did the attorneys who charged $100,000,000+ for prep work and a week in court).
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Of the 139 recent sales, nine were marked with zero days-on-market (6%), which are the off-market sales typically. They aren’t as widespread as everyone wants you to think, at least not yet. In 17% of the sales, the listing agent also represented the buyer too, though there isn’t a box to check for unrepresented buyers (the listing agent must input a buyer-agent). I predict that both of these percentages will increasing.
I was in Orange County yesterday and saw this in a local publication:
The off-market craze is just getting started.
We’ve already been hearing the hucksters at open houses who lead with their only pitch:
“I operate in the off-market space.”
“Does your agent offer you off-market deals?”
“Would you like me to alert you to our off-market listings?”
“Ok, great – sign my buyer-broker agreement right here.”
When the inventory of superior homes being so tight, it is inevitable that buyers will be lured into thinking that there might be something they’re missing.
But the real benefit to the off-market action is that realtors regain control of the market.
The industry loved it during the frenzy when the MLS/search portals were publishing sales that closed several hundred thousand dollars over the list price in the first few days on the market.
But now, the MLS/search portals are the enemy.
They publish the number of days-on-market, and the price reductions….ouch. If you are a listing agent of one of those listings, you are begging for ways to hide those facts. The agents who ‘refresh’ their listings have been thwarted now because the MLS also publishes the CDOM, or combined-days-on-market to highlight when a listing was just cancelled and re-inputted:
This is one of the main reasons why the Clear Cooperation Policy will be attacked by the brokerages.
Operating in the off-market space avoids racking up days on the market, and public changes in price. Think about the commercial brokers – you have no idea how long they have been sitting on that listing, or what the price was an hour ago, let alone tomorrow.
When the market is great, then the truth is our friend.
Nowadays? Not so much.
Potential home buyers must think that the real estate gods have it out for them. Rates and prices went through the roof and never came back (yet), the bidding process is a disaster, and now they are forced to pay for their own agent (maybe). In spite of the internet, the real truth about the market has never been so well disguised. They can’t get a break!
Sellers just want their money.
Compass needs a partner. If we split from the pack over the CCP then we will be labeled the sole renegade. But if eXp, Realogy, KW, or Berkshire joins us then the rest will fall in line (the eXp CEO said so). We can quit the MLS, and make Zillow/Homes.com publish our listings the way we want them published.
In the meantime, we can expect the off-market craze to thrive.
