Preparing for the rate cut

As we await the expected rate cuts from the Fed, the big question is now how much will it be? .25% or .50%? In our second story, we look at one of the top indicators and try to read the tea leaves.

While the specific number remains up in the air, one thing is certain: when that cut comes, sellers are going to start fielding more offers. In today’s Foundation Plans below, we provide some great tips on how to handle those multiple offers.

And now, on with today’s Blueprint

– James and David

Fannie Mae releases home price forecast

Home prices are expected to grow year-over-year by 4.7% in 2024 and 3.1% in 2025, according to Fannie Mae’s latest Home Price Expectations Survey (HPES) forecast. Here are the other major takeaways from the report:

• Fannie Mae revised its forecast for the home shortage, predicting the U.S. will be short approximately 2.8 million homes, down from its previous estimate of 4 million.

• The "lock-in effect" will continue to fade as more would-be homebuyers and sellers get used to higher mortgage rates.

• The company states these policy reforms that could improve housing supply: expedited construction permitting, expanded zoning for multifamily housing, and development of “missing middle” housing (i.e., duplexes, triplexes, fourplexes, townhomes)

• However, 63% of those surveyed doubt that the above reforms will be enacted in the next five years.

Our take

As we expected, the rapid home price explosion we saw between 2020 to 2022 isn’t coming back anytime soon. Home price growth is returning to normal. We also agree with their policy recommendations to address the housing shortage. However, that 63% of doubtful responders is a bit of a troubling number. While we understand their skepticism, we hope they’re proven wrong, and we will continue to urge governments to do what they can to ease this problem.

Mortgage rate predictions for 2025

Experts continue to look for signs which indicate whether the Fed will cut interest rates by 25 or 50 basis points. The recently released job report from the BLS is one of those indicators. It shows that the U.S. added 142,000 jobs in August, below expectations of 160,000, but a decent rebound from the 89,000 jobs in July. The unemployment rate fell to 4.2%, down from 4.3% in July, and wages are up 3.8% year-over-year, well above 2.9% inflation. 

Here are the current major mortgage forecasts via KCM:

Our take

The case for cutting by 50 basis points is strong, but we believe that the Fed will only cut by 25 bps. Most mortgage forecasters are anticipating that the 30-year mortgage rate will only fall below 6% by the end of next year. However, this could change once the market gets clearer signals from the Fed on how quickly they will cut interest rates. Keep an eye on these dates: Wednesday 9/11, when the latest CPI inflation report will drop, and Wednesday 9/18, when the Fed meets to adjust policy. 

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Metros with the most home construction

ResiClub researched single-family and multifamily home construction by measuring the number of permits issued between January and July of this year. On a national basis, total housing permits declined by 6.3% YOY, with single-family permits declining 1.3% and multifamily permits (5 units or more) dropping 16.6%.

These 10 metros saw the most single-family permits issued in the period they studied:

1. Houston-The Woodlands-Sugar Land, TX – 31,994

2. Dallas-Fort Worth-Arlington, TX – 29,247

3. Phoenix-Mesa-Chandler, AZ – 18,606 

4. Atlanta-Sandy Springs-Alpharetta, GA – 16,154

5. Charlotte-Concord-Gastonia, NC-SC – 11,675

6. Austin-Round Rock-Georgetown, TX – 10,570 

7. Tampa-St. Petersburg-Clearwater, FL – 9,399 

8. Nashville-Davidson-Murfreesboro-Franklin, TN – 9,079 

9. Orlando-Kissimmee-Sanford, FL – 9,030

10. Raleigh-Cary, NC – 8,227

Our take

We’re not going to sugarcoat it, we’re not happy with this news. After all the talk about the need for more construction, we have built LESS this year than last year. To illustrate our point, just consider this fact. In June alone, Austin, Texas permitted 1,156 units of new apartments, twice as many as San Francisco has permitted in all of 2024. And today, we just saw this about Beverly Hills dragging its heels on the affordability crisis. It’s maddening! We NEED to build, as we said above, we want to see legislation that gets things moving.

The news that just missed the cut

• Cameras agents should consider getting

• Disney’s new mega-neighborhood is taking shape

• L.A.’s mansion tax has collected $375 million. Here’s where the money is going.

• Even after 12 years, Michael Jordan’s Highland Park mansion still hasn’t sold 

• Cities seeing the highest number of workers return to the office

Foundation Plans

Advice from James and David to win the day

The number of offers has dropped to just 2.7 per listing, but once mortgage rates go down, that number will jump back up – most likely by the end of the year or into the next. In anticipation, we want to give you some tips on how to represent your seller in a multiple-offer scenario.

1. Follow the code of ethics – According to NAR’s 2024 Code of Ethics, “REALTORS® shall submit offers and counteroffers objectively and as quickly as possible.“ Offers should be shared with the seller as they come in unless the seller has given specific instructions otherwise. It's essential to follow the terms outlined in the listing agreement. Keep in mind that the seller holds the decision-making power—your role as the agent is to provide guidance, not make decisions on their behalf.

2. Always get the offer in writing –  Agents might call and say, “Hey, would your seller take X or Y with a 30-day settlement?” That’s not enough info. Instruct the agent to put it in writing. That way, you get all the terms, conditions, and prices clearly spelled out so you can effectively communicate them to your client. Every state is different, so defer to your state laws as to what needs to be documented.

3. Defer to your seller once you get more than one offer – Let your seller take the lead when multiple offers come in: As the agent, your job is to present all offers and provide options, but the final decision is entirely up to the seller, including whether they want to move forward at all. If the seller decides to negotiate one of the offers, they can set a deadline for all interested parties to submit their best price and terms. Once all offers are in, the seller can then make a decision. Remember that this doesn’t bind the seller to any specific offer—they may want to adjust details like the settlement date or other terms. A helpful approach is to say, "We have three options. I recommend we proceed this way. What are your thoughts?" This gives the seller control while allowing you to offer your professional advice.

4. Always complete an agreement of sale summary – There's no need to overwhelm your clients with a lengthy contract. What they really want to see are the key details—price and terms. Prepare a clear, concise summary in writing (preferably as a PDF) so your client can easily review the offer. A one-page summary sheet along with a seller net sheet based on the offer’s price and terms works best. This approach helps minimize confusion and prevents unnecessary renegotiation, which can delay the agreement. Just be sure to follow your state’s regulations when doing so.

5. No late-night deadlines or decision-making –  There is a tendency in our industry to set Sunday night as the deadline for decision-making. We don’t like it. This practice often results in late hours after a busy weekend. We suggest steering away from this approach. Instead, consider setting deadlines for Monday and requesting responses by Tuesday. While the final decision is always up to the seller, you can offer this as a practical recommendation to help ease the process for everyone involved.

We assure you that following these best practices will lead to more efficient business and better results for your sellers. To learn more, we encourage you to study this post from fellow agent Tom Toole. His excellent advice inspired our takes on his points on the matter.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.” — Charlie Munger

Thanks for reading, and we’ll see you back here on Friday!

– James and David