Surprise, surprise

Well, they say life is full of surprises, and that’s certainly the case in our first story. We report on the spike in starter home sales, which saw the biggest leaps in – of all places – San Francisco and San Jose. 

But this is exactly what we love about our business. It is always changing.

On that note, we are still absorbing all the changes from the NAR settlement, and we want to keep delivering on our promise to help you adjust to our new reality. In today’s Foundation Plans, we share our advice for how agents should communicate these changes to clients. 

Now, on with today’s Blueprint!

– James and David

Starter home sales spike

In July, pending sales of starter homes increased by 10.2% YOY, reaching their highest level since October 2022. That's in stark contrast to pending sales for all other tiers, which fell between 6% and 10% over the same time period, according to the latest market update from Redfin. Here’s what else the company reports from July:

• The median price for a U.S. starter home climbed to $250,000, but price growth was slower than for other price brackets

• Sales of starter homes fell 0.6% YOY, while middle-priced and upper-priced homes fell 3.9% and 3.4% YOY, respectively

• Here’s where home sales increased most:

  • San Francisco, CA (18.7%)

  • San Jose, CA (14.5%)

  • Cincinnati, OH (12.4%)

• Starter homes sold fastest in Seattle (7 days median) and sold the slowest in Fort Lauderdale (81 days)

Our take

This is excellent news. It shows that there are signs of life for first-time homebuyers at the lower end of an otherwise sluggish market. The uptick in sales appears to be related to increases in supply. Active listings in July were up 18.9% YOY for starter homes, well above the increases for the luxury (9%), middle (4.1%) and upper tiers (1.6%). But we still have a ways to go. The starter-home-sale boom has not been enough to jumpstart the overall real estate market.

“The time has come for policy to adjust”

With those words, Fed Chair Jerome Powell confirmed that the Fed will cut interest rates at its next policy meeting on September 18th. Although cuts will happen in September, the size and speed will depend on incoming economic data, particularly labor market data. Markets have already priced in aggressive expectations for how quickly the Fed will move. If the Fed ends up cutting slower than anticipated, rates might rise a bit in the fall.

After Powell’s speech, both Wells Fargo and Fannie Mae updated their 30-year fixed mortgage forecasts:

Our take

Our loyal readers know this news does not come as a shock to us. The question now is: how big will the cut be? 25 basis points or 50? We’re in the 25 bps camp. Now while this is clearly great news, especially for buyers, we do have one word of caution–most of the benefits from these cuts won’t be seen until 2025. As the projections from Wells and Fannie Mae show, that’s when mortgage rates will finally fall below the 6% threshold.  

Boost Your Real Estate Success with Homes.com

Your Listing, Your Lead

Over 100 Million buyers uses Homes.com, the fastest growing home search site. Put your best profile forward with a Homes Pro membership—amplifying your real estate brand with premium tools, priority visibility, and enhanced exposure across the internet with Homes.com.

[Signup Today!]

Top markets that could see the biggest affordability gains

The upcoming mortgage rate cut will affect real estate markets in various ways, with some areas seeing bigger gains in home affordability than others. A new Realtor.com analysis shows the metro areas where affordability for the median earner will improve most if rates drop to 6.3%. 

In these particular metros, the monthly savings on house payments from lower mortgage rates would be enough to bring a significant number of additional homes into reach for the typical homebuyer.

Here are the top markets that will see the biggest gains in affordability:

1. Lakeland, FL

2. Salt Lake City, UT

3. El Paso, TX

4. Raleigh, NC

5. Deltona, FL

6. Providence, RI

7. Boise, ID

8. Palm Bay, FL

9. Ogden, UT

10. New Haven, CT

Our take

It’s important to note the way Realtor.com came to these conclusions. They calculated affordable monthly payments as 30% of the local median income in the top 100 U.S. metros. They then assessed the percentage of active listings that local median earners could afford at rates of 6.8% and then 6.5%, considering local taxes and insurance. The increase in affordability was measured by the percentage-point difference between these scenarios. We summarized their process so you can run your own analysis on your own markets.

The news that just missed the cut

• How lenders are using AI in their systems

• What agents can do to save on their taxes

• Here’s why DOJ is suing RealPage

• How to deal with difficult clients

• This crowdfunding firm that flips homes is buying Kanye’s Malibu home

Foundation Plans

Advice from James and David to win the day

It’s been exactly 10 days since the NAR settlement changes have kicked in. Our industry is still in a state of flux as both agents and consumers figure things out. Today, we’d like to give you our two cents on how best to communicate what’s going on with your clients, especially your buyer clients.  

Communicate without all the jargon, legal or otherwise – Buyers don’t need an explanation of when the NAR litigation started, a deep dive into the lawsuit, or an update on its current stage. They simply need to know how these changes impact their ability to buy a home. By focusing on what matters to them, we can ensure that our communication (both in real life and on social media) is both effective and appreciated.

Address your buyer’s needs and concerns up front – The NAR settlement requires buyer agents to have a signed buyer representation agreement before showing a property to a potential buyer. When talking about these agreements, though, agents need to frame the agreement discussions as an act of service, not as a way to get paid (although it is both, of course). Get to the heart of what the client cares about—touring homes and avoiding unnecessary costs. If you want a good example script of how to address this with clients, watch this and read this.

Demonstrate your value from the start – This has always been the case, but it’s especially true now. You have to have conversations about your value from the get-go. While you should be ready to advocate for your buyer, you now have to do the same for yourself and your commission rate. Just as agents had to pitch themselves to get listings, agents will now have to pitch themselves when dealing with buyers. 

To hone your skills as you deal with the changes, use these resources to help yourself.

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:

That’s it for this edition of the Blueprint!

Remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Have a fantastic week, and we’ll see you back here on Friday!

– James and David