NAR’s latest update

As you may know, over the weekend, the NAR announced an important update about the settlement. Not only did they extend the date for implementing the changes from July to August 17th, but they also made several points and clarifications in their update.

In today’s Foundation Plans, we’ve answered some of the questions that were addressed in this update. 

Also, just in case you might happen to have $65 million in Bitcoin burning a hole in your wallet, or rather, computer, check out today’s Schematics. We’ve linked to a report about one of the most unusual listings we’ve ever seen!

– James and David

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Luxury markets are in a supply crunch

A historic decline in luxury listings is forcing luxury buyers to compete over a limited supply, as reported in the Wall Street Journal. This supply crunch is caused by long-term owners hanging onto properties and home builders failing to keep pace with population growth and demand. Here are some other notable trends in the luxury space:

• Construction costs are about 40% higher than before the pandemic

• Active listings of luxe homes remain approximately 40% lower than pre-pandemic levels.

• Since 2000, while the U.S. population has grown 20%, the average monthly number of active existing-home listings has dropped 45%

• Of the top 50 metros in the country, St. Louis has the lowest inventory of luxury listings. Typically, a 5-month supply is considered healthy. St. Louis has a supply of 1.73 months.

• Here are the metros where luxury supply is the tightest: 

  • St. Louis, MO

  • Newark, NJ

  • Atlanta, GA

  • Oakland/San Jose, CA

  • Las Vegas, NV

Our take

Even though our home city of Los Angeles isn’t as supply-constrained as those cities, we feel the lack of luxury listings too. Luxe sellers are still waiting for rates to go down before they list. They think that buyer demand will continue to increase. At the same time, many owners whose property values skyrocketed in recent years are opting to keep the property rather than pay capital-gains taxes. It’s a peculiar time all around.

Top metros that require the highest incomes to buy a home

In 14 of the 50 largest metropolitan areas in the country, homebuyers now need to earn more than $150,000 to afford a home, according to Realtor.com. In some metros, especially those in California, it’s even more.

Here is Realtor.com’s list of the top 10 metros where homebuyers need the highest median incomes, assuming a 20% down payment, a mortgage rate of 6.99%, plus local taxes and insurance rate:

1. San Jose, CA – $361,000

2. Los Angeles, CA – $298,000

3. San Diego, CA – $259,000

4. San Francisco, CA – $256,000

5. Boston, MA – $226,000

6. New York, NY – $218,000

7. Seattle, WA – $193,000

8. Denver, CO – $161,000

9. Sacramento, CA – $162,000

10. Washington, DC – $159, 000

Our take

There’s a false belief out there that, because tech hubs like San Jose top this list, tech money is causing home prices to spike due to gentrification. Gentrification is happening, but that’s not what’s causing this trend in California. State and local policymakers are refusing to build enough homes to keep up with population growth. For example, Austin – which has a population seven times smaller than LA and San Francisco – permitted more housing last year than Los Angeles and San Francisco combined. Texas and Florida are seeing an influx of tech workers, while housing prices are actually stagnating. Why? Because those states are building. If more locales would simply allow more home construction, it would do wonders for their economies.

Top 10 best and worst dates to sell a home

Sellers who listed their homes for sale in May, February, and April have consistently garnered premiums above market valuations. That’s according to ATTOM’s analysis of more than 59 million single-family home and condo sales from 2011 to 2023.

Here are the top 10 dates where sellers are seeing the highest premiums above market prices:

1. May 27th – 16.2%

2. February 25th – 15.9%

3. February 17th – 15.8%

4. February 15th – 15.7%

5. February 22 – 15.5%

6. May 25th – 15.4%

7. March 30th – 15.2%

8. March 25th – 15.1%

9. February 28th – 15.0%

10. February 24th – 15.0%

Our take

This report is a goldmine. It also identifies the days sellers get the lowest premiums. We encourage you to check it out. This is exactly the type of valuable information that can help your clients, and help you stand out!

Schematics

The news that just missed the cut

• Home prices aren’t falling in any major metro 

• Study and be able to respond to the advice people are given when hiring us agents

• Here’s how much it costs to rent an apartment across 10 major cities in Asia

• Warren Buffett’s ringing endorsement of real estate agency

• The $65 million Malibu mansion you can buy with Bitcoin

Foundation Plans

Advice from James and David to win the day

On Friday, NAR announced that rule changes included in the settlement will go into effect on Aug. 17th, not in July. While the changes are happening this summer, a hearing for final approval of the $418 million settlement is scheduled for Nov. 26th. 

In our ongoing effort to keep you informed, today we’d like to answer some questions about these changes, and explain what MLSs and agents will and won’t be able to do.

When will a buyer agreement be needed? –  The NAR clarified what it means for an agent to be "working with" a buyer. Agents can promote their services to buyers or communicate with potential buyers on behalf of sellers, like answering questions at an open house, without needing a formal agreement. Generally, if an agent is not offering a specific service or does not anticipate payment for an activity, a buyer agreement is not obligatory. 

However, certain services, such as home tours or showings, do necessitate a written contract, which can be a short-term agreement not involving payment. Zillow's newly introduced "touring agreement" is cited as an example of such a contract that complies with the updated regulations. 

NAR further clarified that while buyer agreements are now mandatory, the organization will not prescribe the agent-buyer relationship's nature (agency vs. non-agency), the agreement's terms (duration, number of house showings, etc.), or the services to be provided. Instead, MLSs and brokerages have some leeway to negotiate these aspects, provided they comply with state laws.

How must the buyer agent be compensated? – NAR emphasized that when determining compensation, it must be "objectively ascertainable" and not open-ended and indefinite. However, NAR clarified that it does not mandate a specific payment method. Agents and buyers are free to agree on a fixed amount, a percentage, or an hourly rate. For instance, in the case of an hourly rate, the agreement would not specify the exact compensation amount (although it could limit the hours), but this approach would still meet the requirement of being "objectively ascertainable." NAR also specified that the agreement cannot include a clause such as "buyer broker compensation shall be whatever amount the seller is offering to the buyer."

What about agents who are already using buyer agreements? – Buyer agreements are already mandatory in 18 states. For many agents, this requirement is not new. However, what matters are the specifics: MLSs and brokerages with existing agreements must ensure they are updated to adhere to the new regulations by August 17th. Any mention of indefinite compensation or references to compensation offers via the MLS must be revised or eliminated.

This also implies that agents with existing agreements who continue working with buyers after the August changes will likely need to modify the agreement, or have the buyer sign a new one to ensure compliance with the updated rules.

Bookmark NAR’s updated FAQ and use this resource to learn more about the changes.

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:

If you can believe it, we’re just twenty-six days away from the half-year mark of 2024! Time waits for no one. Learning how to manage it means learning how to say no, even to good things. Intensely focus on your goals and ruthlessly cut out the rest. Otherwise, you’ll just be swept away, wondering where the time went.

That’s it for this edition of the Blueprint. Thanks for reading, and we’ll see you back here on Friday!

– James and David