The “buy-it-yourselfers”

Look, we love the D.I.Y. culture. There is something truly satisfying about doing things yourself. But as we know, there’s a big difference between fixing something around the house and actually buying the house.

Yet there are some people out there who believe in “B.I.Y.” and think they don’t need an agent to help them buy a home. Let’s just say, this isn’t, um, wise.

In today’s Foundation Plans, we continue our series about how to demonstrate and explain the value of an agent. We list three key ways that agents take a complicated process and make it less complicated for buyers. 

This might be stuff you already know, but we think it’s helpful to boil these points down in ways that we can remember and pass along to those “buy-it-yourselfers.”

– James and David

Zillow’s forecast for housing prices 

U.S. home prices will rise by 1.4% between March 2024 and March 2025, according to Zillow’s latest forecast. Here’s what else Zillow reports and projects:

• U.S. home prices rose 1.1% between February and March, exceeding what is considered typical for the season.

• U.S. home prices are up 4.6% year-over-year.

• Zillow economists expect national price growth to remain positive over the next year, but they do expect growth to decelerate.

Our take

Forget all the doom and gloom naysayers. There is not going to be a dramatic crash in housing prices. Instead, prices will grow at a slow and steady rate this year. But it’s not all rosy. Since interest rates are going to stay higher for longer (see the story below), mortgage rates will also stay higher, and affordability will continue to be an issue. Even though buyers are getting more aggressive with all-cash deals, and we haven’t seen the expected drop in sales, we do think that deal volume and overall pending sales will be down this year.

Expect interest rates to stay higher for longer 

On Tuesday, Fed Chair Jerome Powell strongly implied that the central bank’s inflation fight could take longer than previously expected. While speaking at the Washington Forum, Powell said “More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal. The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence.”

The "higher for longer" view is now widely shared by most analysts and traders on Wall Street, who have recently reduced their forecast for 2024 rate cuts. This has coincided with mortgage rates surging back up.

On Tuesday, the average 30-year fixed mortgage rate hit 7.50%. That’s the highest mortgage rate reading this year, and the highest level since November 13, 2023.

Our take

We never expected six or seven rate cuts this year, or that rate cuts would begin in March. However, we were expecting rate cuts in June. Unfortunately, given the data from Q1, that doesn’t seem in the cards. While we don’t think the Fed is likely to raise interest rates any time soon, those rates will certainly stay higher for longer. While the economy is doing fine – both current GDP and unemployment numbers are good – we need inflation to go down faster. Keep an eye on April 25th and 26th, when fresh GDP and PCE inflation numbers come out.  

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Top 10 zip codes with the highest foreclosure rates

One in every 1,478 properties nationwide had a foreclosure filing in Q1 2024, down less than 1% from a year ago. That’s according to ATTOM's latest analysis of foreclosure activity. 

Here are the states with the highest foreclosure rates per housing unit in Q1 2024:

1. Delaware (one in every 894)

2. New Jersey (one in every 919)

3. South Carolina (one in every 929)

4. Nevada (one in every 961)

5. Florida (one in every 973)

Here are the top 10 zip codes with the highest foreclosure rates in Q1 2024:

1. 77702 – Beaumont, TX

2. 95404 – Nice, CA

3. 95428 – Covelo, CA

4. 95454 – Laytonville, CA

5. 95542 – Garberville, CA

6. 33946 – Placida, FL

7. 19462 – Plymouth Meeting, PA

8. 83644 – Middleton, ID

9. 93222 – Frazier Park, CA

10. 77327 – Cleveland, TX

Our take

We love this report because it is so granular. Not only can you get foreclosure data at the state and county level, but at the zip code level! That’s a goldmine of information for any real estate wholesaler, buyer, or investor. Share it widely with your clients. Beyond that, we want to make one important point: unlike the previous real estate cycle, an imminent crash in housing prices or a foreclosure crisis isn’t likely, or even in the cards. More concerning is the yield on 10-year treasuries which affects mortgage rates. That should have every agent’s attention because our current housing unaffordability issues will worsen enormously if it isn’t kept in check.

Schematics

The news that just missed the cut

• Fannie & Freddie say agent commissions aren’t counted toward IPC limits

• These are the latest modern styles for outdoor spaces 

• The metros where homes are taking the longest to sell

• This is America’s most expensive home listed this week

• The pros and cons of reverse mortgages

• These are the highest-paid occupations in construction

Foundation Plans

Advice from James and David to win the day

As we told you up top, we are continuing our series explaining the value of buyer agents. In an environment where many buyers think they can “just do it themselves,” it’s more important than ever for agents to be able to explain the value of buyer agency. Here are three reasons why buyer agents are incredibly valuable:

Buyer agents have a fiduciary responsibility to clients – Buyer agents have to tell clients about the risks of buying a certain property. Many people seem to think that it’s better in countries where there is no buyer agent, and buyers deal directly with listing agents. It isn’t! As Damien Eales correctly notes, there are many international markets where listing agents do not have a fiduciary responsibility to the buyer. For example, in some parts of Australia, “if a buyer looks at a home on a flood plain or in a region prone to bushfires, the seller’s agent isn’t necessarily obligated to tell him about the risks.” If buyers want their interests protected, they should get a buyer’s agent. Period.

Buyer agents procure and help clients understand property disclosures –  Property disclosures don’t magically appear next to a listing on Zillow or the MLS. However, these disclosures are crucial for understanding a property's complete history and worth. Good agents are adept at obtaining these disclosures and interpreting them effectively by reading between the lines. Although property disclosures are mandatory in every state in the U.S., their specifics differ by market. Good agents can assist in uncovering details such as flood damage, pest issues, a death, or anything else. These are things “buy-it-yourselfers” typically don’t even know to watch out for. 

Buyer agents know how to make an offer and negotiate – Crafting an offer and negotiating a deal is an art and involves real skill. In addition to the home's listing price, agents consider local comparables and unique market dynamics. This helps the buyer avoid overpaying or annoying the sellers by lowballing. In competitive situations, good agents understand nuances that influence sellers' decisions. They know properties don’t always go to the highest offer. Some sellers prioritize a flexible closing timeline or prefer not to handle repairs post-inspection. A good agent will know how to use these tidbits to their client's advantage, while also protecting their long-term interests as well.

Buying a house isn’t like buying a pair of socks on Amazon. There is no return policy and properties are sold as is. Buyers are responsible for due diligence, and there are still uncertainties even with the most diligence done. We don’t think people should make such a huge decision by themselves without guidance and help. Agents add real value to the lives of their clients. Don’t be shy to say it!

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:

“You are what your deepest desire is. As is your desire, so is your intention. As is your intention, so is your will. As is your will, so is your deed. As is your deed, so is your destiny.” — Upanishads

Mind your desires friends. It will determine your destiny. We hope you have a wonderful weekend. We’ll see you again next Tuesday!

– James and David