“Valuable” answers

We all know the value that agents provide for their clients. However, between the NAR settlement and the Sitzer case, we’re now in a time when people are questioning that value.

That is why it is so crucial for us to tell potential clients what we bring to the table, and why exactly we deserve our compensation. We are well-aware that for many agents, this is a tough pill to swallow, but this is part of our new reality.

In today’s newsletter, we are going to discuss how we can clear up some of the misconceptions about agents, and how we can take proactive steps to fix it.

But this is only the beginning. This is clearly one of the most important topics we can discuss, and we are committed to helping you navigate this new era in our industry.

– James and David

Home prices up 6% in January

The S&P CoreLogic Case-Shiller U.S. National Home Price Index posted a 6% annual gain in January, up from a 5.6% gain in December, according to CoreLogic’s latest report. Here are other key takeaways:

• January marked the seventh consecutive month of annual price growth and the biggest increase since November 2022.

• For the second consecutive month, all 20 cities tracked by the index reported annualized increases in prices.

• All indexes tracked by Case-Shiller increased on a month-over-month basis when seasonally adjusted

  • National index: +0.4%

  • 20-city composite: +0.2% 

  • 10-city composite: +0.1%

Our take

This report shows that homeowners saw healthy gains last year, no matter where they lived. That’s an important stat for your potential buyers to know. Despite the high prices and mortgage rates, and the low inventory levels, there’s still upside out there to buying a home. Right now, for-sale options are improving and should continue to climb into the summer. This is all good motivation for buyers to get off the sidelines and start making moves.

The current price of starter homes

First-time buyers must make $76,000 to afford the typical U.S. starter home, up 8.2% from a year ago. That’s according to Redfin’s latest analysis of U.S. incomes and median monthly housing payments for starter homes. Here are more points from the report:

• The typical starter home sold for $240,000 in February, up 3.4% year over year

• The income required to buy a starter home is actually down 8% from last October’s all-time high of $82,373.

• The typical American household earns an estimated $84,072, up 5.5% YOY

• Active listings of starter homes rose 7% annually in February, the biggest increase in at least a decade.

• Since high costs are pushing down homebuying demand, first-time buyers are able to negotiate prices down or get concessions from sellers

Our take

We encourage all agents to study this report carefully. Use it to educate everyone you know about the actual state of our housing market. Agents right now are being scapegoated. A lot of people are alleging that agent commissions are a cause, or even THE cause, of the housing affordability crisis. This is entirely false. European nations, which have a radically lower commission fee system compared to the U.S., are facing a housing affordability crisis that is even worse. We can’t blame agent fees. The problem is the lack of supply (more on this in our Schematics section below).

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Markets offering the most rental concessions

The share of rentals offering tenant concessions (months of free rent, free parking, etc.) has hit its peak, according to Zillow. Renters looking to secure a new lease may encounter fewer incentives and increased competition. However, there is good news for renters. The share of rentals offering a concession is up 5.6% from a year ago, reaching 32.2% nationwide.

Here are the markets with the highest share of rental listings offering concessions:

1. Salt Lake City, UT – 60.3%

2. Austin, TX – 55%

3. Charlotte, NC – 53.5%

4. Dallas, TX – 50.7%

5. Raleigh NC – 50.6%

6. Nashville, TN – 49.9%

7. Washington, DC – 49.4%

8. Minneapolis, MN – 49.4%

9. Phoenix, AZ – 48.8% 

10. Denver, CO 48.1%

Our take

We are not surprised. Given the explosion of apartment building construction, specifically in metros like Austin, there are more apartments available than there are people looking to rent them. This is why it’s actually cheaper to rent than buy a home in the top 50 metros in the U.S. It may seem counterintuitive, but this is how the market can balance itself out. Rents will fall… which will lower future measures of inflation… which will cause the Fed to lower interest rates… which will lead to lower mortgage rates and rising housing affordability. This is the necessary cycle we need to make the housing market sustainable overall.

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Schematics

The news that just missed the cut

• The implications of NAR’s settlement on veterans who use VA home loans

• Stop scapegoating agents: commissions aren’t causing the housing affordability crisis

• DOJ opens criminal probe into RealPage for price-fixing

• Host events like this to connect with your community

• A peek inside Gisele Bündchen’s real estate portfolio

Foundation Plans

Advice from James and David to win the day

If the NAR settlement is approved, the changes will go into effect in mid-July. Over the course of the next few months, we’ll be offering you our thoughts and tips on how to prepare. Here are some preliminary thoughts we have:

If you’re a listing agent, develop a system to disclose compensation – Buyer agent compensation will no longer be included on the MLS as a specific field. You don’t want to waste time fielding calls about whether you’re paying a buyer agent commission or not. The solution: develop a system of notification. You could send an email blast or even disclose a compensation offer in a general purpose listing-database field.

Verify compensation fees on a listing if you are a buyer agent – Learn from the playbook of our commercial real estate colleagues. Get in the practice of verifying compensation before you go out and show a property. You need to do this so you can properly advise your client. Although commission fees have always been negotiable, residential clients haven’t known that for some reason. That is changing with the publicity surrounding Sitzer/Burnett and the NAR settlement. 

Educate your clients without being defensive – As we said up top, agents are being blamed for the affordability crisis when it’s not their fault. This means we need to go out of our way to show clients why we’re worth our compensation. We’ll have more tips on this over the next few months, but our simplest advice is this–try not to be defensive. We know that it can be tough when people are questioning the value of your life’s work! Aim to educate clients and provide tangible examples of what you bring to the table. It’s a fine line, but your clients will be able to tell the difference. 

To learn more about what you can do to prep for the changes that are coming, start here.

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 weekend, and we’ll see you back here on Tuesday!

– James and David