Housing Inventory Trends Explained: Real Estate Market Update

0:08) Well, hello internet. Welcome to the Texas Real Estate and Finance Podcast market update (0:13) for the week of June the 4th. I'm your host, Mike Mills, a North Texas mortgage banker (0:17) with Geneva Financial.

And I'm here each and every Tuesday to update you on all the big (0:21) stories affecting your business each week, so you can focus on what you do best, which (0:26) is sell real estate. So, thank you for making an appointment to tune in with me each week (0:30) and for being such an important part of our little Texas real estate community. And to (0:33) all my treffers out there, that's my new term for you guys.

Hopefully it sticks. All you (0:36) Texas Real Estate and Finance Podcast fans who are here each week giving me just a little (0:41) piece of your valuable time. I want to say thank you, thank you, thank you.

You guys (0:44) are the best. Now, being loyal listeners is the first and easiest way to support this (0:48) show. The second way is sending those out of the box, tough deals our way.

My team and (0:53) I specialize in solving problems and finding loans for folks when everyone else has told (0:57) them no. I'm sure all you guys have great lenders at your beck and call, but if you (1:00) ever have a sticky situation and need a second opinion, give me a call. I'm here to help (1:04) in any way that I can.

My number is really easy to find and you can reach me any time (1:08) of the week. So, reach out, say hello. I'd love to hear from you and help your clients (1:12) get into the home of their dreams.

Okay, personal commercial over. What is on tap for today's (1:16) market update? Well, first I'm going to try something just a little bit different this (1:20) week. I'm going to do some what I call quick hits of some big stories that you may or may (1:24) not have heard about that aren't necessarily related to real estate.

It's just some (1:27) small personally curated news stories I found interesting and impactful. These will (1:31) be really quick with little context, but just a few things to put on your radar that you (1:34) may not have known about. And who knows, they might be good little party tricks that you (1:37) can tell your friends about next week.

It's just a little something to mix it up a bit. (1:40) If you love it, let me know. If you hate it, let me know.

I'm just trying to spice up our (1:44) relationship a little bit. So, humor me a little bit today. Then sliding down to the (1:47) two hole this week, we have mortgage interest rate updates.

Where are they now? Where are (1:51) they headed and why? Then I'll share some May housing inventory data with you nationally (1:55) and locally. And if you like selling real estate and affordability, there is some good (1:59) news that's trending in our direction. And lastly, I've got several quick hits regarding (2:02) the recent news around the NAR commission settlements.

MLSs across the country are deciding what (2:08) they're doing now. Some are moving forward as told, but one big one is opting out and (2:13) telling NAR to pound sand. I'll tell you all about it.

NAR also released its membership (2:17) updates and there's some interesting numbers that might surprise you. But before we get (2:20) started, as always, I would greatly appreciate it if you would share this episode with your (2:24) network. Send it to a friend, share it on your social media sites, or drop me a review (2:28) on my website.

I appreciate any little thing that you guys can do to help us share our (2:32) message. It's just a little something that you could do to brighten this little podcaster's (2:36) day. All right, news quick hits.

So, first off, your Dallas Mavericks beat the Minnesota (2:40) Timberwolves in five games to advance the NBA finals last week for the first time in (2:44) 13 years to play the Boston Celtics. Right now, Boston's the favorite, but the Mavs probably (2:49) have the most dynamic backcourt in the history of the NBA. So, it's going to be nothing (2:54) if not entertaining and fun.

Make sure you check it out. Also, in Dallas Fort Worth Sports (2:58) News, the Stars lost Monday night. So, unfortunately, their season is over, which is a bummer to (3:03) all you Texas hockey fans out there.

They had a great run this season, but unfortunately, (3:06) it came to an end. Do you guys remember the GameStop guy who beat all the Wall Street (3:10) investors and made out like a bandit in 2021? Well, he's back at it again and he pumped (3:15) the stock 74% in one day, taking out $180 million in stock and call options, squeezing (3:22) short traders again. Right now, he's already up $300 million and maybe on his way to billionaire (3:27) status if the trend continues.

This story is insane and it's on every financial news (3:31) outlet right now and they're covering in great depth. So, check it out because maybe you (3:35) can make a little money. Who knows? Also on Monday, a quote glitch in the New York Stock (3:39) Exchange sent Warren Buffett's Berkshire Hathaway stock crashing down 99% along with some dramatic (3:45) drops in several other stocks.

And just to give you an idea what that means, if you had (3:49) somehow been able to buy $500 worth of Berkshire stock when it crashed, right now at this moment, (3:53) it'd be worth $2 million. Oops. It's all good now though, apparently, but not necessarily (3:58) for the possibility of future glitches.

Technical issues like this isn't exactly something that (4:02) gives traders a whole lot of confidence in the market. So, we'll see what the repercussions (4:06) are from something like this. Recently, Bank of America raised its target price for this (4:10) year for NVIDIA to $1,500 a share.

It's currently trading around $1,100 a share right now and (4:15) has more than doubled in price since the start of 2024. It's almost single-handedly (4:19) propping up the US stock market rate. NVIDIA and the other magnificent seven stocks, Apple, (4:24) Microsoft, Amazon, Google, Meta, and Tesla make up over 30% of the total S&P 500 market (4:30) cap, which historically is rather unprecedented.

For the market to be this top heavy with so (4:35) many stocks controlling so much of the market cap seems a little bit unhealthy and not necessarily (4:39) good for the market overall, but again, time will tell. And finally, the house from the (4:43) blockbuster movie Home Alone is for sale in Winneteka, Illinois. The five-bedroom, (4:47) six-bath house that was the featured exterior from the 1990s Christmas classic is listed (4:52) for $5.25 million.

It was built in 1921. It's over 9,000 square feet. It's got a gym, a (4:59) private movie theater, and an indoor sports court.

Wouldn't be so bad to be left over (5:02) the holidays in that house. So, if you've got $5 million laying around and want to reenact (5:06) all those scenes from the movie, now you can. Go check it out on Zillow.

It's pretty cool. (5:09) Okay, that's all my news hits for today. If you liked it and want to see a little bit (5:12) more, let me know.

If you found this to be a complete waste of your time and want me (5:16) to completely cut it out, let me know that also. Always love some good feedback. All (5:19) right, now let's get on to real estate.

So, hey Mike, where are the rates? Well, the end (5:23) of last week and Monday saw some good rallies in the bond market, and that led to some slight (5:26) improvement for rates compared to where they were at highs in the middle of last week. (5:29) So, as of June 3rd, according to Mortgage News Daily, the average 30-year fixed conventional (5:34) mortgage is about 7.125% and the average 30-year FHA loan is about 6.625%. The average 15-year (5:40) conventional rate is also sitting at about 6.625% and the average jumbo rate is about (5:45) 7.4%. Now, this is going to be a big week for jobs data as we'll get the job openings or (5:49) jolts report on Tuesday, ADP non-farm payrolls on Wednesday, and the May BLS jobs report (5:56) on Friday, letting us know if we're still going to be sitting at that 3.9% unemployment (5:59) rate or if we'll be ticking up to that 4% mark. Right now, the expectation is that unemployment (6:04) should remain about the same, but if we see it tick up even just a little bit, you can (6:07) expect the bond market to react in a very positive way, along with mortgage rates.

(6:11) So, this week's going to be another big week for the future of mortgage rates. The next (6:15) Fed meeting is going to be held next week on June 12th, where they're going to let everyone (6:18) know if they intend to cut, raise, or pause rates where they are right now. And almost (6:22) everyone believes that they're going to continue to pause rates.

The most recent CPI numbers (6:26) show that inflation's growth is starting to slow, and job data continues to tell us that (6:30) the economy might not be doing as well as we've been told. However, the Fed will be (6:34) easing how many U.S. Treasuries it'll be selling on the open market each month, from (6:38) $95 billion a month to $65 billion a month. And this is just another tool in the Fed's (6:43) arsenal to manage the money supply and give a small stimulus to the market that could (6:48) have a positive indirect impact on mortgage rates.

And we're starting to see signs that (6:52) the Fed might be headed back in the direction of cheap money. Not 2% cheap money, but they (6:58) are starting to turn the Titanic that is the U.S. economy back in the direction of quantitative (7:02) easing and away from the quantitative tightening position that we've been in for the last (7:06) two years. This isn't a fast process and isn't going to happen overnight.

However, it does (7:10) seem to be steering things in that direction. And all interest rates will be predicated (7:14) on how the economy is doing. In basic caveman terms, economy good, rates high, economy bad, (7:21) rates low.

And right now, signs are pointing to economy bad. In fact, last month in May, (7:26) it was reported that the first quarter GDP grew by 1.6%. But on June 1st, GDP numbers (7:31) were actually revised down. Of course, not widely reported, showing that growth was only (7:35) 1.3% as opposed to the 1.6% originally reported.

Pending home sales are the lowest they've been (7:41) since the start of the pandemic when no one was buying homes. Layoffs are up and inflation (7:44) is coming down, just not that fast. So if this trend continues, you could expect to (7:50) see interest rates continue to decline over the next several months.

How much and how (7:54) fast is going to be dictated by how bad everything gets. So although we may all really want lower (7:59) rates, the price for that will be a much worsening economy and could get very tough (8:03) for many Americans, especially those on a lower income scale. But we'll continue to (8:07) watch this every week and let you know when that tide starts to turn.

So be sure to tune (8:10) in and stay informed. All right, let's get into some inventory numbers. So we are now (8:13) fully into the summertime.

And as we wrapped up May of 2024, unsold inventory on the market (8:19) increased across the U.S. in every single state. There are more homes on the market (8:23) right now than we've had since August of 2020. And according to Mike Simonson of Altos Research, (8:28) it's predicted that this summer will probably peak at around 700,000 homes for sale.

New (8:33) listings climbed during the past week as well. We added 72,000 more single family homes (8:38) to the market just this week. And more new listings is, of course, a good thing for affordability.

(8:43) But at the same time, we've really got to watch pending sales as well. What we don't (8:47) want is a scenario where we have a ton of sellers flushing the market and no buyers (8:50) and swing the market in a different unhealthy direction. Balance is always the key here.

(8:55) So good news is that pending home sales also went up a little bit this week as well, after (8:59) having several bad weeks to start the year off. So right now, there are about 595,000 (9:04) single family homes on the market in the United States. And at the end of May, Texas (9:08) had 106,000 of those, up from 102,000 at the end of April.

Now, if the rate trend continues (9:13) where we are right now and rates stay above 7%, you can expect this inventory number to (9:18) continue to grow as the appetite for homes at 7% is pretty minimal. But if rates start (9:23) to trend downward and get to, say, 6.5% sometime this summer, then you can expect that inventory (9:28) growth to really level off as the demand for housing will start to increase. So as it stands (9:32) right now, homes are sitting longer than they have been, causing inventory to grow.

But (9:36) new listings had somewhat started to trend downward for the last three weeks, which is (9:41) kind of normal this time of year. So the hope is that we can get a few more positive listing (9:44) numbers as we move further into the summer before they start the normal seasonal downtrend. (9:48) There were also 18,000 listings that went right under contract when they came out.

So (9:52) basically we had about 90,000 new sellers this past week, and that's about 10% more (9:56) than we had this same time last year, which again is good for affordability. But in 2022, (10:01) there were 108,000 new listings this week, which is 20% higher than they were this year. (10:05) If you're in Texas, however, we're leading the way in new listings up 20% from this (10:09) time last year.

Now we do have more people here also, so we always kind of lead the trend (10:12) a little bit, but more inventory is always a good thing. There were 404,000 homes under (10:17) contract last week, which is up 1% from the previous week and a little over 1% higher (10:21) from this time last year. So these homes coming under contract increasing is good.

(10:24) And what you'll see is typically a pretty good push for this all the way leading up (10:27) to the 4th of July. And that's when you'll start to see things taper off a little bit. (10:30) So get why the good is good this month.

Also right now, about 35% of the homes on the market (10:34) have had a price cut. Now that's about four and a half percent higher from this time last (10:38) year. And this is a combination of dwindling demand in some areas, but also a function of (10:42) price expectations from sellers thinking to list their price a little too high.

The median (10:46) price for us single family homes on the market today is about 454,000. That's up almost (10:50) 1% from last week and slightly higher than in late may of 2023. And most indicators are (10:56) still showing about a three to 4% growth over last year in median home prices.

So starting (11:00) in June or July prices will probably start to tick down a little bit during the second (11:04) half of 2024. But again, this is normal as we move into the slower season in real estate (11:08) and transactions start to fall even more. So as we look to the rest of this year, the (11:12) big mover of the sales figures of course is always going to be interest rates.

There's (11:16) many that believe that we've hit the peak rates for this cycle and expect them to decline (11:20) over the next several years. How much and how quickly still very much remains to be (11:24) seen, but a decline is expected. And if rates declined, you'll start to see sales volume (11:29) increase, especially if we can find our way below six and a half percent.

I feel like that's (11:33) probably the magic numbers to really start to see sales turn around. But as always, time (11:38) will tell. All right.

And finally, let's get into some updates from the NAR settlement (11:42) and commission lawsuits that have kind of come in a way, but there's a lot of things (11:45) that have happened over the last week that I think you guys should know about. So first (11:48) off, um, bright MLS, which is the nation's second largest multiple listing service in (11:53) the Northeast is set to overhaul its platform this summer to align with the new standards (11:57) stemming from the national association of realtors, recent settlement of the real estate (12:01) agent commission lawsuits. So bright MLS is getting their ducks in a row, making sure that (12:05) everything meets what the commission settlement requires to do.

Starting August 14th, bright (12:10) MLS will eliminate its commission field, preventing listing agents from advertising any commissions (12:15) that they offer to buyer brokers and a written signed buyer agreement will also be required (12:20) to show properties listed on the MLS. Now on the other side of the country, Northwest MLS, (12:26) the largest multiple listing service in the Pacific Northwest will not take part in the (12:30) $418 million agreement reached by the national association of realtors. NW MLS said that its (12:35) own rules on buyer agent compensation are fairer and more transparent than the terms (12:41) NAR agreed to in March.

It also criticized NAR for pushing consumers and brokers to (12:47) make secret deals off the MLS, inviting deceptive practices, discrimination and unfair housing. (12:53) NW MLS also stated that depriving buyers of information about the transaction risks is (12:59) harming buyers, especially those who are already disadvantaged, including first time home (13:04) buyers and members of protected classes. So bright MLS is all in, but Northwest MLS is (13:09) all out.

I don't know how they're going to be able to do that, but I guess we'll have (13:13) to wait and see. Locally in the North Texas area, the greater Fort Worth association of (13:17) realtors and the Arlington board of realtors are pursuing a unification of the two organizations (13:21) into a single realtor association while retaining their current MLS services. Their goals are (13:27) to amplify member value, strength, strengthen the regional voice, align with their real (13:32) estate markets, brokerages and cities, improve operational efficiencies, maintain local decision (13:37) making and enhance services to better support brokers, agents and their clients.

Nothing is (13:43) official right now, but it is in the works. I think you're going to start to see more and more (13:47) associations across the country unite as the number of agents could possibly begin to dwindle (13:51) as we move into this new era of real estate. But in regards to those numbers, the National (13:56) Association of Realtors reported that it had 1.5 million members as of the end of April of 2024, (14:02) a decline of about 3% from the 1.55 million members that it had at the end of 2023, but higher than (14:09) its numbers in February and March.

Now, these April figures don't exactly break out where the (14:13) losses are coming from on a state by state basis, but housing wire previously reported that the (14:18) largest declines in membership last year were from Washington DC, Colorado and Maryland. So overall, (14:24) while NAR membership is in decline, it's still quite high by historic standards and above what (14:29) observers expected when membership dues were required by January 1st of 2024. And in modern (14:34) times, membership hit a low point of about 963,000 in February of 2023 and climbed to a high of 1.6 (14:42) million in October of 2022 before gradually starting to decline.

Membership dipped just (14:47) below 1.5 million in February before rebounding slightly since then. Now, NAR recently made the (14:53) decision to remove decades of historic membership data from its website. And in our spokesperson (14:58) declined an answer as to why that decision was made.

But they did say that the trade group would (15:02) continue to share updated accounts with its constituents going forward. NAR's chief economist, (15:07) Lawrence Yoon, had repeatedly said that he expects membership to decline over the next two years (15:11) before potentially rebounding in 2026. And industry analysts and professors say that the (15:16) trade group is grossly underestimating how many members could watch out in the coming years as a (15:21) result of these rule changes from the Sitzer-Burnett case.

They feel that the decoupling of buyer and (15:26) seller commissions will convince a significant number of realtors to abandon the field. How (15:29) many is unclear, but KBW forecast projected that the changes to the commission structure (15:34) could cause between 60 to 80 percent of realtors to leave the industry. Meanwhile, (15:39) Sonia Gilbu of the City University of New York and Paul Goldsmith of the Yale School of Management (15:45) estimated that about 56 percent of agents would exit the market if one side's commission remained (15:50) at three percent, while the other became a little more competitive.

And a 2015 paper in the Rand (15:55) Journal of Economics predicted that a 50 percent reduction in commissions would result in 40 (16:00) percent fewer agents. So as of right now, NAR's still really kind of hanging in there and not (16:04) losing many of the members that it was predicted to lose. But as these new rules actually become (16:09) reality in August, we're going to have to see how the membership shakes out come this time next (16:14) year.

Because come January when dues are up again, that's when you're going to get a good idea of (16:18) who's staying and who's going. Also related to the commission lawsuits, two websites recently (16:21) launched to help solve this commission advertising problem, ListingSplit and Nesthook accomplished (16:27) similar goals through different methods. But one thing they both do is provide a way to publish (16:32) offers of buyer agent compensation online.

Now, ListingSplit founder Steve Hattan said one of the (16:38) biggest issues with the new rule changes will be the extra workload for agents who may end up making (16:43) or fielding many more calls related to compensation. He said once his site is fully launched in June, (16:48) sellers can enter their addresses and how much they would be willing to offer the buyer's agent. (16:52) That amount could be a percentage, a flat fee or nothing.

The quote listing will also include a (16:58) link to view more details and photos from the home on Zillow. Otherwise, buyers and agents can search (17:04) the address to find more information elsewhere. Hattan said that having this info come straight (17:08) from the seller and not the listing agent doesn't break the new NAR rules.

Eventually, Hattan said (17:13) that there will be a small fee for sellers to add their information, but it'll be free to create a (17:18) at launch. He's also created a browser extension that'll show compensation information when viewing (17:23) properties on other home search sites. Now, Nest Hook is another upstart that displays offers of (17:28) compensation, but unlike ListingSplit, only licensed real estate professionals can create (17:33) accounts and see property details.

According to founder Ryan and Kelly, there'll be an annual (17:38) or monthly rate to join the site. And while agents can view offers of compensation, they can't search (17:43) listing by compensation amounts, something users can do on ListingSplit. Now, both Hattan and (17:48) Kelly, who are real estate professionals themselves, said they consulted with lawyers (17:51) before launching their sites and claim that they are fully compliant with the NAR settlement.

Hattan (17:55) and Kelly also both pointed to section H of the settlement agreement that covers rule changes, (18:00) highlighting language that indicates the settlement applies to NAR and its subsidiaries, predecessors, (18:06) and successors. So in other words, not to these third-party websites. Now, you'll be seeing a lot (18:11) of these sites popping up all over the place as we work through all these changes.

Some will stay, (18:15) some will go, some will never show up, but either way, there's a lot of people trying to solve (18:19) these problems. And lastly, in settlement news, this week, NAR Council issued some clarity about (18:24) some of the minimum requirements for buyer rep agreements. In an article posted on NAR's website, (18:28) it states that starting August 17th, 2024, MLS participants must have a written agreement with (18:34) buyers before home tours begin.

These agreements will outline the services provided and compensation (18:40) details, ensuring transparency. Some mandatory provisions include clear disclosure of (18:45) compensation, negotiable broker commissions, and adherence to legal duration and termination. (18:50) Other optional considerations include addressing conflicts of interest and dispute resolution (18:55) methods.

Meaning if you guys don't agree on the compensation at the end of the day, (18:58) how's that going to be resolved? You don't have to include it, but they're saying you probably (19:02) want to. Now, this new policy aims to clarify the professional relationship and protect consumer (19:06) interests. So NAR is starting to tell you what you need to include in your buyer rep agreements, (19:10) so you can be compliant with all these changes coming August 17th.

And if you haven't put (19:14) together that buyer rep agreement, now is certainly the time. Now, I am planning another (19:18) episode here soon on that very topic, where we're going to go into buyer value propositions and (19:23) what to have on your buyer rep agreement to make sure that you're covered. So check that one out.

(19:28) But that's all for today. I thank you guys for sticking around. Hopefully you got a little (19:31) news you can use for this week.

I really appreciate you spending a little time with (19:34) me today, and I hope to have you back next week. But until then, as always, be good humans and keep (19:39) grinding, because life is what you make it. So make it great.

See you next week.