Stay up-to-date with the latest news in the real estate industry. Forbes Advisor reports on the current state of the housing market, highlighting the impact of rising mortgage rates on affordability and the upcoming changes to real estate broker commissions. Fannie Mae predicts an increase in home sales transactions, but experts anticipate a slower rise in home prices compared to recent years. Meanwhile, the Daily News focuses on California’s housing nightmare and the need for policy changes to address the state’s homelessness crisis. The California Building Industry Association identifies bills that could either worsen or alleviate the housing crisis. LAist explores the possibility of exempting urban housing projects from environmental reviews to accelerate housing development. If you’re a first-time home buyer in California, there are various assistance programs and grants available through the California Housing Finance Agency (CalHFA). Lastly, City Journal argues for market-driven solutions to increase housing supply instead of relying solely on government-funded projects. Read more about these topics and stay informed about the latest developments in the real estate industry.
Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor
Thanks primarily to an unexpected rise in mortgage rates, which exacerbated affordability challenges, the spring home-buying season has yet to spring to life. Though newly built home sales are thriving, sales of existing homes, which comprise the lion’s share of the housing market, have stagnated. On the bright side, tepid demand for existing homes is helping boost the country’s low housing supply.
Meanwhile, the home purchasing process edged closer to a colossal shift. In April, a judge preliminarily approved the landmark $418 million real estate broker commissions settlement centering on the National Association of Realtors (NAR). The new rules mandating significant changes to the industry’s long-standing buying and selling model will begin in July.
The further rise of already-elevated mortgage rates and home prices in the past few weeks amid a prolonged inventory shortage has dampened the hopes of many prospective buyers. Yet, despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower increase in home prices over the course of 2024 compared to recent years. However, price fluctuations will continue to vary regionally and depend strongly on local market supply.
Despite the recent run-up in mortgage rates, the month-over-month home price index rose by a robust 0.6%. By comparison, month-over-month index gains averaged 0.2% between 2015 and 2019, according to Selma Hepp, chief economist at CoreLogic.
For a housing recovery to occur, several conditions must unfold. “For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off, but the timeline for that development seems to be getting more protracted now that rates have blown past 7%. For the week ending May 9, the 30-year fixed mortgage was 7.09%. However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says. He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year. “[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. A federal judge granted preliminary approval for the settlement in April. The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though a final approval hearing is not scheduled until November, required practice changes laid out in the agreement will go into effect beginning August 17, according to a NAR press release. The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.
Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers. NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.
Per NAR’s settlement terms, the costs associated with buying and selling a home are set to change dramatically. “The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.” While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling. “We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.” Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.” As a result, NAR is calling on the VA to revise its policies prohibiting VA buyers from paying broker commissions. Meanwhile, the VA is discussing foreseen issues with the Department of Justice to ensure the new practices do not disadvantage VA home buyers.
Even so, there is skepticism that the federal government will be able to implement changes by the July deadline. Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so. In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while—even as more homeowners begin to sell.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, remained flat at 51 in April. A reading of 50 or above means more builders see good conditions ahead for new construction.
Meanwhile, permits for new single-family homes dipped to their lowest rate since October, slumping 5.7% in March, according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD). This decline breaks a 13-month streak of increases.
Single‐family housing starts also sagged compared to the previous month, dropping 12.4%. Builders know the underlying demand for homes exists, as reflected in their outlook. Still, these latest readings suggest that stubborn inflation and persistently high rates could dampen the creation of new homes.
In March, new home sales continued to blossom despite elevated mortgage rates, while existing-home sales withered. Existing-home sales wilted at the onset of the spring home-buying season, declining 4.3% from February, according to the latest report from NAR. Sales sagged 3.7% from a year ago.
Despite the pent-up demand, interest rates stalling in the high-6% range for most of March likely dampened sales. “Prospective home buyers face a challenging—and confusing—housing market,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
An upside to fewer sales is that existing inventory rose 4.7
California Dreamin’ has become a housing nightmare – Daily News
The Orange County Register recently noted, “as Orange County spending on homelessness grows, the number of homeless people grows, too.” Even worse, the strategy has not changed. In March 2024, California voters, by a razor-thin margin, approved another $6.4 billion in bond-financed spending. But California’s homeless problem is not due to alcohol or drug abuse, mental illness, or the lack of shelter beds—our research indicates that this new spending will also do little to address California’s crisis of homelessness. Instead, median home price to median income was found to explain 78% of the variance in the rate of homelessness across the 350 areas studied. None of the other 53 factors studied came close.
The state has a long history of constraining new home construction, causing it to be the most expensive in the nation, with a median price of $793,600, more than double Texas’ median of $336,400. The impact on homelessness is best illustrated by comparing Los Angeles (LA) to Houston. While LA’s homeless count more than doubled from 2012 to 2023, Houston’s declined by more than 50%. LA’s homeless rate is now 15 times that of Houston’s, up from 2.6 times in 2012. It was recently announced that Orange County’s homeless increased 28% from 2022 to 2024.
This result is attributable to two things. First, homes are allowed to be built in Harris County (Houston). In 2022, Harris permitted about three times as many homes per capita as LA and Orange Counties. As a result, in spite of decades of rapid growth, the median home price in Houston remains below the national median, with home prices being about one-third and one-quarter respectively of those in LA and Orange Counties. Second, Houston’s regional response to homelessness, known as ‘The Way Home’, began in 2012 and is credited with housing over 28,000 individuals and families. Ninety percent are still housed today, and homelessness has been reduced by 62% since 2011.
Houston is an example of a “Good Neighbor” city. First, it recognizes that its neighbors need housing stability. Second, it releases housing through light-touch density. Third, it uses life navigation behavioral resourcing to rapidly rehouse those experiencing homelessness.
The AEI Housing Center has done numerous case studies of cities across America, including Anaheim and Los Angeles. In every case, we found the presence of two key inputs – by-right zoning and “keep it short and simple” (KISS) land use regulations. The result in each was the release of a massive market-driven supply response due to American enterprise and ingenuity.
We call this the three-part pattern for success. Unfortunately, California has largely embraced a different approach. California tried high tax intervention and it failed. California, by ignoring the pattern for success, has stymied home building and violated the KISS rule: “An affordable housing development has faced nearly every hurdle that California laws allow, [which is] why it took 17 years to build 49 housing units in Los Angeles.”
California spent over thirty years fine-tuning legislation legalizing accessory dwelling units (ADUs). Finally, in 2016 the three-part pattern for success was in place. In 2022, ADUs accounted for 6159 or 37% of all building permits issued in Los Angeles, up from less than 200 in 2016.
California’s neighbors also want it to act. Virtually every city within one thousand miles of its border is suffering an affordability crisis largely due to net out migration out of California having totaled over 4.3 million since 1990. Prices and rents in Seattle, Boise, Dallas, Las Vegas, Denver, Phoenix, and Austin still look like a fire-sale compared to San Francisco, San Jose, and LA.
It is time for California to adopt the three-part pattern for success: 1) By-right zoning, 2) Keep It Short & Simple, 3) Release housing enterprise. Releasing housing dissolves homelessness, increases the tax base and reduces the tax burden, and, most importantly, moves people from dreaming of housing to living in housing.
California building association identifies state bills that kill housing, or create it
The California Building Industry Association (CBIA) is sounding the alarm over the state’s housing crisis. In the last 10 years, housing production in California has averaged fewer than 80,000 new homes per year, which is not nearly enough to satisfy demand. Citing a report by the Legislative Analyst’s Office, CBIA says the state should have been building up to 110,000 units of housing per year between 1980 and 2010 in order to have avoided the recent explosion in the cost of housing.
CBIA says home ownership has many benefits. It not only stabilizes communities and provides access to education and employment opportunities, it also helps maintain physical and mental health. In addition, owning a home is one of the main ways California families can build wealth that can be passed on to future generations. However, home ownership rates in California are at their lowest level since the 1940s.
To encourage building more homes, CBIA has put forward its 2024 Housing Killers and Creators list. It identifies bills moving through the California legislative process that, if approved, would impact California’s housing policy crisis in some way. CBIA says the bills in question should be either dropped, improved, or championed. Housing killer bills would make the housing crisis worse by increasing the cost and time of building homes in the state. Housing creator bills, on the other hand, would reduce barriers to home construction and help address the need for more housing in California.
One of the bills identified by CBIA is AB 2230, which adds residential housing to the state’s Anti-Trust Law, Unfair Business Practices law, and Unfair Competition Law. It would expand the scope of housing regulations in the state and create more barriers to investment in home construction, ultimately making housing less affordable.
Another bill, AB 2010, requires contractors and subcontractors contracting with a state agency to certify the wood used in their projects has not come from certain proscribed regions. CBIA says the bill is unnecessary and is in opposition to rigorous North American sustainable practices and certification standards. Enacting a redundant program will disrupt lumber supply to California during the current housing shortage, increase the cost of housing, and waste the state’s already limited resources.
CBIA says SB 903 creates a complex new regulatory program to regulate all commercial and consumer products that may contain perfluoroalkyl and polyfluoroalkyl substances (PFAS). This bill could have a significant impact on California’s green housing market by outlawing such building products as heat pumps and electrical wiring that have been mandated to help California reach climate and energy objectives.
On a positive note, CBIA has also identified two pieces of legislation that could stimulate the construction of new housing. AB 247 places a school bond on the November 2024 statewide ballot that will allow for the construction and modernization of safe schools and the building of more housing. AB 2996 makes California’s home and commercial insurance marketplace more stable by authorizing the California FAIR Plan Association to issue bonds and strengthen the FAIR Plan’s financial stability.
State Agency Says Getting New Housing Built Will Be ‘Urban Warfare’ If Environmental Reviews Don’t Change | LAist
Under a California law created more than 50 years ago, housing projects large and small across the state have been required to undergo environmental review. The process outlined by the California Environmental Quality Act of 1970 (widely known as CEQA) is intended to push developers to mitigate potential environmental harms. However, it can also delay projects for years, cost developers millions of dollars, and even kill projects in wealthy neighborhoods that rarely build new housing.
Now, an independent state agency is recommending that lawmakers broadly exempt new urban housing from these reviews in the interest of moving the needle on the state’s intractable housing crisis. The report, published by the Little Hoover Commission, concludes that California will never achieve its housing goals as long as CEQA has the potential to turn housing development into something akin to urban warfare — contested block by block, building by building.
The report finds that CEQA has made good on its intent to protect California’s environment but is most often used to challenge new housing, particularly infill housing. The report recommends exempting housing in existing urban areas from environmental reviews and limiting who can file a CEQA lawsuit to those able to articulate how a project would cause environmental harm rather than purely economic harm.
Defenders of the current process under CEQA argue that it offers disadvantaged Californians one of the few avenues for challenging large projects in already crowded neighborhoods experiencing environmental injustice. Efforts to reform CEQA have been piecemeal, with exemptions carved out for specific types of housing. However, more sweeping reforms have faced challenges from various interest groups.
The Little Hoover Commission report suggests that California should follow the example of Washington state, which recently voted to exempt projects from environmental review if they’re located inside urban growth areas. The next hearing of the Little Hoover Commission is scheduled for Thursday, May 23 at 10 a.m.
California First-Time Home Buyer | Assistance Program & Grants
Buying your first home can be a real challenge, especially in a state like California where prices are often sky-high. Luckily, the Golden State has a variety of first-time home buyer loans and grants to help those who need an extra hand. Here’s how to get started.
For California home buyers, a good place to start looking for assistance is the California Housing Finance Agency (CalHFA). This agency offers a wide range of first-time home buyer loan programs at its own special interest rates. To qualify for any of CalHFA’s special mortgage loans, you’ll need to:
- Take an eight-hour online home buyer education course
- Participate in one-on-one counseling sessions
The CalHFA FHA loan program is guaranteed by the Federal Housing Administration and features a 30-year mortgage with a fixed interest rate. The CalPLUS FHA program is another government-backed mortgage that comes with a slightly higher interest rate but includes a closing cost assistance program called the CalHFA Zero Interest Program (ZIP).
Eligible veterans and active-duty service members can take advantage of the CalHFA VA program, which offers a VA-insured mortgage with a 30-year loan term and fixed-interest rate. The CalHFA USDA program, backed by the USDA, provides a 30-year, fixed-rate loan with down payment assistance called the “MyHome Assistance Program.”
These are just a few examples of the programs available to California first-time home buyers. To explore more options and find the right match for your needs, visit themortgagereports.com.
Gimme (Government) Shelter | City Journal
States and cities spend billions on housing projects that are costly, cumbersome to build, and won’t solve the affordability crisis. The current housing shortage in America has led to soaring prices and increased financial burden for homebuyers and renters. Calls for government-led affordable housing programs have grown, but these initiatives often fail to address the root causes of the housing crisis.
Government-led affordable housing projects tend to be expensive and slow to construct, while ignoring the impact of local government regulations that hinder private sector construction. These supply-side failures, coupled with misguided federal fiscal and monetary policies, have contributed to the current housing predicament. Reforms that promote increased housing construction should be a higher priority than relying solely on government-funded projects.
Despite the push for government intervention, taxpayer-funded affordable housing initiatives have proven to be inefficient and ineffective. The performance of federal housing trust funds, which subsidize affordable housing plans, has been underwhelming. Construction costs for affordable housing projects are exorbitant, and government regulations further inflate expenses. Fraud and mismanagement have plagued many subsidized housing programs, eroding public trust.
Instead of relying on government subsidies, increasing housing supply through market-driven approaches has shown positive results. Cities that have revised zoning and permitting processes to encourage greater residential development have experienced a housing boom and reduced rents. Adding new housing supply, even at the high end, creates a ripple effect that benefits renters across all income levels.
To learn more about the challenges of government-subsidized housing and the need for market-driven solutions, read the full article on City Journal.