Note: You can find the charts & graphs for the Big Story at the end of the following section.
Paradigm shift after NAR settlement
On March 15, 2024, the National Association of Realtors® (NAR) announced a $418 million settlement with a nationwide class of plaintiffs in an antitrust lawsuit. The lawsuit centered around claims that Realtors® conspired to artificially inflate commission rates by not being transparent about how buyer’s agents are compensated.
So, what’s changing about how buyer’s agents are compensated?
Today, when a seller’s agent lists a home on a REALTOR®-owned Multiple Listing Service (MLS), they are able to include an offer of compensation to the buyer’s agent as part of the listing. Moving forward, this compensation cannot be advertised on the MLS.
The practice of putting the buyer’s agent commission percentage on the MLS has led many to believe that number is fixed. And many agents have not done a good job explaining that commissions are negotiable.
If the court approves NAR’s settlement, agents will no longer be able to advertise any buyer’s agent’s compensation when they list a home on a REALTOR®-owned MLS. This will encourage agents to have more in-depth conversations with their clients around compensation, promoting greater transparency across the industry.
Lastly, buyers will now be required to sign buyer’s agency agreements to ensure they fully understand the buyer-broker relationship, obligations between broker and client and how their buyer’s agent is compensated.
All in all, it’s too soon to tell exactly how the proposed rule change will impact the housing market. What we do know is that there are too few homes and too much demand — even with current mortgage rates — for home sellers to worry about competing on price, generally speaking.
Speaking of mortgage rates, the Federal Reserve held rates steady at the March meeting, which was in line with expectations. With the information from Fed Chair Powell, we are now expecting rate reductions after the June or July Fed meetings. The Fed’s dual mandate aims for stable prices (inflation ~2%) and low unemployment. Employment has shown its persistent strength, and inflation is coming down, but the Fed wants more good data before lowering rates because they want to avoid raising rates once they’ve started lowering them.
Overall, the market is starting to heat up, which is what we expect and want to see this time of year. Mortgage rates have been elevated for long enough now that buyers and sellers are less hesitant to enter the market. And rate cuts will come in the second half of the year, allowing for refinancing in the near future. As a result, we are expecting far more transactions than last year and a healthier market.
Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.
Big Story Data
The Local Lowdown
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Median single-family home and condo prices rose meaningfully from December 2023 to March 2024, up 21.4% and 10.0%, respectively. Year-over-year prices also appreciated for single-family homes, up 3.5%
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Active listings in San Francisco fell 3% month over month. Both single-family home and condo inventory are near record lows, as sales increased and new listings fell.
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Months of Supply Inventory fell from January to February 2024, indicating that buyer competition is ramping up. MSI implies a sellers’ market for single-family homes and a balanced market for condos.
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.
Median single-family home price rose significantly in March 2024
In San Francisco, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from May 2022 to July 2022. Since July 2022, the median single-family home and condo prices have hovered around $1.5 million and $1.2 million, respectively. In Q1 2024, the median single-family home and condo prices both rose significantly. Year over year, the median prices were up 4% for single-family homes, which is meaningful because single-family home prices peaked in March last year. We expect prices to rise as more sellers come to the market. Additionally, inventory is so low that rising supply will only increase prices as buyers are better able to find the best match. More homes must come to the market in the spring and summer to get anything close to a healthy market.
High mortgage rates soften both supply and demand, but at this point rates have been above 6% for 16 months, and rate cuts will likely occur sometime this year. Potential buyers have had longer to save for a down payment and will have the opportunity to refinance in the next 12-24 months, which makes current rates less of a limiting factor. However, high demand can only do so much for the market if there isn’t supply to meet it.
Single-family home and condo inventory still near all-time lows in March
Since the start of 2023, single-family home inventory has followed fairly typical seasonal trends, but at a significantly depressed level, while condo inventory has been in decline since May 2022. Low inventory and fewer new listings have slowed the market considerably. Typically, inventory peaks in July or August and declines through December or January, but the lack of new listings prevented meaningful inventory growth. Last year, sales peaked in May, while new listings and inventory peaked in September. New listings have been exceptionally low, so the little inventory growth throughout the year was driven by fewer sales. In November and December, new listings dropped significantly without a proportional drop in sales, causing inventory to fall to an all-time low in January 2024, which further highlights how unusual inventory patterns have been over the past year. However, new listings in January 2024 rose nearly 127% month over month, after hitting a record low number of new listings coming to market in December. New listings still couldn’t keep up with sales in January, however, and inventory declined further.
New listings in January led to a 67% sales increase in February. Even though new listings declined from February to March, sales still increased 7% month over month. With the current low inventory levels, the number of new listings coming to market is a significant predictor of sales. Year over year, inventory is down 20%, new listings are down 28%, and sales are down 10%. The next three months will be critical to our understanding of the market. More supply will mean a healthier market and a more normal housing market in 2024.
Months of Supply Inventory in March 2024 indicated a sellers’ market for single-family homes
Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The San Francisco market tends to favor sellers, at least for single-family homes, which is reflected in its low MSI. However, we’ve seen over the past 12 months that this isn’t always the case. MSI has been volatile, moving between a buyers’ and sellers’ market throughout the year. In February and March, MSI declined significantly, indicating that single-family homes shifted from balanced to favoring sellers, and condos moved from favoring buyers to balanced.
We can also use percent of list price received as another indicator for supply and demand. Typically, in a calendar year, sellers receive the lowest percentage of list price during the winter months, when demand is lowest. Winter months tend to have the lowest average sale price (SP) to list price (LP), and the summer months tend to have the highest SP/LP. In Q1 2024, SP/LP was 2% higher than last year, meaning we expect sellers overall to receive a higher percentage of the list price throughout all of 2024 than they did in 2023.
Local Lowdown Data
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