2023 was a strange year in real estate!

With the news of the NAR lawsuits, interest rate fluctuations, and all the stats on the market floating around, there is a LOT of misinformation we've seen.

It is extremely hard to decipher what is what, but that's why we are here to help!

Stats

2023 actually had less existing residential sales than there were in 2008 in the US. That is how different our market was last year compared to previous years in the US. Alan and I have been selling real estate for over 10 years now and this was by far the strangest year we've seen.

The graphs below come directly from the Northwest MLS so they are numbers from our local board. No skewed numbers or data from outlying areas.

Interest Rates

Interest rates are still among the highest they've been in many years. With 62% of homeowners having an interest rate below 4%, homeowners are reluctant to give that up to go buy something with 7-8% interest. This together with current home prices means most potential sellers have been staying put. We've seen a huge uptick in homeowners that have to move, renting out their homes and moving where they need to go. As interest rates go down, inventory is expected to go up which seems counterintuitive but that is the backwards world of real estate we’ve been in lately. Historically, rising interest rates caused inventory levels to increase while plummeting interest rates caused inventory levels to shrink due to buyer demand. It seems most economists are in agreement that starting Q4 of 2024 is when we'll really begin to see the interest rates go down enough to create some movement (literally and figuratively).

The Lawsuits

As for the class action National Association of Realtor lawsuits, we are in limbo waiting for the settlement to be approved by the courts and to see what logistical changes have to be made in our day-to-day work life. Despite what the news may have you believe, the sky is not falling. Logistically, we have a LOT of questions that no one has answers for yet and it is really early in the process to speculate.

As of January 1, 2024, all buyer agents in Washington State have been required to have a buyer sign a buyer agency contract so this is something we've already been doing. Those forms will have to be changed if this goes through though as the form gives the option for the buyer to owe $0 and the buyer's agent only gets what the seller offers. This is the option we choose so we do not have to charge the buyer but we will have to figure out the logistics on that to make it a win-win. We are concerned about buyers who potentially cannot afford to pay a buyer's agent for representation. Having quality representation when making the largest purchase of your life is just too important to skimp on. We work with a lot of buyers utilizing their VA benefit. Per the VA regulations, VA borrowers are not allowed to pay buyer’s agent commission which could have unintended negative consequences. As it is proposed, sellers would still be able to pay a buyer's agent commission. It would just be a mystery what they are willing to pay until it's negotiated. There are absolutely workarounds, but this just makes things more difficult for all parties involved.

In the wake of the lawsuits years ago, the Northwest MLS decided to get ahead of the game and made a couple of notable changes:

1. They changed how our listing contracts addressed commissions. Previously per the contract, the listing agent would make X amount and would share their commissions with the buyer's agent. Now it specifies that listing agent gets X amount and the buyer's agent gets X amount. In practice there is absolutely no difference with how it's carried out, but it made it clearer to the seller what is what.

2. The other change they made was to allow publishing of buyer agent commissions on 3rd party websites (Zillow, Homes.com, etc.). This was to create transparency with the consumer.

So imagine our confusion when the settlement said they're not allowing publishing of buyer agent commissions on the MLS at all creating less transparency. To be clear, we understand what the intent was with this settlement. We don't agree with how its structured, but it is what it is and as an industry, we will adapt as we always do!

Looking to buy, sell, or invest or know anyone who is? We would love to help!

Alan & Jana Sherwood