Will the NAR Settlement Changes Delay Home Buying?
It has been a week since the changes to the NAR settlement went into effect. Have the changes affected the housing data we maintain on a weekly basis? Since the buyer commission payout is not as transparent as before, I expected delays in the home buying process as people adjusted to the new rules.
The last time we saw this kind of effect was when mortgage providers had to implement TRID in 2015. It caused a month-long crash in existing home sales because it just took a little longer to close a deal. The following month, that turnover recovered, because everyone found a rhythm in the way of working. Let’s see if something similar happened during the first official week of data after the NAR settlement changes.
Weekly home inventory data
With mortgage rates recently falling, inventory growth has slowed below my weekly target level of 11,000-17,000. This is not surprising as I focused on the weekly average growth level with rates above 7%. My premise is that higher interest rates can create more inventory growth because they limit the demand for mortgages. So the slowdown in inventory growth seems normal to me. Nothing in this data seems to me to have been meaningfully affected by the changes in the NAR settlement thus far. The housing stock has grown in the past week 6,271.
- Weekly inventory change (August 16 – August 23): Inventory increased from 698,473 Unpleasant 704,744
- Same week last year (August 18 – August 25): Stock rose from 497,361 Unpleasant 503,924
- The lowest inventory level of all time was in 2022 240,497
- The annual inventory peak for 2024 is over this week 704,744
- For some context, the active listings for this week in 2015 were 1,215,873
New advertising data
New listings data is experiencing the traditional seasonal decline. 2024 is the second lowest year of new listings in history, but we still saw growth compared to last year, which is positive. Nothing seems abnormal here either.
Here you will find the number of new listings from the past week in recent years:
- 2024: 64,595
- 2023: 54,584
- 2022: 64,670
Price reduction percentage
In an average year, a third of all homes are reduced in price; this is the standard home activity. Rising mortgage rates last year and this year have led to increasing levels of price cuts, mainly as inventories have risen. This data line has slowed recently due to falling interest rates, but we saw some growth weekly.
If a seller doesn’t pay a buyer’s commission from the seller’s proceeds, that seller theoretically makes their home more expensive for the buyer, who has to bring more money down at closing. While we saw some growth here on a weekly basis, nothing is conclusive in the markdown rate data.
A few months ago I discussed on the HousingWire Daily podcast that price growth rates would cool off in the second half of the year. Here are last week’s price reduction percentages compared to recent years:
- 2024: 39.9%
- 2023: 36%
- 2022: 39%
Weekly ongoing sales
Below you will find the Alto’s research weekly ongoing contract data year on year to reflect real-time demand. We saw a slight increase in demand here from week to week, and the year-over-year growth is slightly different than last week. Still, there’s nothing that makes me think the law has changed anything yet.
- 2024: 368,363
- 2023: 361,337
- 2022: 405,363
In conclusion, I saw nothing in the data above to indicate that we are already seeing an impact from the changes in the NAR settlement. It’s only week one: I’ll keep an eye on this for four weeks to see if, like TRID, this impacts the monthly sales data, but as of today, nothing.
10-year interest rate and mortgage interest rate
My prediction for 2024 included:
- A mortgage interest rate range between 7.25%-5.75%
- The 10-year return is between 4.25% and 3.21%
Even with a negative task revision print and a baby pivot from Jerome Powell last week, the famous 3.80% level I’ve been discussing all year has held. This is very impressive. Again, if the labor market and economic data weaken, we can lower interest rates and mortgage rates.
Mortgage spreads
Mortgage spreads were a negative storyline in 2023, as the mortgage market collapsed Silicon Valley Bank and the resulting banking crisis pushed them to new cycle heights. This year we don’t have that variable, and spreads have improved.
If we took the worst levels of 2023 spreads and included them today, mortgage rates would be the same 0.49% higher now. While we are far from average in terms of spreads, the fact that we have seen this improvement this year is a plus.
In my interviews with CNBC And Yahoo Finance On Friday I discussed how future rate cuts and a more dovish Fed should lower spreads, bringing rates down 0.75%-1% and back to more normal levels.
Buy application data
Since mortgage rates recently fell more than 1%, we’ll draw a line in the sand at that point and monitor purchase application data for the remainder of the year. In the last 11 weeks there has been purchase request data six positive points vs five negative prints. Last week there was a weekly decline of 5%.
Since mortgage rates started falling in November 2023, we’ve seen it 18 positive prints, 18 negative prints, And two flat prints in the week-to-week data. However, when mortgage rates started to rise earlier this year, we saw a drop in demand.
Coming up next week: housing reports and PCE inflation data
It will be a less dramatic week in terms of economic data, but we have a lot of housing reports, some home price data, pending home sales and purchasing apps. The Fed’s primary inflation numbers – quarterly and monthly reports on personal consumption expenditure – will be released this week. Fed President Waller will also give a speech. I am curious whether the level of 3.80% will hold again this week.
