June 2024 Market Report

As we move into summer for the northern hemisphere, holiday-driven markets are flourishing with seasonal demand. 

 

In the US, mortgage rates continue to hover between 6.5-7% in most markets. We expect to see just one rate drop this year, likely at the Fed meeting that immediately precedes the US Presidential election. 

 

Transaction volume is bifurcated, pending market and price points, with some seeing continued strong demand and other areas slowing down.

 

"Hardly anyone expects prices to collapse. The millennial generation is in the heart of the home-buying years, meaning demand for homes should be strong, and years of under-building mean the country still has too few homes by most measures. And because most homeowners have plenty of equity, and lending standards have been tight, there isn’t likely to be a wave of forced sales as there was when the housing bubble burst nearly two decades ago. But that also means that the affordability crisis isn’t likely to resolve itself soon. Lower rates would help, but it will take more than that for homeownership to feel achievable to many younger Americans”

 

 

Homes in the ultra-luxury space ($50-million+) are moving swiftly (check out Oakley founder James Jannard’s 9.5-acre beachfront sale in west Malibu for $210 million (Fox Business) but those in the $10 million - $40 million space are sitting on the market longer, averaging over 180 days in most markets, giving Buyers the long-awaited opportunity to secure a good deal on trophy properties. 

 

Although it is often said that owners of the top 1% properties are immune to inflation, we are seeing an influx of inventory due to higher insurance costs, higher than expected property taxes, condo assessments and maintenance costs in south Florida, NYC metro and the greater Los Angeles areas. 

 

 

In the mass market, the public builders continue to offer incentives like mortgage rate buy-downs while driving up comparable sales numbers due to higher recorded prices. Home builder stocks have pulled back, as affordability is still stretched, but most have significant stockpiled cash reserves.

 

Insurance has proven to be one of the fastest growing costs of home ownership in recent years. With carrier consolidation minimizing competition and recent natural disasters driving up payouts, the southern coastal states have faced the brunt of new premiums. Interestingly, the southern coastal states are also seeing the largest decline in home prices during a similar timeframe, suggesting that prices are readjusting in an attempt to align overall affordability.

 

Change in the average U.S. home insurance premium by year:

 

2018 --> 3.2% 

2019 --> 2.5% 

2020 --> 3.0% 

2021 --> 3.8% 

2022 --> 6.2% 

2023 --> 11.3%

 

Housing markets where local home prices are down the most over the past 12 months:

 

New Orleans, LA: -5.9% 

Lake Charles, LA: -4.6% 

Alexandria, LA: -4.6% 

Austin, TX: -4.1% 

Laredo, TX -3.6% 

Punta Gorda, FL: -3.4%

 

Internationally, we are receiving more and more inquiries regarding fractional ownership of luxury properties. Likely driven by tightening economies combined with the desire to live in top trending markets, fractional ownership is similar to a private timeshare whereby a group of friends/relatives/investors purchase a property together and divide usage. Many HOA communities will not allow fractional ownership as it tends to drive down surrounding property values and create a more transient environment. It is most common to see fractional ownership options trend in international vacation towns and domestic beach and ski destinations. 

 

Reminder: Beginning August 17, 2024, an MLS Participant “working with” a buyer will be required to enter into a written agreement with the buyer prior to touring a home, including both in-person and live virtual tours. This resource provides information about what provisions must be included in the written agreement pursuant to the NAR settlement as well as other provisions that, while not required by the settlement, MLS Participants may consider addressing with their clients.

 

Local MLS providers will be providing forms (if they have not already done so), and you should keep the following in mind when discussing with your clients:

 

Agreement forms should account for the choice and optionality consumers and real estate professionals have when negotiating the terms of their relationship permissible under state law.

 

Agreement forms should give the real estate professional and consumer the ability to efficiently memorialize the relationship based on the transparent and clear conversation they have when deciding to work together.