The next massive real estate lawsuit
Plus, all-cash purchases hit big number
More big headlines
Yet another wild week in our industry. On top of all the potential repercussions from the Sitzer verdict, we saw WeWork declare bankruptcy.
Below, we link to an article that explains the effects this massive development could have on real estate.
We will also break down the details of the lawsuit that could be even bigger than Sitzer.
There is so much to keep tabs on in our industry, and we will do our best to keep you up to speed, and give our take on what’s happening.
- James and David
Homebuyers are paying cash at staggering rate
1 in 3 U.S. homebuyers are paying all cash, the highest share in nearly a decade. That’s according to Redfin’s latest report on homebuying trends. Here’s what else they report:
The typical U.S. buyer put down 16%, the highest percentage in nearly 18 months.
In dollar terms, the median down payment was $60,980.
15% of buyers with mortgages used FHA loans, up from 14% a year ago.
FHA loans have become more common now than during the pandemic homebuying boom.
Just over 6% used VA loans, down just marginally from a year earlier.
No shocker here. Given current mortgage rates, it doesn’t surprise us one bit that more homebuyers are opting to pay cash for a home rather than finance it. But while the down payment trends are raising eyebrows, they aren’t surprising when you look at the key trend here–buyers are able to make large down payments because they’re using equity from their previous home. The share of homes being sold to first-time buyers is declining as it becomes harder to afford a home without selling another one and taking out the equity.
Rent growth finally ticks upward
Annual rent growth, according to Zillow, ticked up in October for the first time since the pandemic peak in early 2022. These are the key trends:
The typical U.S. rent is $2,011, 3.2% higher than a year ago and up slightly from September’s year-to-year change.
Rents fell slightly from September, but this cooldown is common for this time of year.
Annual rent appreciation remains strongest in smaller markets in the Northeast and Midwest, while markets out West saw the weakest year-over-year growth
CPI rent inflation is likely to continue to decelerate
This report has us slightly worried because housing cost is one of the biggest components of how we measure inflation. If rents rise, our measures of inflation will rise. But, as Zillow notes, it takes time for changes in asking rents to be reflected in the nation’s inflation stats. This means that housing-specific components of CPI and the Fed’s preferred gauge (the Personal Consumption Expenditure price index) should continue to decline in the near term. However, it's a bit dicier when it comes to medium and longer-term measures of inflation. We’ll have to keep a close eye on this.
New lawsuit is even bigger than Sitzer/Burnett
While we await the final judgment in Sitzer/Burnett, multiple new lawsuits have already been filed. Here is an update on all these cases:
The Moerhl suit against the NAR has yet to have a trial date set, but it is expected to start in early 2024. The suit also alleges that NAR and the brokerage firms conspired to inflate and fix home prices by enforcing the cooperative compensation rule.
The Gibson case is a class action suit filed by Michael Ketchmark, the lawyer in Sitzer, against NAR and other brokerages on behalf of three Missouri home sellers Don Gibson, Lauren Criss, and John Meiners. It makes the same allegations.
The Batton case, developed from a suit filed in Chicago by firms Korein Tillery and Lowey Dannenberg, is the biggest industry lawsuit to date. Unlike the other cases, this suit is on behalf of home buyers instead of home sellers. It alleges that homebuyers had “to pay inflated prices for the homes they purchase, and to receive reduced quality broker services” due to the actions of the brokerages under suit.
Lastly, NAR, Keller Williams, and the other defendants in Sitzer are in the process of appealing that verdict.
What a week. While it’s too soon to say exactly how these cases will change our industry, some MLSs and industry groups such as the Real Estate Board of New York have already dropped the Cooperative Compensation Rule. It’s also a genuine possibility that NAR and the other firms could win on appeal. Still, it’s undeniable there is a lot of pressure for the industry to change its practices, even if NAR wins on appeal. We’re watching this all very closely as we’re sure you are.
The news that just missed the cut
Advice from James and David to win the day
Today, we’d like to offer you some tips on hosting a smashing open house. Even though virtual tours and online photo galleries are popular, nothing beats a well-executed open house to generate interest in your listing.
Showcase the full potential of the home – Always get there at least an hour early to freshen up the home. Pull back curtains, turn on lights, and remove any distracting clutter so the listing looks as fresh as possible. We understand that not everyone can afford it, but if you can, professionally stage the home to showcase its full potential and create a lasting impression on potential buyers.
Go big on publicity – Marketing and signage are critical for having an effective open house. Place signs around town, update your socials, and knock on neighbors' doors to personally invite them to the open house. Even if they just stop by to look, you never know where that connection might lead in the future!
Gather information and follow up – Politely insist that all visitors leave their contact information as they arrive. Don't be salesy! Just thank them for attending and lay the foundation for an ongoing relationship. The key to maximizing your open house, though, is following up with leads within 24 hours to capitalize on their interest.
For more tips for hosting a successful open house, watch this.
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Just in Case
Keep the latest industry data in your back pocket with today’s mortgage rates:
Source: Mortgage News Daily
That’s a wrap on this edition of The Blueprint!
Remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!
Thanks for reading, and we’ll see you back here on Tuesday!
- James and David