As the Twin Cities housing market thaws out from its annual winter slowdown, it is an appropriate time to look back at 2023 and peek into what may transpire in 2024. Last year was a tough year for the residential real estate market locally and nationally.
Low listing inventory continued to have a negative impact on home buyers in most housing markets, including ours. In addition to the inventory challenge, mortgage interest rates peaked at almost 8% last fall, which eliminated many potential buyers from the market. Overall, there was a 20% decline in closed sales last year. Listing activity also lagged, with 13% fewer homes listed last year versus 2022. The median sale price in the Twin Cities Region increased a modest 1.4% from $363,000 to $368,000.
While these are not impressive statistics, 2023 was not as devastating to the industry as some economists had predicted. The forecast for 2024 is optimistic, much more so than 12 months ago.
Last year, real estate sales were sluggish in the beginning before reaching a frenzied pace once again. At the beginning of the year, mortgage interest rates were relatively low, and listing inventory was on the rise. This active market sustained through summer. With the intention of curbing inflation, the Federal Reserve continued increasing interest rates throughout the year. Once mortgage rates neared 8% for a 30-year fixed mortgage, the market slowed down dramatically. Due to high interest rates, many buyers put their home-buying plans on hold. Currently, inflation seems to be under control and interest rates are decreasing.
I feel like a broken record when we write that, once again, one of the most challenging aspects of the real estate market is the lack of listing inventory. The lack of listings is impacting real estate markets across the country. There is no clear solution to this challenge, and I do not expect it to go away anytime soon. That being said, we typically experience an increase in listing activity in the coming months which will provide buyers with more options. Having more listings available and lower rates will benefit buyers. The upside for homeowners is that the extreme lack of housing supply has buoyed home prices, as home prices appreciated last year despite a massive decrease in demand.
I would be remiss to not address the litigation that the National Association of Realtors (NAR) is facing. If you have not heard about it, I explain it briefly below. Our take is that, for buyers and sellers who value high-level service and advice, this option remains readily available. We approach our clients and our work with skill, knowledge, and commitment. We are confident this approach will serve our clients well and ensure our role as proactive, trusted advisors who are widely respected and valued.
For a great majority of buyers and sellers, a transaction represents their largest single asset, the most significant amount of debt, and is often loaded with excitement, anxiety, happiness, and change. Our role as proactive trusted advisors is to listen, teach, guide, negotiate, and advocate for you, as it serves your best interest. At Fazendin Realtors, we believe there will always be real client-focused value in our efforts.
I am optimistic about 2024.
As mentioned above, interest rates are declining, and because of this, I anticipate another active spring market. It will be a competitive market for buyers due to a lack of inventory, but determined buyers can certainly succeed. As rates decrease, I expect home values to increase due to the imbalance of supply and demand. The Twin Cities region will remain a seller’s market, and we encourage those thinking of selling and/or buying in the next year to plan ahead. The market can be daunting, but our customized approach to representing buyers and sellers is aimed at creating a strategy that will enable you to reach your personal real estate goals. I encourage those contemplating a move in the next year to reach out to us. The real estate market has been more volatile in the past years, because of this, timing has become a more important factor in buying and selling strategy. All of my agents and I continue to study the market and strive to stay current in our continuing effort to use our knowledge to give our clients an edge in buying and selling real estate.
As Fazendin Realtors embarks on its 59th year in business, I want to express our gratitude to you, our valued clients. Thank you for trusting us to guide you and your loved ones through some of the most eventful, exciting, and sometimes stressful transactions in life. Without your loyalty and support, we would not have the good fortune to serve you and the Twin Cities communities we enjoy so much. Wishing you a healthy and prosperous 2024!
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Antitrust Litigation Update
Multiple ongoing antitrust cases targeting the National Association of Realtors (NAR) are impacting the real estate industry. These legal actions focus on NAR's commission-sharing rule, which dictates a commission offering to the agent who brings the winning buyer when a property is listed on a multiple listing service.
Traditionally, this rule results in a split commission, with a percent going to the seller's agent and a percent to the buyer's. The core concern raised by the plaintiffs is that the buyer doesn't directly pay their agent's fee; instead, it is entirely covered by the seller.
Allegations of antitrust practices contend that this structure diminishes competition and artificially inflates commissions. A recent jury verdict favored the plaintiffs, suggesting a perceived collusion environment facilitated by NAR's practices.
Currently, in the appeals process, NAR argues that commissions are negotiable while emphasizing that the present practice benefits a broad spectrum of buyers, especially first-time buyers, disadvantaged communities, minorities, and veterans, by providing them with professional representation and broad access to inventory. It also asserts that sellers gain access to the maximum number of potential buyers through this split commission system.
For more information and general discussion about these class action lawsuits and what they mean for you as a home buyer and seller, please contact us.