Adapting to changing Real Estate Industry
For over 40 years, Wisconsin has upheld a standard of transparency and consumer protection by requiring written buyer agency agreements. As one of the 18 states with this requirement prior to the recent National Association of REALTORS® (NAR) settlement, Wisconsin's commitment ensures that consumers are well-informed about the services their agents will provide and the compensation structure involved. These agreements serve to set clear expectations between the consumer and the real estate agent. The commission structures, although sometimes perceived as standard, have always been negotiable. Buyer’s brokers traditionally found cooperating commissions listed in the MLS, providing a basis for negotiation. Agents could negotiate for higher or lower commissions based on the specifics of each transaction. Additionally, Wisconsin offers a Customer Disclosure form for consumers who either prefer not to sign a buyer agency agreement or are not yet comfortable doing so. This form details the agent’s responsibilities to all parties in a transaction, ensuring transparency and accountability regardless of the agency status. Realtors with strong leadership and vision, such as those at REAL, are prepared to navigate these changes confidently. REAL’s President, Sharran Srivatsaa, has been a relentless advocate for positive adaptation, providing daily educational content to agents across various brokerages. This proactive approach has equipped many Realtors to face the upcoming changes with optimism, despite the remaining uncertainties at both local and national levels. However, there are concerns about agents who have not engaged with these changes or are seeking ways to circumvent the new rules. These agents may face significant challenges as the industry transitions to these new standards. In South Central Wisconsin, with approximately 4,000 Realtors, 62% or roughly 2,500 have conducted five transactions or fewer in the past 12 months. Realtors who have not been active in understanding these changes may find themselves unprepared and facing difficulties. As a Veteran, I am particularly concerned about how these changes will impact veteran homebuyers utilizing VA loans. Veterans, along with buyers relying on low downpayment or downpayment assistance programs, may struggle to pay their Realtors. Although the Veterans Administration has temporarily allowed seller concessions to cover Realtor commissions, such concessions are rare in competitive markets like Madison, Wisconsin. This situation may leave buyers without adequate representation, potentially delaying or halting their home purchasing plans. This is troubling, especially given the current economic challenges and the need for affordable homeownership options. Everyone deserves the opportunity to achieve the American Dream of homeownership. As the industry adapts to these changes, it is crucial to ensure that all buyers, especially those most vulnerable, receive the support and representation they need. For more information on Wisconsin’s buyer agency requirements and how REAL is leading the charge in adapting to these industry changes, please contact: John Reuter Integrity Homes Broker/Owner 608-669-4226 john@integrityhomeswi.com
Federal Reserve Signals Potential Rate Cut Amid Economic Shifts
Federal Reserve Chair Jerome Powell indicated on Wednesday that the central bank may consider its first rate cut in four years, pointing to progress in reducing inflation and a cooling job market. However, the Fed maintained its key interest rate at 5.3%, the highest level in 23 years, despite calls from some economists and politicians to lower it immediately. Powell emphasized that a rate cut could be on the table during the Fed’s next meeting in mid-September if inflation continues to decline. He stated, "We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point." The anticipated rate cut is expected to have a limited immediate impact since it has already been factored into financial market expectations. Over time, however, lower Fed rates should decrease borrowing costs for consumers and businesses, including mortgages and auto loans, potentially bolstering economic growth. Economic Indicators and Fed's Dual Mandate In its statement, the Fed noted that job gains have moderated, and the unemployment rate has risen. The central bank, mandated by Congress to pursue stable prices and maximum employment, highlighted its attentiveness to the risks to both goals. This focus on balancing inflation and employment marks a shift from the Fed’s recent emphasis solely on combating rising prices. Powell described the current economic state as a "sweet spot," with inflation falling and steady hiring, while wage growth has cooled, reducing inflationary pressures. Despite the rising unemployment rate over the past three months, some economists argue for a quicker rate reduction to prevent economic downturn. Financial Market Reactions and Future Outlook Before the Fed’s announcement, financial markets had fully anticipated a rate cut in September, according to futures markets. The Fed aims to avoid surprising investors with its decisions. Following the Fed’s decision to maintain the current rate, the S&P 500 saw a modest gain, ending Wednesday up 1.6%. The Fed faces the challenge of keeping rates high enough to control inflation, which has dropped to 2.5% from a peak of 7.1% two years ago, without triggering a recession. Powell left open the possibility of multiple rate cuts by the end of the year but provided no specific guidance. Global Central Bank Activities The Fed may be one of the last major central banks to cut its benchmark rate. The European Central Bank reduced borrowing costs in June and may do so again in September. The Bank of England is also considering a rate cut, while the Bank of Japan recently raised its key rate in response to higher inflation. Conclusion The Federal Reserve is navigating a complex economic landscape as it considers rate cuts. With inflation declining and the job market cooling, the central bank is poised to adjust its policies to sustain economic growth while avoiding potential pitfalls. The upcoming meetings in September and November will be crucial in determining the Fed’s course of action.
Signs of Hope for Homebuyers: The Housing Market Begins to Shift
Over the past few years, Americans have faced a daunting housing market characterized by soaring home prices and elevated mortgage rates. However, recent developments indicate a potential shift that may favor prospective homebuyers. Changing Market Dynamics According to chief economists, June has shown signs of the housing market slowing down in favor of buyers. During the pandemic, families and remote workers sought larger homes, taking advantage of historically low borrowing costs after the Federal Reserve slashed interest rates to support the US economy. Although the Fed does not directly set mortgage rates, its actions influence borrowing costs throughout the economy. When the Fed began aggressively hiking rates in March 2022 to combat high inflation, most economists expected housing demand to drop, leading to lower prices. However, instead of decreasing, demand persisted as homeowners held off listing their homes to retain their low mortgage rates, exacerbating the existing housing shortage and driving prices even higher. Emerging Trends in Home Sales Potential homebuyers have been grappling with high prices and mortgage rates for the past two years. A recent report revealed that nearly one in four home sellers offered price cuts in June, the highest level for that month since 2018. Additionally, the average rate for a 30-year fixed-rate mortgage fell to its lowest level since mid-March. This trend, coupled with increased new home construction and the possibility of the Federal Reserve cutting interest rates in September, could make home buying more affordable in the near future. Lawrence Yun, chief economist at the National Association of Realtors, noted a shift from a seller’s market to a buyer’s market, with homes sitting on the market longer and sellers receiving fewer offers. More buyers are also insisting on home inspections and appraisals, while inventory is rising nationally. Positive Indicators for Homebuyers Rick Sharga, founder of real estate consulting firm CJ Patrick Company, expressed optimism, stating, "We’re sitting today at probably, if not the worst affordability ever, really close to the worst affordability ever — so we almost have nowhere to go but up. I do believe we’re past the worst." Zillow’s June Market Report supports this view, showing a slowdown in home price appreciation and an increase in home inventory, with 1.32 million active listings in June, a 23.4% jump from June 2023. Potential homebuyers may now feel less pressure to make snap decisions. Homes in June sat on the market for an average of 15 days, four days longer than last year, providing a bit more breathing room. Olsen noted, "That’s still a sign of a housing market that we classify as a sellers’ market, but we’re on the cusp of going neutral." Expectations for the Future Many Wall Street investors predict that the Federal Reserve will begin cutting interest rates in September, potentially leading to lower mortgage payments. This could also encourage more homeowners to list their properties, increasing inventory. Moreover, home construction is flourishing despite higher borrowing costs, with new home construction rising by 3% in June and the completion of new homes jumping over 10% in one month and 15.5% since June of last year. Challenges Remain Despite these positive indicators, buying a home remains unaffordable for many Americans. The median price of a previously owned home rose to $426,900 in June, marking the second consecutive month of record highs based on data going back to 1999. Improvement in the housing market may take time, and real estate trends vary by region. For instance, New Orleans has already shifted to a buyer’s market. However, Leslie Heindel, a Realtor in New Orleans, pointed out that lower home prices in the city come with higher homeowners’ insurance rates, adding unexpected costs to home ownership. Conclusion While the housing market is beginning to show signs of favoring buyers, challenges remain. Prospective homebuyers should stay informed and be prepared for regional variations and additional costs. The shift from a seller’s market to a more balanced or even a buyer’s market brings hope, but careful consideration and planning are essential in navigating the evolving landscape. Follow us for more information on the housing market and current trends in our area. John Reuter Integrity Homes 608-669-4226 john@integrityhomes.com Real Broker, LLC
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