NAR members and REALTOR® associations must implement the practice changes stemming from NAR’s proposed settlement agreement fully and in good faith.

Consumer choice is paramount, particularly when it comes to determining the nature and cost of professional representation in a real estate transaction. As such, it is deeply concerning to see others take positions on listing agreements and offers of compensation that would harm consumers by leaving them with less choice than ever before.

Form agreements serve as a positive foundation for real estate professionals to engage in clear and open conversations with consumers about the full range of choices when it comes to professional representation and compensation. Ahead of the Aug. 17 practice change implementation date, NAR encourages associations and other form providers to address form updates early and educate real estate professionals to ensure they can confidently engage with consumers about what the practice changes and form agreements mean for consumers. To be clear, NAR opposes any attempts to circumvent the settlement: Members and associations must implement the practice changes fully and in good faith, doing so with the goal of promoting consumer empowerment, consumer choice, and healthy competition.

Offers of compensation also remain an important option available to consumers. Under NAR’s proposed settlement related to broker commissions, home sellers can continue to choose to offer compensation to the buyer’s broker off-MLS. Offers of compensation help make homeownership and the benefits of professional representation more accessible to buyers, including first-time home buyers, increase homeownership opportunities for historically underserved groups, and benefit sellers by expanding the potential buyer pool.

The ability for listing brokers to make an offer compensation to a buyer broker has significant implications for buyers who struggle to come up with cash to make it to the closing table. Proposals to limit or eliminate this option would put an additional strain on their finances, resulting in these buyers sitting out of the housing market or going through the biggest transaction of their lives without professional representation. There are those who suggest the onus should be put on buyers to ask for compensation for their agent as part of their offer. Competing against multiple offers, cash buyers, and investors, a first-time buyer or a buyer lacking generational wealth will see such an offer move to the bottom of the pile. Other suggestions—for example, that buyers bid up the home price in order to win a concession from the seller—will have the perverse effect of driving up home prices in the midst of a housing shortage and historic affordability crisis.

Members and consumers are encouraged to visit facts.realtor(link is external) for more information on the proposed settlement, including NAR’s overviews of how buyers and sellers can prepare for how the settlement practice changes will impact their home buying and selling experiences

National Association of REALTORS®
Reprinted with permission

Despite big changes ahead, NAR’s president Kevin Sears is confident that members will adapt.

A new day is approaching: Changes are coming to the way many of us do business. As of Aug. 17, we will be required to have written agreements with buyers before we tour a property with them, and offers of cooperative compensation will be prohibited on MLSs.

NAR’s Legal Affairs team spells out what you need to know about written buyer agreements. As far as offers of compensation go, as always, it’s up to each of us to negotiate what compensation we receive for our work and communicate the value we deliver. Complying with these rules will require open dialogue between listing agents, buyer’s agents and consumers. Fortunately, ours is a relationship business, and I’m confident we’ll adapt.

I encourage you to begin implementing these rules now so that when Aug. 17 rolls around, you’ll be able to approach them with confidence and a clear understanding of, and belief in, your value.

National Association of REALTORS®
Reprinted with permission

You can help correct the record about the association’s proposed settlement to resolve nationwide claims brought by home sellers.

National Association of REALTORS® leaders have been talking to reporters and members full-time over the past month to correct the record about the association’s decision to resolve nationwide claims brought by home sellers. You can help by challenging inaccurate information that you see appearing in social media posts, news articles or elsewhere.

Myth 1: The proposed settlement covers only a fraction of members.

FACT: Nearly every real estate professional who is a REALTOR®, a member of NAR, is covered by the release that NAR negotiated in the settlement. The agreement would release NAR; more than 1 million NAR members; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions.

To be clear, NAR members are covered by the settlement unless:

• They are affiliated with HomeServices of America or one of its affiliates, or
• They are employees of a defendant in the remaining Gibson/Umpa lawsuits in Missouri. (Note: All independent contractors affiliated with these defendants are covered.)

Myth 2: NAR left large corporate brokerages and affiliated agents to fend for themselves.

FACT: NAR fought to include as many people and companies in the release as possible and achieved a release for everyone it could. Well over 1 million members are covered, as are tens of thousands of businesses operated by REALTORS®. But, despite NAR’s efforts, the plaintiffs did not agree to include everybody. Those that are not released — the largest companies in our industry — are no worse off now than they were before the settlement. In fact, many are better off, as thousands of their independent contractor real estate agents are released by the settlement. Additionally, NAR’s settlement provides an avenue for most large corporate brokerages with an NAR member as principal and more than $2 billion in residential volume in 2022 that were not included in the settlement to pursue inclusion in the release. But the settlement does not obligate them to opt into the settlement. These brokerages will have 60 days after plaintiffs file the motion for preliminary approval of the settlement to complete Appendix C of the settlement agreement, which is required to opt into the settlement if they choose to do so. (See the estimated timeline and download the settlement and its appendices at facts.realtor.)

Myth 3: NAR requires a standard 6% commission.

FACT: You know this is untrue, but it’s a myth that has persisted in the media. NAR does not set commissions — they are negotiable. The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation. That offer can be any amount, including zero. And other rules throughout the MLS Handbook and NAR policy expressly prohibit MLSs, associations and brokers from setting or suggesting any such amount that should be included in that field.

Myth 4: NAR will raise dues to fund the settlement.

FACT: NAR will not change membership dues for 2024 or 2025 because of this settlement.

Myth 5: Brokers representing buyers now have to work for free.

FACT: Under the proposed settlement, the types of compensation available for brokers working with buyers would continue to take multiple forms, including but not limited to a fixed-fee commission paid directly by consumers; concessions from the seller (as long as such concessions are not conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative); or a portion of the listing broker’s compensation. NAR has long believed that it is in the interest of the sellers, buyers, and their brokers to make offers of compensation; however, using the MLS to communicate offers of compensation will no longer be an option. Compensation will continue to be negotiable and should always be negotiated between agents and the consumers they represent.

Myth 6: The practice change will do away with offers of compensation to brokers representing buyers.

FACT: Offers of compensation are an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. The settlement also expressly provides that sellers may communicate seller concessions — such as buyer closing costs — via the MLS, provided that such concessions are not conditioned on the use of or payment to a buyer broker.

Myth 7: NAR settled because the plaintiffs’ allegations are true.

FACT: As the settlement makes clear, NAR denies any wrongdoing in connection with the MLS cooperative compensation model rule. Cooperative compensation arrangements facilitate the process of selling a home and help ensure equal opportunity for buyers. It has always been NAR’s goal to resolve this litigation in a way that preserves consumer choice and protects our members to the greatest extent possible. This settlement achieves both of those goals and provides a path forward for the industry and the association.

National Association of REALTORS®
Reprinted with permission

Interest rates are expected to soon rise, even as the Federal Reserve announced on Wednesday that it would keep its benchmark rate near zero. The Fed, however, warned that it was preparing to taper its emergency stimulus efforts from the pandemic, including winding down its bond purchases. That is expected to make mortgage rates rise, as well as rates on credit card and car loans.

“Tapering itself is going to increase yields in the medium- and long-term horizons, which will translate into higher borrowing costs,” Yiming Ma, an assistant finance professor at Columbia University Business School, told CNBC.

The Fed has purchased $40 billion worth of mortgage-backed securities each month as part of the stimulus program during the pandemic. That has brought a surge of liquidity into the mortgage market. It has allowed lenders to drop interest rates.

Mortgage rates have been ultra-low for over a year. Freddie Mac reported that the 30-year fixed-rate mortgage averaged 2.86% last week.

Long-term, fixed mortgage rates will move higher as soon as the Fed starts to slow the pace of bond purchases, Ma told CNBC.

“The moment the Fed starts pulling back, they will have an immediate effect,” George Ratiu, manager of economic research at realtor.com®, told MarketWatch. Even before the Fed does so, rates could rise. Mortgage rates follow long-term bond yields, like the 10-year Treasury note. Long-term bond yields began to rise after the Fed’s statement on Wednesday.

The National Association of REALTORS® has been predicting rates will rise over the next few months: They predict the 30-year fixed-rate mortgage to average 3.5% by mid-2022.

National Association of REALTORS®
Reprinted with permission

Mortgage rates barely budged this week, but that likely soon will change after the Federal Reserve’s bond tapering announcement this week.

The 30-year fixed-rate mortgage averaged 2.88% for the week ending Sept. 23, Freddie Mac reports.

Rates are largely predicted to rise on the heels of the Fed’s decision to reduce its bond purchases before the end of the year. The National Association of REALTORS® is forecasting that 30-year fixed-rate mortgages will average 3.5% by mid-2022.

“Even with this increase, consumers should bear in mind that these rates will still be historically low,” says NAR’s Nadia Evangelou, senior economist and director of forecasting. The historical average for the 30-year fixed-rate mortgage is 8%.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 23:

• 30-year fixed-rate mortgages: averaged 2.88%, with an average 0.7 point, up slightly from last week’s 2.86% average. Last year at this time, 30-year rates averaged 2.90%.
• 15-year fixed-rate mortgages: averaged 2.15%, with an average 0.6 point, rising from last week’s 2.12% average. A year ago, 15-year rates averaged 2.40%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.43%, with an average 0.3 point, falling from last week’s 2.51% average. A year ago, 5-year ARMs averaged 2.90%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining a mortgage.

National Association of REALTORS®
Reprinted with permission

The Federal Housing Finance Agency announced that mortgage financing giants Fannie Mae and Freddie Mac will continue to offer forbearance indefinitely to qualifying multifamily property owners as part of their ongoing COVID-19 protection.

This marks the fourth extension the FHFA has made to the programs. The latest were set to expire Sept. 30.

“Given the uncertain nature of this pandemic, the FHFA is taking further action to protect renters, property owners, and the mortgage market,” says Sandra L. Thompson, acting director of the FHFA.

Property owners with Fannie Mae– or Freddie Mac–backed multifamily mortgages can enter a new or modified forbearance if they experience a financial hardship due to the pandemic’s impact on their business operations. Property owners must inform tenants in writing about tenant protections available during the forbearance and repayment periods. They also must agree not to evict tenants for nonpayment of rent while the property is in forbearance.

Additional tenant protections are in place when the repayment period starts.

National Association of REALTORS®
Reprinted with permission

U.S. needs to put attention on rental, first-time buyer markets.

Just as the for-sale market is starting to moderate, the rental market is heating up, which will put added pressure on people trying to save for their first home. Rental listings are attracting multiple offers, and apartment vacancy rates are approaching record lows. Consequently, rents are set to soar.

The reason is twofold. First, the jobs market is improving. Despite a disappointing August employment report, 85% of the 21 million jobs slashed during the first month of the pandemic lockdown have been recovered. Job openings have reached an all-time high of 10 million, and those who might have been sleeping in the basement of their parents’ house are emerging in search of housing.

The second reason for strong rental demand is that many potential first-time buyers are priced out. The median existing-home sales price was up 25% year-over-year in June, though this is partly because high-end sales are up. The S&P CoreLogic Case-Shiller Index, a constant quality home price index, was up by 18% over the same period. The gain has been a boon for owners but is causing serious anxiety for nonowners. Even near-record-low interest rates can’t compensate. It’s no surprise, then, that the number of mortgage applications to buy a home has been falling, along with the share of sales to first-time home buyers.

Mortgage rates may further squeeze renters next year. The Federal Reserve will soon slow the pace of buying mortgage-backed securities and will certainly raise its benchmark interest rate next year, which may drive rates up to near 4% by the end of 2022. One bit of good news: Fannie Mae will soon consider rental payment history in qualifying borrowers. That will enlarge the pool of eligible buyers. But to ensure that housing costs remain manageable, America needs more homes, both for ownership and for rent. New construction alone won’t fill the need. Rehabbing dilapidated homes and repurposing commercial buildings into residential units—is essential. There is a massive housing shortage. All hands must be on deck to get the supply up.

Inventory Starts to Tick Up

In July, NAR reported a 2.6-month supply of homes for sale, up from 2.5 months in June. Months’ supply represents the number of months it would take for the current inventory to sell at the current sales pace.

National Association of REALTORS®
Reprinted with permission