October 24th, 2023 - This Week in Real Estate
What’s new in the world of Real Estate
An antitrust lawsuit is targeting real estate broker fees. This could have a major effect on the residential real estate market.
Existing-home sales dropped to a 13-year low. Sales in September dropped 15.4% year-over-year and mortgage demand is at its lowest since 1995.
Distressed commercial real estate debt hit a 10-year high. It climbed to $80 billion last quarter, a rise of $5.6 billion.
Homebuilder sentiment fell to a 10-month low. Higher mortgage rates are mostly to blame.
Plus: A DJ and real estate influencer are accused of a Ponzi scheme in New Jersey.
Listing of the week: A private island in Northern Michigan.
Freddie Mac 30 Year Fixed
(Weekly - 10/19)
7.63% (+.06 since last week)
Dow Jones Real Estate Index
(Daily - 10/24)
289.75 (-15.14 since last week)
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Research and Insights from the Vincent team
A trial underway could determine the future of real estate brokers’ fees. An antitrust class-action suit against some of the largest brokers in the country and the National Association of Realtors (NAR) accuses the groups of colluding to keep commissions high by requiring sellers to pay the buyer’s agent. Multiple brokerages have already paid hundred of millions of dollar to settle their part of the lawsuit and withdrawn from the NAR. If commission sharing ever got banned or stopped being commonplace, it would shake up the entire industry and potentially shift costs from sellers to buyers and lower housing prices. It would also greatly affect the earnings of the millions of real estate agents in the country and potentially put the future of the NAR in doubt.
Sales of previously owned homes dropped to their lowest level since October 2010. According to the National Association of Realtors, the rate of sales dipped 2% from August to September and is 15.4% lower than it was this time last year and 40% lower than it was two years ago. Inventory is also down 8% since this time last year and demand for mortgages is at its lowest point since 1995. Until mortgage rates start falling, there is not likely to be a turnaround in the market any time soon.
The amount of debt on distressed commercial real estate jumped to $80 billion. The outstanding debt from buildings that are in bankruptcy, have been repossessed, or are in the process of liquidation rose by $5.6 billion last quarter, reaching the highest level in the last decade. Office buildings made up 41% of that number, with retail at 26% and hotels at 17.5%. Additionally, there are around $216 billion worth of properties at risk of becoming distressed, which would far outpace the numbers seen during the 2008 financial crisis.
Homebuilder sentiment dropped again this month. The National Association of Home Builders/Wells Fargo Housing Market Index fell 4 points, reaching a 10-month low of 40 on the scale - where anything under 50 is considered negative. The major factor is the increase in mortgage rates, which has lowered buyer traffic, particularly for first-time homebuyers, who are the main target group for new construction.
Listing of the Week
A property that caught our eye
This 4-acre private island located in Northern Michigan has a four-bedroom main cabin and a large studio guest cabin in addition to the acres of forest and over 1800 feet of lake frontage. Located a little over three hours north of Detroit and 60 miles east of Traverse City, the asking price is $2.5 million.
More stories worth checking out
A New Jersey real estate influencer and business partner of DJ Envy is accused of running a Ponzi scheme that scammed people out of millions.
Potential losses in the commercial real estate market rank as a top concern in the latest Fed survey.
Workplace startup HqO raised $50 million for its platform aimed at owners and managers of commercial real estate.
A number of U.S. Banks reported increases in delinquent commercial real estate loans.
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