Give Your Realtor Friends a Hug
The real estate world is WEIRD right now. Going into the holiday season we always see a drop in real estate sales - a natural lull as people focus on the holidays and avoid uprooting their lives during this crazy season. However, this year we are dealing with a whole plethora of additional issues affecting the market and us real estate agents in general. From high interest rates to lawsuits - buckle up.
1. High Interest Rates: The Economic Yo-Yo
After a few years of record low interest rates, many prospective home buyers today are having a very hard time wrapping their minds around these higher interest rates that are falling in the 7s for most. For many current home buyers, these interest rates are making them sick considering everyone they know who bought or refinanced in 2020 or 2021 attained interest rates between 2 and 3.5.
To better put this into perspective, the difference of a 3% vs 7% interest rate on a $400,000 home (assuming 20% down on a 30-year fixed mortgage) is more than $780 a month. This has HUGELY diminished the buying power for most home buyers today, leading many people to put off this purchase and continue renting instead.
2. Skyrocketing Home Prices: The Eternal Upward Climb
The low interest rates of the past few years, paired with low home inventory led to a large increase in home prices. Sure, prices have more or less stayed steady over the past year, but they haven’t dropped in the way that many people hoped they would. AKA - the real estate market hasn’t crashed. In fact, from 2019 to 2023, median home prices in Colorado Springs have grown from $310K to $445K - an increase of $135K (yikes).
The high interest rates paired with these high home prices have made homeownership unaffordable for many people.
3. Tax and Insurance Premium Peaks in Colorado Springs: A Rocky Road
If you thought the high home prices and high interest rates were already too much, property taxes and home insurance premiums saw insane increases this year as well in Colorado Springs. Home insurance has become a huge issue for many people this year. After a summer of crazy storms and a lot of hail damage, insurance companies decided to either drop Colorado altogether or greatly increase their premiums. As an example, I live in a modest home (around $400K value) near downtown, and my insurance premium increased by almost $200 A MONTH.
On top of home insurance premiums increasing, premiums for HOAs are also increasing, causing many HOAs to greatly increase their monthly dues. In fact, I just read about an HOA in Castle Rock (just north of Colorado Springs) that announced their monthly HOA dues are increasing from $300 to over $800!!
4. Commission Lawsuit Drama: Legal Tango in the Real Estate World
Real estate agents have a lot working against us right now. In addition to everything listed above, there has also been a 12.5% increase in realtors from 2019 to 2023. Beyond this, we are facing a lot of unknowns in the years ahead, including how we are going to get paid.
To summarize, there is an ongoing lawsuit challenging traditional buyer agent commissions. The lawsuit is questioning how buyer agent commissions are set, by claiming the National Association of Realtors and major brokerages limit competition. They argue that the current rules inflate costs for consumers by obligating sellers to pay commissions for both agents. This legal battle has caused panic amongst realtors who are now concerned about how they will get paid as a buyer agent (because as I’ve already noted above, today’s home buyers can very likely not afford to pay for a realtor on top of buying a house).
To summarize, it’s rough out there. Give your realtor friends an extra hug or drink this holiday season ;).
Also, if you have been considering buying or selling a home in the new year, let’s get in touch. Just because it’s tough doesn’t mean it’s impossible! It would be a pleasure to help you find a solution and make your home dreams come true.
