Will the NAR settlement changes slow down home-buying?

It’s been one week since the NAR settlement changes went into effect. Did the changes affect any of the housing data we track every week? Since the buyer’s commission payout isn’t as transparent as before, I have been anticipating delays in the home-buying process as people adapted to the new rules.

The last time we saw this kind of effect was when mortgage lenders had to start incorporating TRID in 2015 — it created a one-month crash in existing home sales because it just took a bit longer to close a deal. The following month, those sales rebounded as everyone finds a rhythm in how to operate. Let’s take a look to see if something similar occurred during the first official week of data following the NAR settlement changes.

Weekly housing inventory data

As mortgage rates have dropped recently, inventory growth has slowed below my weekly target level of 11,000-17,000. This isn’t surprising since I targeted the weekly average growth level with rates over 7%. My premise is that higher rates can create more inventory growth because they limit mortgage demand, so the slowdown in the inventory growth rate looks normal to me. Nothing in this data strikes me yet as being meaningfully moved by the NAR settlement changes. Last week housing inventory grew by 6,271.

• Weekly inventory change (Aug. 16-Aug. 23): Inventory grew from 698,473 to 704,744 
• The same week last year (Aug. 18-Aug 25): Inventory rose from 497,361 to 503,924
• The all-time inventory bottom was in 2022 at 240,497
• The yearly inventory peak for 2024 is this week at 704,744
• For some context, active listings for this week in 2015 were 1,215,873

New listings data

New listing data is experiencing its traditional seasonal decline. 2024 is the second-lowest new listing year recorded in history, but we still saw growth from last year, which is a positive. Nothing here strikes me as abnormal, either.

Here are the number of new listings for last week over the previous several years: 

• 2024: 64,595
• 2023: 54,584
• 2022: 64,670

Price-cut percentage

In an average year, one-third of all homes take a price cut — this is standard housing activity. Rising mortgage rates last year and this year have created a growing level of price cuts, especially with inventory rising. This data line has recently slowed down with falling rates, but we saw some growth weekly. 

In theory, if a seller doesn’t pay a buyer commission from the seller’s proceeds, that seller makes their home more expensive for the buyer, who must bring more money to closing. Even though we saw some growth here weekly, nothing is conclusive in the price cut percentage data.

A few months ago, on the HousingWire Daily podcast, I discussed that the price-growth data would cool down in the year’s second half. Here are the price-cut percentages for last week over the previous few years:

• 2024: 39.9%
• 2023: 36%
• 2022: 39%

Weekly pending sales

Below is the Altos Research weekly pending contract data year-over-year to show real-time demand. We did see some pick-up in demand here on a week-to-week basis, and the YoY growth is somewhat different from last week. Still, there is nothing here to make me think the law has changed anything yet.

• 2024: 368,363
• 2023: 361,337
• 2022: 405,363

In conclusion, I have seen nothing in the above data to indicate that we’re seeing an impact from the NAR settlement changes yet. It’s only week one: I’ll be monitoring this for four weeks to see if, like TRID, this impacts the monthly sales data, but as of today, nothing.

10-year yield and mortgage rates

My 2024 forecast included:

• A range for mortgage rates between 7.25%-5.75%
• The 10-year yield between 4.25%-3.21%

Even with a negative job revision print and a baby pivot by Jerome Powell last week, the famous 3.80% level I have discussed all year has held the line. This is very impressive. Again, if the labor and economic data weaken, we can head lower in yields and mortgage rates.

Mortgage spreads

Mortgage spreads were a negative storyline in 2023, as the collapse of Silicon Valley Bank and the resulting banking crisis pushed them to new cycle highs. We don’t have that variable this year, and spreads have improved. 

If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.49% higher right now. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.

In my interviews with CNBC and Yahoo Finance on Friday, I discussed how future rate cuts and a more dovish Fed should lower the spreads, bringing rates down by 0.75%-1% and back to a more normal level.

Purchase application data

Since mortgage rates have fallen more than 1% recently, we will draw a line in the sand at that point and track purchase application data for the rest of the year. In the last 11 weeks, purchase application data has had six positives versus five negative prints. This last week saw a weekly decline of 5%.

Since mortgage rates started to fall in November 2023, we’ve seen 18 positive prints, 18 negative prints, and two flat prints in the week-to-week data. However, as mortgage rates began to rise earlier this year, we observed a decline in demand. 

The week ahead: Housing reports and PCE inflation data

It will be a less drama-filled week regarding economic data, but we have a ton of housing reports, a few home price data reports, pending home sales, and purchase apps. The Fed’s primary inflation data — quarterly and monthly reports on personal consumption expenditures— will come out this week. Fed President Waller will also give a speech. I will be interested to see if the 3.80% level holds up again this week.