Glimmers of Hope for Buyers
Mortgage applications climbed 17% in the week ended Aug. 9, according to data from the Mortgage Bankers Association’s Market Composite Index. The highest application volume level since January 2023 is driven in part by a jump in mortgage refinance activity. But as rent prices continue to soar, the lure of lower loan rates and an increase in housing inventory have home shoppers looking again.
The number of active listings from April to June of this year were up 40.8%. The second-quarter 2024 report from Texas Realtors also showed months of supply grew. It rose from 3.1 months in Q2 2023 to 4.6 months in Q2 2024. That’s the highest amount of supply in the state in at least eight years.
However, housing affordability remains a concern for most. Despite the increased supply, in most Texas cities, median home prices have not dipped too significantly. Inflation in the cost of building materials is one reason. NAHB reported that June saw the highest yearly increase in building material prices since February 2023. Other sources say that the increase in listings in Texas are mainly from higher-priced homes.
Analysts Hope For Better Rates on Land Acquisition, Development & Construction (AD&C) Loans
NAHB’s survey on AD&C Financing shows lenders are reducing the amount they are willing to lend and lowering the loan-to-value (or loan-to-cost) ratios. As credit becomes less available, it also tends to become more expensive.
In the second quarter, the contract interest rate increased on all four categories of AD&C loans tracked in the NAHB survey: loans for land acquisition, loans for land development, loans for speculative single-family construction, and loans for pre-sold single-family construction.
An NAHB Eye on Housing post said the average effective rates on loans for land acquisition and speculative single-family construction in the second quarter of 2024 were the highest they’ve been since NAHB began collecting the information in 2018. However, the news posts anticipates that the data will show improvements when the third and fourth quarter numbers are finalized as the Federal Reserve cut rates.
Texas has the “Narrowest Mortgage Rate Lock-In Gap”
of any State
U.S. News & World Report looked at the average mortgage rate homeowners were paying versus the average rate they would pay if they sold their home and took out a new home loan to move to another residence.
The findings show that Texans, on average, are currently paying among the highest mortgage rates in the country. (And that’s because so many Texans just moved here and have newer loans). But relative to other states, that data shows that Texans have access to the lowest rates in the U.S. for new mortgages.
“If you had the average mortgage rate for Texas homeowners and you decided to sell your house and buy another home at the average new loan rate offered in Texas, you’d pay 2.55% points more,” notes a recent WFAA post. “On the average loan, realtor.com figures that would cost you about $340 extra per month. Yes, that is more, but not as much more as they found in other states when a homeowner with the existing average rate sells and then buys another place at the average current mortgage rate.”
New Buyers Agent Rules Now In Force
The new rule that became effective on August 16 is part of a settlement agreement that was granted preliminary approval in April 2024 and is subject to final court approval on November 26, 2024. And it leaves many with a lot of questions.
It will prohibit real estate agents in Texas from communicating buyer’s agent commissions through the MLS. This includes any language or fields related to broker compensation in the MLS, even in agent remarks. However, the rule does not prevent sellers from paying buyer’s agents, or listing agents from communicating compensation offers outside of the MLS.
This means that the seller maintains complete control over whether the buyer’s agent gets paid. However, it cannot be advertised in the MLS. And it means buyers agents must clearly detail their compensation in a written representation agreement upfront. The buyer has the option of trying to work without an agent representing him or her. But without a buyers agent, homebuyers need to be aware that they have no one representing their best interest.
Most agents contend that they will continue to transact with the similar fee structure they have been using. In the case where the seller is offering no or reduced commission, buyers will have to decide if they wish to see properties and are willing to pay their agent themselves. Any portion of the compensation per the buyer’s representation agreement that is not offered by the seller will be the responsibility of the buyer.
Texas REALTORS® has updated it Residential Buyer/Tenant Representation Agreements on its website at texasrealestate.com
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