The arrival of October means there are only a few weeks remaining in this year’s fall selling season. Historically, home sales have tended to slow towards the middle and end of November.
This year’s presidential election may impact sales as well, but not as much as you might think. According to John Burns Research and Consulting, a review of home sales and elections since 1992 reveals that, while political discourse can be loud and pervasive, it rarely translates into significant changes in home-buying behavior. Home purchases are life decisions rather than political ones.
“In San Francisco in recent weeks, prime properties on desirable blocks, namely single family homes or house-like condos — like our listing 1497 Masonic — have been snatched up quickly with multiple offers,” said Ron Wong, an agent with Compass Real Estate. “Our Masonic property, in fact, closed well over the list price.”
Wong said demand for San Francisco homes remains high. He described those looking for homes as both mature buyers who have been sitting on the sidelines throughout the summer, and newer, less experienced buyers just starting their home search. It takes some time for these newer buyers to grapple with the complex nature of the city’s housing stock — from single-family homes, condos, and TICs (tenancies-in-common) to luxury units in high-rise buildings — in a wide variety of distinctive neighborhoods, each of which has its own pricing parameters.
Of course, home prices throughout the city are high and expected to climb higher when mortgage rates start to come down further and demand increases even more.
San Francisco isn’t alone in this. According to a recent Business Times report, in 237 U.S. cities, the typical starter home — defined as inventory in the lowest third of home values in a given region — now costs $1 million or more. Five years ago, this was true in only 84 cities.
Clearly, something needs to happen. What that might look like is difficult to say.
In the Business Times piece, editor Ashley Fahey quotes Emily Hamilton extensively. Hamilton is a senior research fellow and the director of the Urbanity Project at the Mercatus Center at George Mason University in Arlington, VA. She said even though housing affordability has been a concern for voters since the 1970s, when modern land-use regulations still largely in place today were first widely adopted, the cost of housing has become a more pressing political issue in recent years.
“Within the last several years, and even more so since the pandemic, this has bubbled up to become an issue that, I think, lots of governors and state legislators are hearing about and putting on their policy agendas as more of their constituents are struggling with housing affordability,” she said.
The new research from the Mercatus Center focuses primarily on land-use regulations, which have proven restrictive to building new housing in many places. That subsequent lack of new inventory has contributed to higher prices in both rental and for-sale housing in many markets.
The study also lists several policy reform options for lawmakers to consider ahead of 2025 legislative sessions, aimed largely at reducing regulations around housing production.
Hamilton said while most land-use regulations and zoning ordinances come from localities, the Mercatus Center focused primarily on how state policymakers could set limits on a local authority to implement zoning regulations.
The report highlights ways to streamline procedures, including a reformation of protest petitions — which are still allowed in 20 states — and improvement of legal frameworks, such as simplifying homeowners association laws and limiting objectors’ standing to sue against new housing proposals. It also says reform is needed in construction standards, such as allowing single-stair multifamily design, a hurdle commonly cited by infill housing developers.
Hamilton said there are about 100 years of regulations that have been built up in states and municipalities that have made it tough to build housing today in many places.
Meanwhile, the recent National Association of Realtors settlement is top of mind for everyone in the industry, as brokerages, buyers, and sellers scramble to implement new policies that took effect Aug. 17. This fall has been a period of transition, where buyers, sellers, and agents have had to adjust to new commission structures — now formally separating buyer agent commissions from listing agent commissions.
“We’ve actually seen many sellers remain open to offering buyer agent compensation,” said Jennifer Gottlieb, an agent with Compass and a colleague of Wong’s. “They want to optimize the highest net proceeds from the sale of their house, and they understand that some concessions — like a credit for a repair, or coverage of an agent commission for buyers lacking liquidity — might help them achieve that goal.”
In a changing real estate landscape, there are no clear-cut solutions to the affordability problem. It is, however, crystal clear that something needs to be done.
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