This week I am going to continue to cover some important news, along with some big changes to how Realtors are operating. Our local MLS (Multiple Listing Service) is also rolling out some huge changes that are meant to give consumers more access to off-market deals.
I am excited to see how it all plays out.
New Updates to the Local MLS Rules
There are some drastic changes that went into effect on May 1, 2020 on how business is conducted among Realtors here in the South Bay.
Clear Cooperation Policy
Last year, the National Association of Realtors announced the new “Clear Cooperation” policy, which effectively worked to limit off-market deals. NAR’s stance is that Sellers are more likely to find the highest and best price on the MLS due to the wide-ranging exposure over an off-MLS (off-market) transaction.
In a nutshell, a home for sale by a Realtor must go to the MLS within one day, if there is any marketing to the public, effective immediately by NAR. There are, however, lots of nuance and debate on how it will all work and if it truly can even be enforced.
Coming Soon
As a result of the Clear Cooperation Policy from NAR, our local MLS has added a ‘Coming Soon’ tab, which is not available to the public through Zillow, etc. and can only be viewed by all active agents and users of the MLS.
This new MLS feature could become a brand new off-market marketplace accessed only by agents to share with their clients.
The ‘Coming Soon’ tab allows agents to market a listing to the public (mailers, online advertising, etc.) without it actually going live on the MLS, Zillow, etc. but at the same time allows other agents to see it online.
This new ‘Coming Soon’ tab can be done for up to 21 days. This allows buyer’s agents to see the properties that are “off-market,” but being marketed. If all goes according to plan, buyers’ agents will now see off-market deals faster than in the past and can send them to clients before they go live to the rest of the public marketplace. In theory, the more agents that know about a listing, the more exposure it gets.
There are a lot more rules like no signs in the front yard during ‘Coming Soon’ and no showings or open houses. It is basically an alert to the market that a home is for sale and coming soon, but rather than just known to a small neighborhood or a few agents, the entire agent network will know and be able to prepare buyers who may be interested.
It is a bit confusing to explain in a short post. I will dedicate more time to this as it matures and write a full blog post to educate you on the changing landscape of these new rules.
I do believe this could be a positive development for 99% of the consumers out there, as well as a nice development for many agents that may have been shut out of deals their clients would have liked. It has the potential to be a win-win.
More properties can be seen on the MLS and it will keep an even more transparent, functioning marketplace.
Of course not all agents agree, but change is tough for many people…it is only human nature. There will be new strategies on how to play the ‘Coming Soon’ market and it will also change how business is done. More on this later…but, it is a big deal!
If you are working with me as a Buyer, expect to see some “Coming Soon” listings sent to you that can only be seen by agents with access to the MLS.
Important Real Estate News/Data
In this post, I want to bring up two pieces of information that I found remarkably interesting and thought worthwhile to cover.
Housing Confidence
Last week, Fannie Mae released new numbers from its “Home Purchase Sentiment Index.”
Confidence has plummeted among buyers and sellers alike. Of those surveyed, 46% said it was a bad time to buy a home and 65% said it is a bad time to sell a home. Not really a vote of confidence by any measure.
This is not the end all be all real estate data. It is actually far from it.
But, it is worth noting as confidence and psychology in markets can have powerful effects in moving prices.
Public Company Guidance
While looking for clues among big, publicly traded companies, I stumbled upon the transcripts of the conference call for Weyerhaeuser Company.
Weyerhaeuser is one of the world’s largest private owners of timberlands, according to Yahoo! Finance, and began operations in 1900. They are also one of the world’s largest manufacturers of wood products with $6.6 billion in net sales in 2019.
Why do they matter? They supply massive amounts of timber to the construction industry.
Take a look at what the CEO, Devin Stockfish, said:
“Really, we look at this through the context of the macro environment and our market conditions. And really, as I mentioned, just an unprecedented situation in terms of what’s going on with the pandemic, broad swaths of the economy being locked down. We’re seeing historic levels of unemployment, GDP contraction in Q1, expectations that it’s going to be much more dramatic in Q2, consumer confidence dropping, and really no clear path on the trajectory of recovery. And so really, we’re expecting a significant erosion in housing and residential construction as well as, to some extent, larger remodel activity here in the near term. I think we’re in the early stages of understanding what that’s going to look like. It may get worse for a while.
And so we’re expecting that that’s going to result in a very challenged and choppy pricing and demand environment for our products for much of 2020. And our view is that the full impacts from the housing slowdown won’t be seen for a while longer, just given the builders and contractors are working through existing backlogs. They’re finishing up projects that are under construction. So there’s likely to be a bit of a lag before we see the full impacts of the reduced wood products demand. So just a lot of uncertainty around how this is going to play out over the next few quarters. Again, we’re expecting a challenging environment for most of 2020.
And so in light of that, we elected to suspend the dividend as a temporary measure to help preserve our liquidity and financial flexibility.”
This company, mind you, beat profit expectations for Q1 and had quarterly year-over-year growth…and they are suspending their dividend! They are obviously preparing for things to get pretty ugly.
As I have harped on week in and week out, real estate moves slowly. A company like Weyerhaeuser has its pulse on the construction market and housing demand. This is a clue. I would not take it lightly.
In addition, construction is still fulfilling contracts to-date, but what about six months down the road if construction contracts dry up due to a worsening economy? That is more delayed job loss and potential weakness to the economy as construction represents a HUGE portion of employment in this country.
Now onto some of the weekly stuff I like to share with all of you…
Forbearance
According to Black Knight, as of April 30th, more than 3.8 million homeowners were in forbearance plans. This represents 7.3% of all mortgages outstanding. Hopefully, this does not continue to grow but we will see with May 1st mortgage payments late after the 15th.
Mortgage Applications
For once, some good news I can get behind.
I do not care about week-over-week growth as much as I want to look at purchase applications compared to the same time last year. The Mortgage Bankers Association (MBA) reported that California saw a decrease of 22.3% in applications from last year.
That is bad, however, it is better than the 40% drop less than a month ago and the 30% range about a week ago. Things are still ugly, just not quite as ugly, so that is good to see things be “less bad” on the demand side.
And, demand is everything right now.
Unemployment/Initial Claims
The past few weeks I have touched on initial unemployment claims to gauge the job losses as a result of COVID-19. Well, last week the U.S. Labor department reported the April unemployment rate at 14.7%.
Obviously, that is not good and will likely continue to get worse through the month of May. Some experts are predicting that we are already at 20% or higher.
Initial claims this week increased by another 2.98 million filings bringing Coronavirus crisis initial claims to 36.5 million. However, a bright spot did surface with continuing claims rising by less than half a million.
The jobless numbers are nothing to be happy about, but the choppy data might suggest that the worst is behind us as long as our country can continue to flatten the curve.
Conclusion
There is a lot to follow right now.
It is great to see purchase mortgage applications start to bounce as well as continuing unemployment claims begin to flatten.
We still, however, need to heed negative information on forbearance, consumer housing confidence, and a huge company reporting that they are “…expecting a significant erosion in housing and residential construction…” and thus, suspending their dividend after beating profit expectations and year-over-year revenue growth. Still not great signs.
I will do a full report on the new ‘Clear Cooperation’ policy and ‘Coming Soon’ listings and their effect on business here in the South Bay.
As always, a change like this will take time to figure out and I can give you early feedback on how the “new off-market marketplace” is working, different strategies on selling as a result, and how you can make the best real estate decisions for yourself.
Have a great weekend and stay well.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]