July sales increase as reality of higher rates settles in
There were 3,166 closings in the area in July, 5% more than July 2023 last year when 3,001 homes closed, Greater Nashville Realtors statistics show.
That number also is greater than the previous month’s 3,042 closings.
The numbers are increasing, perhaps indicating buyers are accepting higher interest rates or buydown rates.
With numbers up 5%, the sales in 2021 and 2022 are but a distant memory. Back then, buyers often worried about overpaying for houses as multiple offers were the norm and houses listed for $1 million often sold for $1.3 million. The demand was greater than the supply, but interest rates, although somewhat manipulated into deflation, were the driving force.
Money was cheap, and that made houses inexpensive regardless of the sale price. In 2019, interest rates were lowered to an average of 3.94% for the year, followed by 3.10% for 2020. And even with those attractive rates, 2021 saw the rates drop to 2.96% for the yearly average.
As noted, July 2024 sales were higher than 2023. In July 2021, there were 4,314 properties that sold in the area. To make matters worse, those buyers took advantage of the 2.96% or lower interest rate. In 2021, there were 4,649 sales compared with the 3,042 this June.
With rates on the rise, buyers clamored to buy in 2022 before rates eventually reached 5.34%, resulting in 4,257 sales in June dropping to 3,459 in July. That was a drastic drop, but still more than the 3,166 sales this July.
Many saw Aug. 17 as D-Day for home prices and real estate commissions. Some waited for that day – hoping to avoid paying buyers’ agents – and many thought sales prices would drop since the sellers have a choice as to whether or not to pay a buyer’s broker. Most sellers want as much money as they can get for their homes, selling with buyers’ brokers, no buyers’ brokers, for sale by owner or by whatever means necessary to realize the most net proceeds.
Aug. 17, the date of the Realtors’ self-imposed mandates, means that when sellers list their houses, they agree to make a certain monetary concessions, not to be confused with commissions.
In the past, the multiple listing services allowed the buyers’ agents commission amounts to be posted. That practice has ceased.
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Now “concessions” are offered if the sellers choose to do so. The buyers might want to reap the benefit of those concessions, as they did in the previously mentioned buydown. Buyers may allow their agents to be paid those concessions, or there may be no concessions at all. If no commission per se will be offered, and if the buyers’ agent would like to be paid at the close of the transaction, the commission will be a condition of the purchase and sale agreement so there are no mistakes. For the record, that was the standard practice for years.
The question: When is $1 million not $1 million? The answer is in 2021, when the payment would have been $3.160 with a $200,000 downpayment and today it would be $5,056.54, meaning the buyer would need to have an income of $68,256 more than in 2021. Same house, different year.
If the person hoped to sell that house and make $250,000, the buyer would have payments of $6,320, which is exactly twice what the owner would have on a $1 million purchase in 2021.
Those numbers are what can slow a real estate market.
Jerry Kemp remembered
Hallowed and revered real estate leader Jerry Kemp died last week following a lengthy illness. He was 89 years old at the time of his death.
Jerry was the president the organization then called the Nashville Board of Realtors in 1991 when sales dropped over 27%, and he initiated campaigns to increase sales beginning with first-time homebuyers. His “trickle up” approach was effective.
Jerry’s wife, Liz Kemp, was elected president of the association in 1998, and they’re the only husband-wife team to hold the office of president of that group. He was the founder of First Realty, a large firm in its day. It later merged with Coldwell Banker Barnes.
Kemp remained active in the association throughout his life and served as a mentor to countless Realtors who came through the ranks, later emerging as leaders themselves.
Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty and can be reached at [email protected].