Real estate market checkup: Q1 2024

Key insights

• The first quarter of 2024 brought an increase in real estate activity across all metrics.
• We explain what key metrics mean – and how they apply to you.
• NAR settlement will result in changes.
• Buyers should make sure they have an agent representing their interests.

Sharry Schmid, president, Edina Realty

As president of Edina Realty, Sharry Schmid provides guidance and direction to over 2,000 REALTORS®.

It’s been a lively first quarter in real estate – in activity and attention! And like many of our Edina Realty agents, I’m frequently asked some version of the following two questions:

“How’s the market?”

“What’s happening with the NAR settlement and/or agent compensation?”

In this article, I’ll take some time to help make sense of what’s going on in real estate, what the data says, and what you should know about those real estate reports around the NAR settlement.

Let’s start with the first question: “How’s the market?”

While I can (and will) provide an overview of regional data in the first quarter, the best answer to the question, “How’s the market,” is: “Tell me a little bit about your goals and personal circumstances, and I’ll give you an overview of how the market is for you.”

If you’re a seller, you’ll experience the market differently than a first-time homebuyer. If you’re buying with cash, your circumstances are much different from someone who needs to qualify for financing and factor in interest rates and a down payment. If you’re buying lakeshore, the market is different than for somebody who has their eye on a condo. Many factors come into play when buying or selling real estate, and a good agent can help you understand the opportunities specific to your situation. Now, onto the data!

Q1 market checkup – the data and what it means

Overall, market activity—specifically new sellers listing their homes and buyers closing on homes—was up in the first quarter of 2024 over 2023. Here are the key statistics for Q1—and a bit about how to interpret each of them.

New listings: Up 16.85%
New listings are pretty straightforward. They indicate the number of new sellers putting their homes on the market and are often a measure of consumer confidence in housing and the economy.

Closed sales: Up 3.89%
Closed sales indicate that a property has officially exchanged hands. This can sometimes be seen as a “lagging indicator” of activity because it can be 30-90 days from when a purchase agreement is signed to when it closes. That means closed sales in Q1 are likely a reflection of the activity in the latter part of 2023, not the activity in Q1 2024.

Inventory of homes for sale: Up 7.71%
Inventory of homes for sale is a measure of new listings combined with existing listings and is a metric we like to see rising because it indicates a growing supply of homes for sale—and more choices for buyers.

Months supply of homes for sale: Up 23.26%
Think of this as inventory’s cousin. This measures how long it would take the current supply of homes for sale to sell if sales continued at their current pace and no new homes came on the market. At the end of March, this number sat at 1.8 months. Generally, a balanced market has around six months of supply, so we have quite a way to go to get to a more balanced ratio of supply and demand.

Days on market: Down 6.11%
This measures how quickly homes are selling. If there is less supply and more demand, homes sell more quickly and for a higher price (think: competition).

Median sales price: Up 3.22%
The median sales price indicates the price at which the greatest number of homes are selling. Why not use average? Mostly because one very high-priced home can greatly skew that number, making it less meaningful to the bulk of buyers and sellers. In March 2024, the median price was $366,000; the average was $423,996. A healthy rate of appreciation is generally around 1-3% per year.

So overall, it was a healthy first quarter with a lot of activity leading into what is typically our busiest time of year in real estate – spring! I’d be remiss if I didn’t mention interest rates, which are a major driver of market activity—and can be a bit of a wild card. Rates crept up to over 7% in April,* so we’ll see if that has an impact on spring activity.

Now that you know how to interpret the data, you can see how your personal circumstances and goals can play a major role in how “good” or “bad” the market is for you.

Question #2: “What’s happening with the NAR settlement?”

In March, the National Association of REALTORS® (NAR) reached a settlement agreement relating to a class action lawsuit. While NAR admitted no wrongdoing, according to the terms of the settlement, some changes will occur that aim to make agent compensation more transparent to buyers and sellers beginning in July 2024.

Changes

The most significant change is that agents will no longer be able to include offers of buyer broker compensation in their listing information on the Multiple Listing Service (MLS). There’s a fair amount of conjecture about what that could mean for sellers and buyers. Here are some things to know:

• Buyers will be asked to sign a written agreement before an agent will show them a home
• For properties with no listing broker offer of compensation, buyers who do not have the cash available to pay agent compensation may need to defer a home purchase or ask the seller to pay
• To protect their best interests, buyers should work with their own agent
• Sellers who offer to pay the buyer broker compensation will open their property up to a bigger pool of potential buyers

Clarifications

Some of the purported changes haven’t been accurately represented, especially for those of us operating in Minnesota and western Wisconsin where buyers have historically signed buyer representation agreements, and commission has always been negotiable for both buyers and sellers. A few key clarifications:

• Real estate agents’ fees have always been negotiable and vary from agent to agent and brokerage to brokerage. Similarly, the products and services they offer vary greatly. Edina Realty agents provide a full-service experience, delivering expertise, marketing, and many valuable services for which they are paid.
• A seller has never been obligated to pay a buyer broker compensation, but the practice has been well-supported and accepted as the best way to attract buyers.
• Buyers have always been free to negotiate their commission in buyer representation agreements, but many have appreciated having the commission paid by the listing broker.

Eligibility

The settlement also outlines a potential payment to consumers who qualify. To find out more about eligibility and the official process, visit realestatecommissionlitigation.com

Moving forward

With nearly 70 years in the business, we’ve helped buyers and sellers through countless obstacles, and we pride ourselves on the professional representation, products and services we provide. Edina Realty has led the market for 24 consecutive years because you have put your trust in us. You value having an advocate by your side as you undertake one of life’s biggest financial and emotional decisions—and we’re grateful to be a part of that.

Reach out to Edina Realty or your agent any time for advice. No matter how real estate evolves, we’ll continue to help you move forward with your home purchase or sale with confidence.

<sub>Based on data from the Minneapolis Area Realtors for Jan.-March 2024 compared to Jan.-March 2023 for the 16-county Twin Cities region.

*Data sourced from Freddiemac.com for informational purposes only. Please contact your mortgage consultant for any questions related to specific loan transactions</sub>