Boots on the Ground On the eve of some fairly dramatic changes for the real estate industry, I thought it would be fun to add a little more historical perspective to the conversation. To best understand the lead up and subsequent rule changes being implemented, we’ll need to take a little trip through time. We’ll start our journey in the early 1900’s when brokers first started offering open houses to help their clients sell a home. The open house could last for a few days or even weeks with the home held open for 12 hours a day until a buyer was found.  This practice was commonplace until the late 1930’s when brokers started hiring sales agents – giving them the ability to take multiple listings at once and market these at open houses if they might be a better fit for the buyer. Everybody wins! In the late 1940’s, just after WWII, my grandpa Lee - who’d returned from his tour in Europe serving as a ball turret gunner in B-17s – graduated from DU and opened his brokerage, Wedgwood Realty. The industry was booming, and brokers were constantly innovating new ways to find buyers for their listings. When newspaper and radio ads didn’t get the job done, buyer incentives would be offered. The first record of this comes from a brokerage in Dallas who offered free Cokes to any visitors and a Cadillac to any buyers in a new subdivision they had listed. By the 1960’s multiple listing services (MLS’s) started emerging state to state, which consolidated listings into a single area database. My grandpa was actually one of the founders of the first MLS in Colorado, starting what they called "Pictorial Property Listing Exchange" along with some other brokers. They would print 5 by 8 inch brochures with a picture of the property and listing details and hang them on pegboards in their lobbies - where the sales agents from each broker could go and pick up brochures for homes that might interest their buyers. The dawn of the MLS expanded the role of brokers and sales agents, allowing them to seek out listings held by brokerages across a wider range, subsequently giving buyers more options to better suit their needs. With more options, buyer incentives lost their luster, so Brokers began offering part of their fee as an incentive to sales agents who brought them a buyer. This ushered in the concept of cooperative compensation, which would become mainstream in the industry after it proved to be overwhelmingly effective. Real estate found its panacea. Offering people a Cadillac might sound like a smart incentive if you’ve never worked in sales – but let’s be real - people buy a home because it feels like…home. Buyers don’t need kitschy incentives, they need guidance from someone they can trust, who understands their specific needs and will work tirelessly to provide them with the best possible outcome.  There was only one problem. Broker licenses were limited to the seller, and the co-op compensation model of this era meant that sales agents working with the buyer would have a fiduciary duty to the seller.    By the 1970’s, when my dad started in the business, rumblings emerged from buyers who (rightfully) felt that sellers had an unfair advantage in the transaction since they had the benefit of representation. Buyers who could afford it might hire an attorney, but more often than not, this would prove cost prohibitive, and buyers would go unrepresented. Fast forward a few decades – and thousands of lawsuits filed by aggrieved buyers – when buyer agency is born, keeping the well-established cooperative compensation model, but elevating the role of sales agents to pledge loyalty and fiduciary duty to buyers. This has been the model since the 1990's and, over time, the industry got a little lazy and the failed to properly communicate the value behind this model. With the new changes, buyer agency and co-operative compensation are unchanged in practice, we’re just limited in how we can advertise any offers of compensation from sellers, and working with buyers will require a level of transparency that had been lost over the years.    My take? Quality representation has become more important than ever for both buyers and sellers. We’ll see plenty of “innovations” that are simply mistakes from the past being painfully re-learned. Should any true innovations emerge – and prove effective - I'll be the first to bring them to my clients if it will provide a better outcome.  As always, I’m available as a resource to answer questions and provide an in-depth consult of best practices going forward!  Click below to schedule some time to chat! Schedule a Time Here Subscribed   Market Insights - July Recap   With active listings growing and closed listings shrinking, it appears buyers are taking the wait and see approach. Not shown on my table though, was a fairly sharp decline in new listings by 11% compared to June. We’ll see how that affects the data for August, but I suspect inventory to tighten a bit. That, plus mortgage rates coming down could help spur an end of summer boost to prices. At the very least, savvy buyers will see an opportunity to get in now while they have more options, less competition and the possible bonus to refi into a lower rate relatively quickly.   Peaks and Valleys 30 Year Mortgage Rates   August kicked off with mortgages tickling some of the lowest rates we’ve seen in over a year, dropping briefly into the 6.3% range before taking a bounce back to around 6.5%. These rates may not seem super exciting to most – we had 6.5% mortgages last year, big whoop – only this time is a little different. You see, last year the mortgage “spread” (difference between mortgage rates and the 10-year treasury yield) was over 3% - the highest levels since 2009. Currently, the spread is around 2.5% and has been consistently falling all year. If the spread were still over 3%, mortgage rates would be around 7% now and would’ve been over 8% last month. If the spread were at the historical average – between 1.5% and 2% - mortgage rates would currently be around 5.5%. Just one of the many, many factors that help determine mortgage rates, but the narrowing spread has been the most impactful this year by far. For more info on this, Lance Lamber on X is a great follow.

Is the Economy Sufficiently Shambled? I long for the day that I no longer set calendar alerts for “Release of CPI Report” and “Jobs Numbers” each month, but that day is not today!! As your local economic correspondent (self-appointed), I take my job very seriously. Whether it’s the CPI, jobs report, FED comments, what have you…I’m right there, on the front lines, ready to bring you the hard-hitting facts! The news never sleeps, people! Well, I’m happy to report that with today’s release (July 10th) of the CPI report it appears as though the tides are changing in the war on inflation. In case you’re not down with the lingo, CPI stands for Consumer Price Index, which tells us how much value this month’s dollar has lost compared to last month’s dollar (aka inflation). July’s report was welcomed with open arms coming in at 0.065% instead of the expected 0.2%!! Earth. Shattering. With inflation still hovering around 3% year-over-year, this helps get us a teensy bit closer to the 2% inflation rate targeted by the Fed. Over the last few years, the CPI report has gained notoriety as one of the leading sources behind large swings in mortgage rates. That held true again, with rates dropping from about 7% to 6.85% - and likely would’ve gone further but the market pumped the brakes a bit to allow for a slower, more sustainable pace. Combined with a bunch of other factors that I won’t bore you with now – data is starting to pile up that could convince the Fed to holster their weapons and consider the economy sufficiently shambled. We’ll see if it holds in the coming months!   Boots on the Ground To quote the great Snoop D.O. double G… “there’s so much drama in the LBC”…in this instance, the LBC is real estate. I’ve been waiting to write about this until the courts finalize everything, but the gears of justice move too damn slow – so let’s dive on in. Several years ago, a number of class action lawsuits were filed against the National Association of Realtors (NAR) along with several brokerage firms, including RE/MAX. The lawsuits covered many issues, but essentially boiled down to NAR’s cooperative compensation rule – which required agents listing a home in the MLS to offer a co-op fee to an agent who brings them a buyer. There was never a set amount tied to realtor commissions or co-op fees – but – if commissions are always negotiable, they should theoretically be negotiable down to zero. This rule made that impossible. For a little history, the co-op rule was adopted in 1990 due to demands from consumer advocacy groups for buyer representation. Co-op fees did exist prior, but they were inconsistent, and buyers without representation frequently fell victim to unfair treatment. Over time, agents either didn’t understand or didn’t explain the concept behind commission sharing, and some sellers felt they hadn’t been given a choice in the matter. While not finalized, the settlements will bring fairly significant changes to the industry. Firstly, co-op fees will not be required but remain optional. Further, these fees can no longer be advertised in the MLS – but sellers and their agents may advertise them in other ways. Also, when working with buyers, agents will be required to obtain a signed agreement prior to showing any homes. The downstream effects from these changes are hard to predict. Like anything else, my focus will be on finding creative strategies to provide the best possible outcomes for my clients based on their specific needs and current market conditions. Innovate to elevate! Peaks and Valleys   See that little tick upwards at the end of the chart? That’s the market catching its second wind – this tends to happen around August after the peak of the spring market cools off so it’s a little early. We’ll see if it keeps going! A couple months back, I talked about the steep and deep valleys that started about this time in 2022 and 2023. Each of the sharp drops you see in those years were the result of rapidly increasing mortgage rates. From 4% to 7.5% in 2022 and 6% to 8% in 2023. To me, this solidifies the fact that, even with rising inventory and more days on market – home values will hold firm with “modest” (aka normal) growth at 3% - 6% year-over-year….as long as mortgage rates don’t go haywire on us again. Market Insights - June Data   While the increase in inventory hasn’t put a damper on home values overall, that doesn’t mean we won’t see at least some effect from this later in the year. For now, the homes that are closing are the ones that are most sought after. There are plenty of homes active on the market that have yet to close – or even go under contract – due to a number of factors. The main one being mispriced homes, with sellers and/or agents chasing prices that were never there to begin with. Regardless, any “valley” we see in home values this year will be the normal, seasonal, kind of valley caused by a glut of homes finally closing after being priced way over-market before finally selling way under-market after several price reductions. Remember, the seasonal home price declines we see at the end of the year aren’t your home losing value. It’s just the product of listings that have languished on the market for several months all closing around the same time and showing in the data. Thanks for reading Denver Evolution Real Estate Blog! Subscribe for free to receive new posts and support my work.