There were massive changes to the Real Estate Market in 2024; many books will undoubtedly be written on the subject. With continued low inventory, the uncertainty of the economy, unfavorable interest rates, and a huge Presidential Election Year, there were only 252 homes and condos sold in Benicia, and only 4.1 million real estate transactions closed nationally.  If you bought or sold a home after August of 2024 you will have done so in a very different way than those that bought or sold in July of the same year. Here is a breakdown of the way business will be conducted moving forward in 2025 and beyond.

The biggest change is a result of a class action lawsuit against the National Association of Realtors (NAR) and the largest national Real Estate Brands. The lawsuit resulted in a fundamental change in the way Real Estate is practiced and how Realtors are compensated. Compensation can no longer be listed on the Multiple Listing Service (MLS) but can be (as has always been the case) negotiated in other ways, including sales concessions. Sellers will still contract with their Broker using the Listing Agreement as the instrument to delineate the Listing Agents compensation and any other duties and responsibilities each party is to perform. Buyers will now need to sign a Buyer Broker Agreement (this is not a new contract, though before the settlement it was not a required agreement between Buyer and Buyer’s Broker) that will delineate the compensation the Buyer will be responsible for paying their Agent, along with all other duties and responsibilities each party is to perform. 

What has not changed is the general costs associated with buying or selling a home.  

Sellers will still need to pay their Listing Broker for their services in the sale of the home, they also may end up paying for some of the Buyer’s expenses, either through concessions, or via price reduction. These concessions might include, but are not limited to, inspection reports, repair items (identified by Inspectors or Buyers), Buyer’s Closing Costs (these may include title/escrow fees, fees for lending expenses, City and County Transfer Taxes, and Buyer’s Broker compensation too). 

Buyers, on the other hand, may need to bring more money to the table to purchase a home. They will now have to pay their real estate Broker, and their Lender, in addition to coming up with down payment and closing costs. 

Both Buyers and Sellers should discuss these changes at length with a real estate professional prior to beginning the process of searching for a new home or preparing their existing home to sell. A willing Buyer and a willing Seller, (likely with the help from real estate professionals) should be able to come to a mutually beneficial negotiated agreement.

What should you expect in 2025?

Well, I think we are in for a good year, all things considered. Yes, we will be doing business in a slightly different way, as stated above, but we are also already seeing more consumer confidence as we finish up 2024 and just begin 2025. NAR’s Chief Economist Dr. Lawrence Yun said that, nationally, he predicts “Existing Home Sales will increase by 9%, New Home Sales will increase by 11%, and the Median Home Price will increase by 2%.”  He also anticipates that interest rates will decrease and flatten out to near 6% (I expect it will bounce around a bit, maybe dip to 5.9% and then go back up to 6.2%, but this will take a few months as the rates slowly continue to drop down from the current range of 6.7% – 7.4%).  Benicia will continue to have an inventory problem, as we are not building new homes, and we rely on the sale of existing homes almost exclusively.  That being said, there are some new housing projects in surrounding cities that may provide opportunities for residents looking to buy a new home (large housing tracts are currently in production in Vallejo, Fairfield and Vacaville). The largest demographic of first-time Buyers that the country has ever seen is waiting to enter the market, a combination of Millennials and Gen Z (these two generations of Americans total 166 million people). Less than 10 years ago, the average first-time Buyer was 32 years old, now they are 38.  Additionally, less than 10 years ago the average Seller was 49 years old and only stayed in their home for 6 years on average; now, the average Seller has been in their home for about 10 years and is 56 years old. These statistics tell me that home Buyers and Sellers are older and have more money than they were a decade ago, and this is a direct result of a lack of available inventory. It is encouraging that more new homes are being built near Benicia, but the massive fires have eliminated so many homes in California in recent years that we are still at a huge net loss when it comes to home availability.  

In conclusion, Buyers, get with your lender and get qualified, so you are ready when the right home comes along (don’t worry too much about the interest rate…it will come down and you will have an opportunity to refinance later).  Sellers, I know you love your low interest rate on your current mortgage, but is the house too small or too big for you? You likely have quite a bit of equity built up; 2025 might be the year you upgrade your quality of life and buy that “right-sized” home to better fit your needs.

 

Eric P. Hoglund 

Real Estate Broker License # 01420325