Good morning!
Attached to this email, you'll find December's Agent Metrics Report and the Tracking Sales in Fresno and Clovis Google Sheet. According to the Fresno MLS data as of January 23, 2025, a total of 5,187 single-family homes and condominiums were sold in Fresno and Clovis throughout 2024. This represents an increase of 75 units compared to 2023, when 5,112 such properties were sold in these areas.
Looking forward in 2025 I believe there are several factors that will suppress the sales of single family homes and condominiums in Fresno and Clovis:
- The Lack of Housing Supply - Despite a local increase in Months Supply Inventory (MSI) to 2.6 months in December 2024, this figure is still considered low, indicative of a seller's market. Economists define a balanced real estate market as one with 6 months of supply; less than that signifies a seller's market, while more than 6 months indicates a buyer's market.
- The Changes in 2024 to How Real Estate is Transacted - The Department of Justice (DOJ) has strongly advised the California Association of REALTORS® and REALTORS® representing sellers of real property against negotiating commissions for agents representing potential buyers. This comes as a result of the settlement of a federal antitrust lawsuit by the National Association of REALTORS® (NAR), which mandates that real estate agents representing buyers must now enter into a written agreement with their clients specifically addressing the buyer's agent's compensation. This represents a fundamental shift from traditional practices. As a third-generation REALTOR®, I've always negotiated a total commission with property owners until the fall of 2024. Previously, as a member of the local multiple listing service, part of this commission was offered to the buyer’s agent or cooperating agent. Now, when representing a seller, my negotiations are limited to my commission only. The Code of Ethics of the NAR now requires that a REALTOR® representing a buyer must have a contract in place that outlines how the agent will be compensated. This new requirement necessitates additional education and training for both agents and buyers. It also introduces a significant challenge: many first-time buyers, who have typically saved for down payments and closing costs, are unprepared to save for their agent's commission. I anticipate that this need for education and additional financial planning will slow down the home buying process, potentially leading to fewer real estate transactions in 2025. This shift could impact market dynamics, affordability, and the overall pace of the real estate market.
- Current Interest Rates & Lock-in Effect - As I write this, interest rates for a FHA Loan stand at approximately 6.125%. Historically, this rate is considered low; for context, when my parents moved to Fresno in 1981, they secured their home with an interest rate of 17.75%.The median home sale price in Fresno and Clovis for December 2024 was $406,000. Using an FHA loan with a 3.5% down payment, the monthly payment for principal, interest, taxes, insurance (PITI) and PMI for this median-priced home, fully amortized over 30 years at a 6.125% interest rate, would be approximately $3,125.23 or $37,502.76 annually.
In 2022, the median household income in Fresno County was $67,756, meaning 55.35% of that income would be allocated to mortgage payments.
Moreover, many current property owners have mortgages with rates below 4%. This "lock-in effect" discourages these homeowners from selling, as moving would likely mean taking on a new mortgage at a higher interest rate, thereby increasing their housing costs significantly.
- Federal Tax Policy - The Taxpayer Relief Act of 1997, particularly Section 121 of the Internal Revenue Code, was very advantageous for homeowners. It introduced a home sale exclusion allowing individuals to exclude up to $250,000 from capital gains tax on the sale of their primary residence, and up to $500,000 for married couples filing jointly. However, these exclusion amounts were not adjusted for inflation. In 1997, the median home price in California was $194,000. Fast forward to December 2024, and the median home price in California has risen dramatically to $861,020, illustrating how the static exclusion limits have not kept pace with the rising cost of housing.
- Insurance - The increased cost of homeowners' and property owners' insurance has been widely publicized. In a recent conversation, my insurance agent speculated that insurance premiums have increased by 100% over the last three years. This significant rise in insurance costs is making housing affordability, particularly for the working class, less attainable.
- The Ruling Class’ Lack Of Motivation - The reality is, if housing and homeownership were truly priorities for the ruling class, they would take concrete action. The media and politicians often label the current situation as a "housing affordability crisis." However, I believe a more precise term would be an "availability crisis” (thank you Steve White for that term). If this were genuinely considered a crisis, a state of emergency might be declared, leading to swift policy changes. Here are some potential solutions:
- Eliminate Impact Fees: These fees significantly increase the cost of new construction, thereby reducing the incentive to build more homes.
- Eliminate School Fees: Given that school districts already receive funding from property taxes, bonds, and assessments, additional fees on new housing seem redundant.
- Incentivize Municipalities to Meet Their Housing Elements: Local governments should be encouraged or required to fulfill their housing plans, ensuring a balance of housing types and densities.
- Incentivize Builders and Developers: Offering tax breaks, faster permit processing, or other benefits could spur more construction activity, increasing housing supply.
Highlights from the Fresno and Clovis Markets are below.
- Median Sold price was DOWN ⬇️ from November 2024:
- December 2024 $406,000.00
- November 2024 $437,000.00
- 362 homes sold:
- 2.95% FEWER ⬇️ homes sold December of 2024 than in December of 2023 (373 homes sold December of 2023 versus 362 homes sold December of 2024 that is 11 FEWER ⬇️ homes)
- 11.49 % FEWER ⬇️ homes sold December of 2024 than November of 2024 (409 homes sold November of 2024 versus 362 homes sold in December of 2024)
- Average Days on Market:
- Average Days on Market for homes that sold in November 2024 was 36 days.
- This is MORE ⬆️ than November 2024. DOM for October 2024 was 30 days.
- The average day on the market for homes with no price changes was 16 days.
- Sales Price versus Offer Price was 99.3%
- The average day on the market for homes with 1+ price changes the was 64 days
- Sales Price versus Offer Price was 93.6%
- Average Days on Market for homes that sold in November 2024 was 36 days.
- Median For Sale Price $433,990.00 versus Sold Price of $406,000.00
- One (1) bank owned property sold:
- Other Real Estate Owned (OREO) sales were FEWER ⬇️ from November.
- 325 homes went under contract.
- 357 New Properties were listed for sale.
- Months’ Supply Inventory of 2.6 months.
- 2024 Inventory levels:
- January MSI - 1.9 Locally versus The National Association of REALTORS®️ 2.6
- February MSI - 2.1 Locally The National Association of REALTORS®️ 2.2
- March MSI - 1.8 Locally The National Association of REALTORS®️ 1.8
- April MSI - 2.0 Locally The National Association of REALTORS®️ 2.0
- May MSI - 2.0 Locally The National Association of REALTORS®️ 2.2
- June MSI - 2.4 Locally The National Association of REALTORS®️ 2.1
- July MSI - 2.1 Locally The National Association of REALTORS®️ 2.0
- August MSI 2.1 Locally The National Association of REALTORS®️ 2.1
- September MSI 2.6 Locally The National Association of REALTORS®️ 2.5 October MSI - 2.2 Locally The National Association of REALTORS®️ 2.5
- NOVEMBER MSI - 2.6 Locally The National Association of REALTORS®️ 2.5
- December MSI - 2.6 Locally The National Association of REALTORS®️ 2.3
- 2023 Inventory levels have fluctuated
- January MSI - 1.8 Locally versus The National Association of REALTORS®️ 2.5
- February MSI - 1.7 Locally versus The National Association of REALTORS®️ 1.9
- March MSI - 1.2 Locally versus The National Association of REALTORS®️ 1.3
- April MSI - 1.1 Locally versus The National Association of REALTORS®️ 1.3
- May MSI - 1.1 Locally versus The National Association of REALTORS®️ 1.1
- June MSI -1.3 Locally versus The National Association of REALTORS®️ 1.2
- July MSI - 1.4 Locally versus The National Association of REALTORS®️ 1.4
- August MSI - 1.7 Locally versus The National Association of REALTORS®️ 1.7
- September MSI - 1.8 Locally versus The National Association of REALTORS®️ 1.9.
- October MSI - 2.0 Locally versus The National Association of REALTORS®️ 1.8
- November MSI - 2.2 Locally versus The National Association of REALTORS®️ 2.2.
- December MSI - 2.3 Locally versus The National Association of REALTORS®️ 1.9.
- The Fresno and Clovis markets still have low levels of inventory.
Articles/Interviews/Presentations that may be of interest:
- U.S. existing-home sales fell in 2024 to the lowest level since 1995, the second straight year of anemic sales due to stubbornly high mortgage rates
- If you want to buy a house, first do this math
- How not to go overboard when fixing up your house before you sell it
- Heard on the Street: The “hidden force” that can bring mortgage rates down
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