Housing market experiencing 'something of an earthquake'

Recently, a federal court awarded $1.8 billion in damages to U.S. homeowners after The National Association of Realtors (NAR), HomeServices of America — Berkshire Hathaway's (BRK-A, BRK-B) real estate branch — and Keller Williams Realty realtor firms were found guilty of conspiring to inflate commissions on home sales. With the housing market already in flux alongside elevated mortgage rates, potential homebuyers are unsure of where to turn to.

ResiClub Co-Founder and CEO Lance Lambert and Kathy Casey, Coldwell Banker Residential Brokerage Realtor and Broker Associate, join Yahoo Finance to discuss the state of the housing market as well as give advice to potential homebuyers.

Lambert is frank in the status of the U.S. housing market: "What I think is impacting buyers and sellers today is the fact that affordability has deteriorated to historic levels. When accounting for incomes, mortgage rates, and prices, last month was the most expensive of this century since 2000 and this month it looks like it will be the second most expensive now that rates have come down a little bit under 8[%]."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

DIANE KING HALL: Lance, when you think about that verdict that happened this week that was found that the National Association of Realtors and these large brokerages conspired to keep costs high, artificially high, what does that do? How does that change the landscape of the housing market from your point of view?

LANCE LAMBERT: Yeah, right now it's a tremendous amount of uncertainty for the industry. Nobody exactly knows how this is going to play out. I call it something of an earthquake, and it's either, is it a small quake or is it the first tremor in something much, much bigger? But as of today, you know, as of November 2023, I don't think it has a huge impact on buyers and sellers right now.

But I think what is impacting buyers and sellers today is the fact that affordability has deteriorated to historic levels. When accounting for incomes, mortgage rates and prices, you know, last month was the most expensive of this century since 2000, and this month looks like it'll be the second most expensive now that rates have come down a little bit under eight.

But back to what Kathy said, you know, there's things that buyers can do in this market, and one of the things that's becoming more attractive is the assumable loans. You know, this morning I was talking to the CEO of Roam, and they are a company that is a listing website, and they've done the data to get the mortgage information to find out what homes available for sale right now have assumable loans, meaning they're FHA, USDA, or VA. And so if you go on their website, you can search and see the homes for sale today that could potentially be an assumable loan.

JOSH LIPTON: And, Lance, so there are some smart, as you're pointing out, tips and tricks that prospective home buyers can think about, but you have these very powerful forces, Lance, which, you know, you've talked a lot about. Limited inventory and affordability has been crushed. How do we move past that?

LANCE LAMBERT: Yeah, right now the market is kind of constrained. So the tailwind for the market is the fact that on a national level. There's just not much resale supply coming onto the market. There's not much inventory. There's not much churn, people who are selling their home to go buy something new, because if they did, they would be trading in that lower monthly payment for something much, much higher, and the fact that the competitiveness coming out of COVID just kind of drew down the inventory.

So resale is the tailwind, but the headwind is this affordability that's deteriorated. You know, the fact that mortgage rates have gone up and touched that 8% threshold, given how much prices have went up since the start of COVID. And so the two forces together are just kind of gridlocking this housing market and constraining the activity levels.

DIANE KING HALL: Kathy, I want to ask you a question. So Lance characterized what happened in terms of that ruling this week as an earthquake, potential earthquake, and it's just about the definition of what scale, what size is this.

KATHY CASEY: Yeah.

DIANE KING HALL: How do you envision this impacting your business, this ruling that came down earlier this week?

KATHY CASEY: You know, none of us really know. It's really a huge uncertainty in our market right now. It could be that buyer agencies will have a whole different look than what it does today. It could be a lot of different things. So it could be that lenders are going to maybe even pitch in and help with buyer agency. Maybe that's part of your buyer agency, your package when you get your loan, that, you know, we work in.

A lot of things could happen and go several different ways. It really is kind of an uncertain market right now in terms of that. So I'm anxious to see--

DIANE KING HALL: Are you worried?

KATHY CASEY: No, I'm not. You know, I think that it is going to separate the wheat from the chaff, definitely. I think that when the real estate market is good, a lot of people tend to get in that don't necessarily have the resources or are just in for the quick buck and not in for the long term and aren't in for really providing good, reliable service for their clients. So I think it's definitely going to, you know, separate the diamonds from the cubic zirconias.