BALTIMORE — Home sales are dropping, inventory remains low, and a national settlement could change the real estate commission process, but there’s optimism that the Maryland housing market will rebound.
“We walked in, the floors are gorgeous. I always wanted hardwood floors. The bay window is just stunning with all the natural light that comes in,” said Valarie Lilly, a first-time home buyer who quickly fell in love with a Glen Burnie home.
“We kind of started the home buying process back in January and then we ended up closing on this home in February,” Lilly added.
She and her husband made just one offer during that time, and it was accepted changing her perception of how she thought the process might go.
“My outlook was like, we're not going to be able to afford this at all, there's no way,” said Lilly, who was concerned about high interest rates and a competitive market.
Meanwhile, Lynn Tuozzo, Lilly’s realtor, has other clients that have been on the hunt for much longer.
“I settled on one in January that we'd been looking for about a year and finally found one that worked. I have one [client] that I've been working with since last summer, and we're still looking,” said Tuozzo.
While interest rates remain high compared to record lows in 2021, Tuozzo said buyers have come to terms with the rates. It's inventory that's lacking.
Maryland home sales fell 13.9 percent last month, according to Maryland REALTORS’ Housing Statistics. In February, home sales were down 4.8 percent year-over-year. Home prices are also climbing, up 6.3 percent on average to $473,442.
“The spring and summer are always the busiest time of year in our industry, so I would say it will get more competitive, but you'll also have more to choose from, we hope there'll be more inventory out there. If it's the right time for you to buy a home, then don't wait,” Tuozzo said.
But July also marks changes to the real estate transaction process. A landmark settlement with the National Association of REALTORS will soon make Buyer Brokerage Agreements mandatory and spelling out how a buyer's agent would be paid.
“Maryland is one of only 17 states in the country that have required by law, require buyer agency agreements, written buyer agency agreements, so we've been doing this for many years already,” said Chris Hill, president of Maryland REALTORS.
While the rules under the settlement already apply in Maryland, norms could change if sellers decide to no longer cover the buyer's agent fees, which is typically 3 percent of the home's sale price. Under the settlement, buyers and sellers must negotiate their own agent commissions and compensation agreements can no longer be listed in the multiple listing service (MLS).
By shifting this burden back onto buyers, they may be limited in what they can afford, or may decide not to use a realtor. Unsurprisingly, Hill advises against this approach, but Lilly stressed there’s value in having someone on your side when making this large life expense.
“[Our realtor] literally walked us through room to room and was like, oh, that needs to be repaired or, oh, I don't know about that. And it's just stuff I wouldn't even have realized was a problem or potentially a problem,” said Lilly.
There's also the funding aspect, negotiating closing costs, seeking out programs that cover some of those expenses, and making sure you can afford to stay in the house once it's yours.
“A buyer's agent is going to help that buyer know those programs, get the best rates, find the best home and the most affordable option for them,” said Hill.
It's still unclear how the settlement will impact compensation arrangements in Maryland come this summer, and if some sellers will start to oppose covering buyer agent's commissions.
On a brighter note, Hill said the Maryland General Assembly recently passed legislation that will ease zoning restrictions on qualified housing projects in certain areas. He expects this will help close the state's 150,000-unit housing shortage.
For more information on navigating today’s housing market, qualifying for a mortgage, finding down payment and closing cost assistance, visit MarylandHomeownership.com and sign up for an upcoming webinar.