High mortgage rates and home prices, coupled with limited available inventory, have created a challenging environment for homebuyers in the U.S., especially for those involved in corporate relocations. In June, home prices reached record highs for the second straight month, significantly impacting the spring homebuying season, which is usually the busiest time of year for the housing market.
Home sales declined in June for the fourth straight time on a monthly basis, but the low inventory of homes for sale in much of the country is pushing prices higher. The national median existing-home price in June rose to $426,900, a record in data going back to 1999, and a 4.1% increase from a year earlier, the National Association of Realtors (NAR) reported. For those in global talent mobility, this trend adds an extra layer of complexity to the relocation process, affecting both corporate budgets and employee satisfaction.
Meanwhile, In Canada, an interest rate cut has jump-started the country’s housing market. The benchmark home price inched 0.1% higher in June from May to C$717,700 (US$526,500), the first monthly increase since August 2023, according to data from the Canadian Real Estate Association. Home sales rose 3.7% from May, the first monthly gain since January, the data show.
In Mexico, the housing market is also seeing significant changes. According to Sociedad Hipotecaria Federal (SHF), home prices with mortgage loans increased by 9.7% nationally in the first quarter. The average price of a home was 1,702,000 pesos (US$92,000) and the median price was 1,040,000 pesos, with variations noted among states and cities. Nineteen states showed prices higher than the national average, while 13 registered smaller variations. In the Metropolitan Zone (ZM) of Tijuana, the SHF Index grew 12.8%; in Monterrey 11.8%, Querétaro 11.6%, León 10.3%, Puebla – Tlaxcala 10.2%, Guadalajara 9.2%, Toluca 7.9%, and Valley of Mexico 6.8%.
How Does Homebuying Compare to Early Pandemic Days?
Reflecting on the early pandemic days, a November 2021 article in Mobility magazine, titled “Welcome to the Great Disruption,” highlighted the upheaval that hit real estate and corporate housing markets. The story also examined legislation, communication, technology, connectivity, and pricing. One WERC member interviewed for that article was Teresa Howe, SCRP, SGMS, at TRH Consulting. She notes several things that have changed between then and now, impacting the relocation industry. For example, at the time of the article, remote work was in full swing, while now many companies are requiring hybrid work or are demanding workers back in the office. This is forcing some employees to return to a commutable distance from their office or look for other jobs.
“The continuation of remote work has affected the relocation industry, and it probably won’t ever return to its original glory days,” she says. “Due to the real estate challenges and high prices, more people are looking to rent instead of buy, and some people who moved to the suburbs are looking to get back to city living.”
Technology’s Role
Technological advancements have significantly streamlined the relocation process. Howe highlights that tools like remote online signings and enhanced virtual tours have simplified real estate transactions. Similarly, Deb Borrell, CRP, GMS-T, GRP, SGDS, SRES, broker and executive vice president of relocation at Allie Beth Allman & Associates, says, “Technology will continue to improve … with all parties in the real estate transaction process being able to communicate more effectively.” These innovations, including mobile apps and virtual tours, are crucial for the efficiency and effectiveness of the corporate housing side, she says.
While technological advancements have proven an overall boon for the relocation industry, Howe identifies at least one area that could be improved. Unfortunately, she says, instead of technology making the referral process easier, most relocation management companies use their own data and referral management portals, making it challenging for downline service providers to have a consistent set of data to follow. Thankfully, however, some are allowing API feeds into the provider’s referral management systems to avoid so many duplicate entries, she says.
Real Estate Agents: NAR Settlement and Beyond
The NAR proposed settlement related to U.S. buyer broker compensation is expected to bring greater transparency to transactions. “Not only for the transferee, but the corporation will better understand the role of the agent and the relocation department, and how everyone gets paid in this new environment,” Howe says. She notes that as a result of the proposed settlement, buyer and seller commissions will be unbundled. Buyers will need to address upfront how they are paying their agent, as it is no longer guaranteed the seller will pay the commission, as was the case in the past. “This added pressure necessitates a thorough understanding of the buyer’s agency agreements and the value the agents bring to the process,” Howe says. “Agents may offer up a variety of ways to be paid, which may create confusion.”
Borrell cites a comment in the 2021 article about more agents being salaried in the future, versus being independent contractors, and has a different perspective on this prediction. “Real estate agents are salespeople, and salespeople are motivated in a different way than salaried employees,” she says. “Agents do so much more than open doors. There is a lot of value in being a real estate agent on both the buyer and seller side of transactions and agents will verbalize this even more so than they ever did in the past, which is a good thing. We may see a reduction in real estate agents in the industry with attrition due to the changes taking place over the course of the past year—perhaps from those who are not ready for change. At the same time, we keep pressing forward and there will continue to be new agents coming into the industry, ready and willing to explore new possibilities.”
Will There Be Calm After the Storm?
While a rate cut in the U.S. is anticipated, the timing remains uncertain, as the Federal Reserve isn’t tipping its hand. When it happens, a moderate drop in mortgage rates is expected to stimulate the housing market, potentially easing some of the current pressures.
Experts from Keeping Current Matters (KCM) predict that in the second half of the year, home prices will continue to climb moderately for most markets around the country, due mostly to a lack of available housing. With experts projecting a rise in inventory and a decline in mortgage rates, data suggests there should be “a more stable and predictable market than we’ve seen in the last few years,” the experts at KCM write. “There is still a lot of motivation for buyers and sellers in the market who are ready, willing, and able, and that’s not expected to change in the six months,” they say.