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Mortgage rates dropped significantly at the start of March before stabilizing, with the average 30-year fixed-rate mortgage settling at 6.65%, according to Freddie Mac. This marks a 19-basis-point (bps) decline from February. Meanwhile, the 15-year fixed-rate mortgage fell by 20 bps to 5.83%.

The drop in long-term borrowing costs was driven by a 24-bps decline in the 10-year Treasury yield, which averaged 4.28% in March. This decline provided a boost to the housing market—new home sales increased 5.1% year-over-year in February, while the participation of first-time homebuyer of existing homes rose 26% over the same period. However, existing home sales saw a slight dip from last February.

The decrease in Treasury yields reflects growing concerns about an economic slowdown, particularly as shifts in tariff policy weaken consumer confidence. Despite this, the labor market remained resilient in February, posting steady job gains even as the unemployment rate ticked up slightly. The strength of upcoming jobs reports will be critical in assessing whether recession risks are intensifying.

At the latest FOMC meeting, the Federal Reserve held interest rates steady but revised its 2025 economic projections: expected GDP growth was lowered to 1.7% (down from 2.1% in December 2024) and the projected unemployment rate was raised to 4.4%, up 0.1 percentage point from previous estimates.

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Property tax revenue collected by state and local governments reached a new high in 2024 and continued to make up a bulk of tax revenue. Total tax revenue for state and local governments also reached a high after falling in 2023, driven by higher revenue across all sources. In 2024, tax revenue totaled $2.095 trillion, up 4.6% from $2.004 trillion in 2023.

According to the Census Bureau’s Quarterly Summary of State and Local Taxes, state and local property tax revenue totaled $797.0 billion (38.0%), up 8.2% from the prior year. Individual income tax totaled $537.4 billion (25.6%), up 4.7% over the year. Corporate income tax totaled $174.5 billion (8.3%), up 0.2% and general sales tax revenue was up 1.2% to $587.0 billion (28.0%) in 2024.

State Level Detail

Separating out this summary to just the state level, property taxes accounted for only 1.6% of state tax revenue in 2024, totaling $24.3 billion. State tax revenue is mostly comprised of individual income tax and general sales tax, with individual income tax reaching $490.7 billion (32.9%) and general sales tax at $470.0 billion (31.5%) in 2024.

Additionally, the state where government tax revenue was most reliant on property tax was Vermont, where approximately 27.7% of the state’s tax revenue was from property tax. Seventeen states did not collect any tax revenue in the form of property tax. This means that for property tax within a state, all collections essentially remain at the local government level.

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Higher interest rates and tight financial lending conditions have led to a decline in loans for new home construction. The total volume of acquisition, development, and construction (AD&C) loans outstanding from FDIC-insured institutions fell 1.02% to $490.7 billion, the third straight quarterly decline. The level of 1-4 residential construction loans, which include loans for the construction of single-family homes and townhomes, has fallen for seven consecutive quarters. Coincidingly, the volume of 1-4 family residential construction has moved to its lowest level since 2021.

The volume of 1-4 family residential construction and land development loans totaled $89.5 billion in the fourth quarter, down 7.6% from one year ago. This is also down after reaching a recent high of $105.0 billion in the first quarter of 2023.

To end the year, a plurality of outstanding loans was held by smaller banking institutions, those with $1 billion-$10 billion in total assets, totaling $30.2 billion (33.7%). Banks with $10 billion- $250 billion in assets held the second largest share at $29.8 billion (33.3%), followed by the smallest banks with under $1 billion in assets, holding $20.7 billion (23.1%). The largest banks with over $250 billion in assets held the smallest amount at $8.8 billion (9.8%).

Notably, 56.9% of 1-4 family residential construction and development loans were held by banks with under $10 billion in assets to end 2024. Small community banks play a vital role ensuring financial and lending opportunities for builders across the United States. The data below shows the year-ending level of outstanding 1-4 family residential construction loans broken out by bank asset sizes.

All Other Real Estate Development Loans

Excluding 1-4 family residential construction loans, the level of all other outstanding real estate construction loans totaled $394.6 billion and was down 2.2% from the previous year This is also down from a peak in the second quarter of 2024 of $404.2 billion.

The banks that held the most loans were those with total assets between $10-$250 billion totaling $163.2 billion (41.4%) to end 2024. Banks with $1-$10 billion in assets held $107.1 billion (27.3%), banks with more than $250 billion in assets held $86.6 billion (21.9%) and the smallest banks, those with less than $1 billion in assets, held $37.7 billion (9.6%).

For the end of 2024, larger banks ($10 billion or more in assets) had more activity in the other construction and land development loan arena compared to 1-4 family residential construction holding 63.3% of the outstanding volume.

It is worth noting, the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced from years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

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Profitability for single-family home builders reached the highest levels in more than a decade in 2023.  Industrywide profit benchmarks are important because they allow companies to compare their financial performance against the entire industry.  Doing so can guide resource allocation, budgeting, and target setting for costs and expense lines.  More broadly, understanding industry benchmarks can lead to an improved business strategy and to higher financial results. 

On average, builders reported $11.3 million in total revenue for fiscal year 2023.  Of that, about $9.0 million (79.3%) was spent on cost of sales (i.e., land, direct and indirect construction costs), which translates into an average gross profit margin of 20.7%.  Operating expenses (i.e., finance, S&M, G&A, and owner’s compensation) cost builders an average of $1.4 million (12.0% of revenue), leaving them with an average net profit margin of 8.7%.  This post summarizes the results from NAHB’s most recent edition of the Builders’ Cost of Doing Business Study.

Based on historical survey data (performed every three years), the 20.7% average gross profit margin in 2023 was the highest registered since 2006 (20.8%).  As a point of reference, builders’ gross margin sank to a record low of 14.4% in 2008 (i.e., during the housing recession), but bounced back steadily through 2017 (19.0%).  The onset of COVID-19 in 2020 increased costs, causing builders’ average gross margin to drop (18.2%) for the first time since 2008.

The 8.7% average net profit margin for fiscal year 2023 is the highest in this survey’s recent history, exceeding the 7.7% reported in 2006.  However, increased use of financial incentives, such as mortgage rate buydowns, and cuts in home prices are likely to have caused this margin to shrink in 2024.

The Cost of Doing Business Study also tracks builders’ balance sheets.  On average, builders reported $7.2 million in total assets on their 2023 balance sheets.  Of that, $4.5 million (62%) was financed by liabilities (either short- or long-term) and the other $2.7 million (38%) by equity builders held in their companies.

Historical data show the average $7.2 million in total assets in 2023 was 23% lower than in 2020 ($9.4 million), and builders’ lowest asset level since 2010 ($6.2 million).  But perhaps more important than fluctuations in the size of their balance sheets, the data reveal a long-term decline in builders’ reliance on debt to finance their operations: in 2006, 74% of their assets were backed up by debt; by 2020, the share was down 10 points to 64%; and by 2023, it dropped to a record low of 62%. Logically, the latter means builders are using more of their own capital to run their companies, as illustrated by their equity share rising from 26% of assets in 2006 to 38% in 2023.

The NAHB Economics team will conduct a Cost of Doing Business Study for residential remodelers in the spring of 2025. If that is your firm’s primary activity, please consider participating in this confidential survey. We simply can’t produce benchmarks without your input.  To participate, please complete this form. A summary of the most recent profitability benchmarks for residential remodelers is available in this blog post.

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The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, rose 4.7% month-over-month on a seasonally adjusted (SA) basis, primarily driven by refinancing activity. Compared to February last year, the index is 15.6% higher.

The Purchase Index declined 6.5% (SA) from the previous month, though it may rebound as mortgage rates continue to fall amid weakening consumer sentiment and growing economic concerns. Meanwhile, the Refinance Index surged 22.7% (SA). Compared to February last year, purchase applications are marginally higher by 2.1%, while refinance activity has jumped 43.7%.

The average 30-year fixed rate mortgage reported in the MBA survey for February fell 15 basis points (bps) to 6.9% (index level 687), 7 bps lower than a year ago.

Loan sizes also increased with the average total market loan size (purchases and refinances combined) rising by 4.4% on a non-seasonally adjusted (NSA) basis from January to $389,500. For purchase loans, the average size increased by 3.93% to $446,000, while refinance loans experienced a 6.1% increase, reaching an average of $305,800. Adjustable-rate mortgages (ARMs) saw a jump in average loan size of 5.9% from $1.07 million to $1.13 million.

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Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.

The 10-year Treasury yield declined 11 bps to an average of 4.52% in February, reversing its recent upward trend. This shift reflects concerns over a weakening U.S. economy due to inflationary pressures and increasing geopolitical risks. In response, the markets anticipate that the Federal Reserve will resume rate cuts later in the year.

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LOS ANGELES — Thinking of buying a home with the help of a real estate agent? You can no longer take it for granted that a seller will cover the cost of your agent’s commission.

Home sellers have traditionally offered a blanket commission to a buyer’s agent when they listed their home on the market. But that will no longer be allowed as of this weekend, when various changes to U.S. real estate industry practices are set to take effect.

A homebuyer may still try to negotiate such an offer from the seller. But if they decline, that would leave the homebuyer on the hook for paying for their agent’s services.

The National Association of Realtors is behind the policy changes, which stem from its $418 million settlement earlier this year of federal class-action lawsuits that claimed U.S. homeowners were forced to pay artificially inflated real estate agent commissions when they sold their home.

Companies behind several major real estate brokerage brands, including Keller Williams, Anywhere Real Estate, HomeServices of America, Re/Max and Redfin, also agreed to pay millions and make policy changes to make home seller lawsuits go away.

The new rules, which go into effect nationally on Saturday, apply to brokers and agents representing clients looking to buy or sell a home advertised on a multiple listing service, or MLS, affiliated with the NAR.

They boil down to two significant changes: Blanket offers of compensation on behalf of sellers to buyers’ agents will no longer be included in listings posted on the MLS, though they can still be made through other means. And homebuyers will be required to sign detailed representation agreements when they hire an agent.

It remains to be seen whether the policy overhaul will lead to lower agent commissions or fewer sellers opting not to offer to cover the buyer’s agent fees.

But the changes are likely to have the biggest impact on home shoppers — especially first-time buyers already facing elevated mortgage rates, a shortage of properties on the market and record-high home prices. They will now have to factor in the cost of hiring an agent if a seller isn’t willing to cover it.

“This will have a negative impact on a buyer’s ability to purchase a home, and so there are going to be quite a few large-scale changes in the buyer’s process,” said Bret Weinstein, CEO of Guide Real Estate, a brokerage in Denver.

Homebuyer representation agreements

Home shoppers who want to work with an agent will have to sign an agreement upfront that details the services that agent will provide and how much they will be paid, including whether it’s through a commission split with a seller’s agent.

Generally, an agent who represents a buyer typically receives around 2.5%-3% commission based on the purchase price of the home. Agents then share part of their commission with their brokerage.

Similar buyer representation agreements are already required in roughly 20 states. However, the new rules require that buyer agreements be completed before an agent begins working on a client’s behalf. That includes before the agent takes a buyer to tour a home, whether in person or virtually. A buyer can still go to an open house without signing a representation agreement.

“The big change now is that we are required to ask the buyer to commit to us early and hire us early in the process,” said Andrea Ratcliff, a Redfin agent in Indianapolis, where the policy changes were rolled out July 1.

One home shopper she spoke with was put off by the changes and the prospect of covering an agent’s fees, she said.

“They definitely weren’t ready to commit to me — weren’t ready commit to any agent, because they weren’t prepared to take on that cost,” Ratcliff said.

Removing buyer-agent compensation offers from home listings

Traditionally, a buyer’s agent’s commission has been paid by the seller. Agents who work with homeowners to market and sell their home would list the property on an MLS and include how much their client was offering to pay a buyer’s agent, a practice known as an offer of “cooperative compensation.” That’s when a seller agrees in advance to offer a commission on the sale of their home to be split between their agent and the buyer’s representative, typically around 2.5%-3% each.

The home sellers behind the lawsuits against the NAR and others argued sellers have had little choice but to offer to cover the buyer’s agent’s compensation in order to ensure their listing was shown to as many prospective buyers as possible.

To address this, homes listed on an MLS will no longer include a seller’s offer to cover the cost of a buyer’s agent’s services. However, they will still be allowed to advertise them practically anywhere else, including the agent’s own website, a display at an open house, or when communicating directly with an agent representing a prospective homebuyer.

Sellers may still elect to pay for a buyer’s agent’s compensation, but without the pressure of making a public, blanket offer on the MLS. Some may opt to pocket the savings and only cover their own agent’s commission.

“If there’s not a clear offer of cooperative compensation from the seller through their broker to the buyer’s broker, then yeah, it’s going to be part of [the] negotiation,” said Kevin Sears, president of the National Association of Realtors. “I think that will be something that we see changing in the marketplace.”

Where does this leave buyers and sellers?

Much of how the industry policy changes play out for buyers and sellers will depend largely on the state of the local housing market.

In a sluggish housing market where homes are taking longer to move and sellers are having to lower prices, it’s more likely that a buyer will be able to negotiate for the seller to cover their agent’s commission. In a hotter market, where properties are selling fast and receiving multiple offers, sellers will have the leverage to accept an offer from a buyer who isn’t asking for them to cover their agent’s fees.

While sales of previously occupied U.S. homes have been in a slump since 2022, years of underbuilding and other factors have kept the inventory of homes for sale at near all-time lows. That’s pushed up prices and fueled multiple offers for many homes, giving a clear edge to sellers in most markets.

Still, real estate agents say sellers should keep offering to cover the buyer’s agent commission.

“We’ve advised that it would be wise for sellers to continue to be open to covering some or all of the buyer’s costs, because the last thing you want to do when you are selling something is to make it complicated for someone to buy it or to limit the number of people who can buy it,” said Alex McEwen, associate broker with Selling Utah in Orem, Utah.

As for homebuyers, they will have to budget for the possibility that a seller won’t cover their agent’s fees. Those who can’t afford to do so may have to come to an arrangement with their agent to only pursue listings where the seller is offering buyer’s agent compensation.

Will commissions come down?

It’s unclear whether the policy changes will spur sellers or buyers to negotiate lower broker commissions, and whether they’ll succeed if they do.

Buyer-agent commissions have eased somewhat this year: The average buyer’s agent commission fell nationally from 2.62% at the beginning of the year to 2.55% through July 14, according to an analysis by Redfin. However, because home prices have kept rising this year, the average commission paid to a buyer’s agent in dollar terms has risen about 1.7% since January to $15,377.

Stephen Brobeck, senior fellow at Consumer Federation of America, expects that more sellers will be encouraged to negotiate with their agent to lower their commission by at least half a percentage point.

“That represents, over the course of a year in the housing market, a very large sum of money,” he said.



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