By now, the guilty verdict in the Sitzer | Burnett trial in Kansas City, and additional lawsuits filed across the country, probably have every real estate agent pondering how to move forward in 2024. The outstanding questions are myriad, especially regarding how these lawsuits can impact homeownership in underserved communities nationwide.
Many agents are focused on how they will get paid. Still, we also need to ask important questions about how consumers may be further pushed out of becoming homeowners because they do not have additional resources to cover commission payments.
Major questions in play
- Will buyer agent commissions still be paid by sellers?
- Will buyers have to pay their own buyer agents?
- Will high interest rates make this situation worse?
- Will buyer agents even exist?
- Will there be a mass exodus of real estate agents leaving the industry?
However, despite all the uproar within the real estate industry, what I haven’t seen fully covered is the impact this can have on diversity in homeownership. And that’s a shame.
As you probably know and may have experienced in your own markets, NAR Chief Economist Lawrence Yun has stated that limited inventory and decreasing housing affordability have continued to dampen housing demand. Digging deeper, though, for first-time homebuyers, “saving for the down payment is often one of the biggest barriers,” according to Sam Khater, Freddie Mac’s chief economist.
Gifts for downpayments?
For many buyers, the down payment could be provided through a gift. But this is exactly where underserved communities that have historically not seen high rates in homeownership are impacted.
According to a Redfin survey from 2021, 79 percent of current homeowners had a parent who owned a home. Furthermore, almost 40 percent of homebuyers under the age of 30 used a gift from a family member to help with their down payment and closing costs. This is not accidental: Homeownership is widely seen as a way to build generational wealth, so, logically, children and grandchildren of homeowners may have access to gift funds to start on their own path to wealth.
Behind in homeownership
Even without having to cover buyer agent commissions, potential homebuyers from underserved communities are starting behind other buyers when attempting to start their homeownership journey. And recent homeownership stats (2022) bear this out:
- 74.4 percent of the White, non-Hispanic population owns their home.
- 53.4 percent of the Native American, Alaskan Native population owns their home.
- 48.6 percent of the Hispanic population owns their home.
- 45 percent of the Black population owns their home.
Where do we go from here?
So, what happens if a first-time homebuyer now must include buyer agent commissions, which can amount to several thousand dollars? Will we begin to see a broader gap in homeownership, based on which communities have had access to generational wealth from parents or grandparents? And how will we, as an industry, ensure that “homeownership [doesn’t] become a birthright instead of an attainable economic aspiration”?
Right now, we have more questions than answers, and we need to come together to advocate for marginalized communities so that the dream of owning a home in our country becomes a fantasy and not a reality for low-income households.
After spending years in corporate America, Nora Crosthwaite decided to become a residential Realtor on a whim in 2015, serving the Des Moines, Iowa area. She built a small team, incorporating systems throughout, and now owns Home Sweet Des Moines, brokered by Realty ONE Group Impact. She is currently the chair of the Iowa Association of Realtors Diversity Committee and focuses any extra time on affordable housing initiatives in the Des Moines area. Connect with her on Threads and Linkedin.