A recent survey conducted by Clever Real Estate reveals that 23% of recent homebuyers regret spending too much on their homes. Despite historically high mortgage rates and escalating home prices, many Americans continue to buy homes. However, the financial burden of buying and maintaining a home is proving significant.
The survey, which included responses from 1,000 recent and prospective homebuyers, found that 43% of participants struggle to make their mortgage payments on time. As buyers look ahead to 2024, they face ongoing affordability challenges, with an additional hurdle: new real estate commission rules effective in August. These changes will require buyers to pay their own agent, adding another expense to the already challenging home buying process.
Financial Strain Among Buyers
The average home price in the United States stands at $492,300. However, Clever's data shows that 52% of recent buyers – those who purchased homes in 2023 or early 2024 – spent over $500,000. This has led to 38% feeling they overpaid and 23% regretting their purchase.
Financial overextension is a common issue, with nearly half of the respondents admitting they struggle with timely mortgage payments. Additionally, 44% have taken on extra non-mortgage debt since their home purchase. The financial strain has impacted overall well-being, with 60% reporting no financial improvement and 51% seeing no increase in happiness since buying their homes.
Interestingly, 68% of respondents are still glad they bought their homes, anticipating that prices and interest rates will continue to rise. However, 82% of recent homebuyers expressed at least one regret. Besides overpaying, 28% regret the high maintenance requirements, 24% feel their home does not meet all their needs, and 23% are dissatisfied with the high-interest rates.
Buyers’ Sentiments Towards Real Estate Agents
While most buyers used real estate agents, satisfaction levels varied. Over half of the recent homebuyers felt their agents prioritized closing the sale over their clients' best interests. Nearly half (42%) found their agents less helpful than expected, and 29% were so concerned about working with agents that they chose to proceed without one.
Of those who bypassed agents, 32% did so due to a lack of trust, and 30% avoided agents to save money, despite the current system where sellers pay both agents' commissions.
Impending Commission Changes
Starting in August, following a federal lawsuit settlement with the National Association of Realtors (NAR), the commission structure will change. Sellers will pay their own agents, and buyers will be responsible for paying theirs. This shift has received mixed reactions: while 94% of sellers support the change, only 61% of buyers do. Experts believe this will enhance flexibility and transparency, with 75% of respondents indicating they would be more likely to use real estate agents if costs were clearly broken down.
Despite these changes, not all buyers are on board. One-third of prospective buyers said the new commission rules would make them less inclined to work with an agent, and 50% are considering buying without an agent to avoid the additional expense. Over half (51%) of future homebuyers are expediting their purchases to avoid the new commission rules.
Potential Impact on Commission Rates
Currently, the average buyer's agent commission in the U.S. is 2.66% of the home sale price. However, 51% of buyers believe a fair commission rate is 2% or less. According to Steve Brobeck, a real estate commission expert and senior fellow at the Consumer Federation of America, commission rates could decline by 20%-30%, dropping to 3%-4% from the current 5%-6%.
Most industry experts agree that the new commission rules will lower average rates as buyers negotiate directly with their agents. Seventy percent of potential buyers are open to negotiating these rates. Additionally, 27% of buyers plan to offset the new commission costs by purchasing less expensive properties, cutting their budgets by an average of $13,167.
The settlement also opens the door for new compensation models, such as a la carte options where buyers only pay for the services they need. These changes could lead to a significant shift in the real estate market.
"If commission rates decline, so would consumer costs," Brobeck explains, "and that should modestly stimulate home sales."