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Despite the prevalence of TikTok videos and recent articles detailing stories of individual college graduates struggling to find good jobs, the data tells a different story.

After all, the overall labor market is stronger than it’s been in decades. And Zoomers who recently graduated from college are certainly better off, in most respects, than previous generations of new grads.

“If you’re a recent college grad, right now things aren’t booming with opportunities like they were a couple years ago,” says Nick Bunker, economic research director for North America at Indeed Hiring Lab. “But it’s still really a relatively solid labor market. And hopefully, fingers crossed, the market stays strong for a couple years. And that gives you more opportunity to find a job as opposed to hanging your hat for the first six months after you graduate.”

When you compare the labor markets faced by Zoomers with previous generations, recent college grads now are better off than their older counterparts: Zoomer grads are earning much higher salaries today than Gen X did in the mid-1990s. Inflation may eat away at Gen Z’s high wages, but it doesn’t touch the stagflation of the 1970s and 1980s that baby boomer college graduates encountered.

The short recession that Gen Z experienced at the start of the pandemic is certainly no Great Recession, which technically lasted less than two years, but was followed by several years of tepid economic growth. That period stymied recent millennial graduates during crucial early employment years and is likely to negatively impact their lifetime earnings.

“It’s not just the year that you graduate,” says Bunker. “Your first years out probably make the most difference because that’s when you’re getting your foot on the career ladder.”

Gen Z bounced back fast

Despite the fact that the oldest cohort of Zoomers — 2020 grads — entered a job market with the highest unemployment rate in the modern era, that recession lasted just two months. And what followed was one of the strongest economic bounce backs ever.

The nation’s unemployment rate has hovered between 3.4% and 4% since December 2021. The current rate, 4.1%, remains among the lowest in 50 years, which means Zoomer college graduates have strong prospects for getting jobs right out of school and moving up the career ladder.

Bunker says the job market has cooled compared with two years ago. There is far less competition among employers than in 2022, which means fewer opportunities, according to Bunker. But it’s not all that dramatic in the broader context.

“If we wind the clock a little bit more and compare to what we saw pre-pandemic, it’s around those levels,” Bunker says. He adds that when compared with previous cohorts of graduates, job opportunities are roughly in line with those enjoyed by millennials who completed college in the early 2000s.

Gen Z’s unemployment outlier

Even with all of the positive aspects of the current labor market, there’s still a unique trend among recent Gen Z graduates that earlier generations haven’t faced: an unemployment rate that’s higher than overall unemployment.

It’s a particular quirk seen when you parse unemployment data among recent graduates over the past 30 years. The unemployment rate as of March 2024 for recent graduates was 4.7% — a full percentage point higher than the overall unemployment rate at that time, 3.7%.

This is an unusual development. Before 2018, the unemployment rate among recent grads was almost always lower than overall unemployment, due to strong employer demand for highly educated workers.

The reversal is likely because there’s been a surge in demand for non-college-educated service workers since the pandemic.

Underemployment is still high among recent grads

Labor data shows that underemployment — the rate of those with college degrees who are working jobs that don’t require degrees — has always been higher among recent graduates compared with all bachelor’s degree holders.

“They go ahead and get that college degree and then they can’t get on a career track that uses that education,” says Elise Gould, senior economist at the Economic Policy Institute (EPI), a nonpartisan think tank.

It doesn’t help that certain job sectors have become more crowded. Majoring in computer science, for example, doesn’t guarantee a job anymore as tech companies pull back from hiring.

Underemployment among computer science majors is higher than those who study health-related programs, education or engineering, according to a February 2024 report by The Burning Glass Institute, a labor market analytics firm, and Strada Education Foundation. But fewer computer science majors are underemployed when compared with those who study social sciences, psychology, humanities and business management.

As of March 2024, some 40% of recent graduates are working in jobs that don’t require a degree versus 33% of all college graduates, according to data from the Federal Reserve Bank of New York.

Salaries for recent grads have spiked

Gen Z college graduates can expect higher-than-ever salaries when they enter the job market: The typical recent college graduate with a four-year degree can anticipate a salary of around $62,609, according to an analysis of employer job postings and third-party data sources by ZipRecruiter, a job posting site. That roughly matches the Federal Reserve Bank of New York’s finding of $60,000 as the median annual wage for a recent graduate with a bachelor’s degree.

As the chart below shows, current median salaries are above those held by earlier generations of newly minted graduates when adjusted for inflation.

Even though salaries are at a peak for recent grads, the latest cohort might not be earning what they expect: A survey released by Real Estate Witch, a housing market research and review site, found 2023 graduates expected to make around $85,000 at their first job and the minimum salary they said they would accept is around $73,000. However, Real Estate Witch found that the average starting salary for a recent grad is about $56,000.

“If you’re a young person graduating now, maybe the differential between what you expected and what reality is, is quite large,” says Bunker.

It’s also possible that wage growth for young new hires may have plateaued as the momentum in the overall labor market that was pushing wages higher has now slowed, says Liv Wang, senior data scientist at ADP Research Institute, which measures workforce data. “If we look at ages from 23 to 26 — that includes a lot of recent grads — and the median hourly base pay for them is like $17, and that per-hour has been little changed since June 2022,” says Wang, citing recent ADP data.

Still, as Gould points out, young workers are disproportionately lower-wage workers — even if they have a college degree.

Jobs for New Grads: How Does Gen Z Stack Up Against X and Y?

Find out what the overall labor market was like when cohorts from Generation X and Generation Y (aka millennials) entered the workforce after college compared with today’s graduates. Read more.

Gen Z grads do face economic and employment uncertainty

Today’s college graduates heading into the workforce aren’t free from economic challenges. They’re dealing with elevated inflation that eats away at their wages. And when you earn less — as most young workers do — higher costs take a bigger bite. In recent years, the cost of housing has skyrocketed, especially for renters, while health insurance and car ownership have both grown more expensive. And, Gould says, like generations before, young workers fresh out of college who have student loan debt will carry an additional burden.

Salaries, overall, may be higher than ever, but it varies based on your degree. And there are still persistent gender and racial inequities to earnings, Gould points out.

But once again, the data shows it is still a pretty good time to be a college graduate and, in general, to have a degree.

It still pays to get a college degree

Those with college degrees remain more likely to be employed than workers in the same age group, ages 22 to 27, according to an analysis of U.S. Census Bureau data from the Federal Reserve Bank of New York. Even an associate degree or professional certificate can give young workers a leg up, as many areas of the country are facing a shortage of middle-skills labor.

In March 2024 the unemployment rate for recent college grads — those ages 22 to 27 — was 4.7% compared with 6.2% for all young workers in the same age group.

(Photo by Nic Antaya/Getty Images News via Getty Images)

Source: nerdwallet.com

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Miami, often referred to as the “Magic City,” is a place of vibrant culture, stunning beaches, and year-round sunshine. Known for its lively nightlife, diverse population, and booming arts scene, Miami is a city that offers a unique lifestyle. However, living in this bustling metropolis comes with its own set of challenges.

Whether you’re considering a beachfront condo in Key Biscayne or a modern apartment in Brickell, this Redfin article will help you weigh the pros and cons of living in Miami.

Fast facts about living in Miami, FL

  • Population: Approximately 470,000 residents
  • Average rent: $2,906 per month for a one-bedroom apartment
  • Median home sale price: $608k
  • Public transit: Miami-Dade Transit includes Metrorail, Metromover, and Metrobus
  • Public parks: Over 800 parks and green spaces for recreation and relaxation
  • Languages spoken: Over 100, reflecting the city’s rich cultural diversity
  • Annual tourists: Approximately 23 million visitors each year
  • Restaurants: Over 10,000, offering a wide variety of cuisines from around the world

1. Pro: Vibrant cultural scene

Miami boasts a vibrant cultural scene with numerous museums, theaters, and music venues. The Pérez Art Museum Miami, the Adrienne Arsht Center for the Performing Arts, and the Fillmore Miami Beach are just a few examples of the cultural treasures found in the city. Miami is also known for its music festivals, such as the Miami Music Week and the Ultra Music Festival, which attract visitors from around the globe. The city’s rich cultural tapestry is further highlighted by its diverse neighborhoods, such as Little Havana and Little Haiti, offering unique cultural experiences and events year-round.

2. Con: High cost of living

While Miami offers a high quality of life, it comes with a high cost of living. The cost of living in Miami is about 18% higher than the national average. Housing, in particular, is expensive, with the average rent for a one-bedroom apartment in Miami around $2,906 per month and a median sale price for a home in Miami $608k. Utilities, groceries, and dining out also tend to be pricier compared to other cities. Utilities are approximately 4% higher, groceries are 5% more expensive, and lifestyle costs 6% more. Although Miami’s vibrant job market and attractive lifestyle can offset some of these costs, residents need to budget carefully to manage their expenses.

3. Pro: Beautiful weather

One of Miami’s biggest attractions is its beautiful weather. The city enjoys a tropical climate, with warm temperatures and plenty of sunshine year-round. This makes it an ideal location for outdoor activities such as swimming, boating, and beach volleyball. Winters are mild and short, providing a pleasant escape from the colder climates in other parts of the country. The consistent weather allows residents to enjoy the city’s many outdoor amenities without the need to adjust for seasonal changes.

4. Con: Hurricane risk

Living in Miami means being prepared for hurricane season, which runs from June through November. The city is located in a hurricane-prone region, and residents need to take precautions to protect their homes. Hurricanes can cause significant damage and disruption, leading to power outages, flooding, and evacuation orders. While local authorities are well-prepared to handle such events, the risk of hurricanes is a factor that potential residents must consider.

5. Pro: Diverse food scene

Miami’s food scene is diverse and innovative, with a wide range of restaurants offering various cuisines. From Cuban sandwiches in Little Havana to fresh seafood in South Beach, the city has something to offer every palate. The Wynwood neighborhood is known for its trendy eateries and food trucks, while the Design District offers upscale dining experiences. Additionally, Miami hosts several food festivals, such as the South Beach Wine & Food Festival, showcasing the city’s culinary talent and diversity.

6. Con: Traffic congestion

Miami’s traffic congestion is a notable downside of living in the city. With a growing population and a high number of tourists, the roads can become very congested, particularly during peak hours. The public transportation system, while extensive, often requires long commute times and multiple transfers, making it less convenient for many residents. To manage the traffic, some residents opt for alternative transportation methods such as biking, walking, or using ride-sharing services.

7. Pro: Strong job market

Miami has a strong and diverse job market, with opportunities in various sectors such as finance, tourism, healthcare, and technology. The city is a major hub for international trade and business, with many multinational corporations having offices in Miami. Additionally, the Port of Miami is one of the busiest ports in the world, supporting numerous jobs in shipping and logistics. The presence of large employers and the growing startup scene make Miami an attractive place for career growth.

Top employers in Miami

  • American Airlines
  • Baptist Health South Florida
  • Royal Caribbean Group
  • University of Miami
  • Miami-Dade County Public Schools

8. Con: High humidity

Miami’s tropical climate, while providing beautiful weather, also means high humidity levels. The humidity can be uncomfortable, especially during the summer months when temperatures can soar. High humidity can also exacerbate health issues such as allergies and respiratory problems. While air conditioning is a standard feature in most homes and buildings, the persistent humidity can still be a challenge for some residents.

9. Pro: Beach lifestyle

Miami’s coastal location provides residents with easy access to some of the most beautiful beaches in the country. South Beach, Miami Beach, and Key Biscayne offer pristine sands, clear waters, and a variety of recreational activities. The beach lifestyle is a major draw for many residents, offering opportunities for swimming, sunbathing, and water sports year-round. Additionally, the city’s waterfront areas feature vibrant nightlife, dining, and entertainment options, enhancing the overall living experience.

10. Con: Limited public transportation

While Miami has made improvements to its public transportation system, it still lags behind other major cities. The Miami-Dade Transit system, which includes Metrorail, Metromover, and Metrobus, provides essential services but may not be convenient for all residents. The spread-out nature of the city and infrequent service schedules can make commuting challenging without a car. Miami’s transit score of 57 reflects these limitations, indicating that public transportation options are available but not always efficient or comprehensive.

11. Pro: Active nightlife

Miami is renowned for its active nightlife, with a plethora of clubs, bars, and entertainment venues that cater to all tastes. South Beach is famous for its nightclubs and beachfront parties, while Downtown Miami and Wynwood offer trendy bars and live music venues. The city’s nightlife scene attracts both residents and tourists, providing a vibrant and dynamic social environment. Events like Art Basel and Miami Music Week further enhance the nightlife experience, making Miami a top destination for those who enjoy a lively social scene.

12. Con: High taxes

While Florida is known for having no state income tax, Miami’s local taxes and cost of living can still be a financial consideration for residents. Property taxes in Miami can be relatively high, with rates averaging around 2% of the property’s assessed value, impacting homeowners significantly. Additionally, Miami-Dade County has a local sales tax rate of 7%, which can add to the overall cost of living. The high cost of living in Miami, combined with local taxes, can offset some of the benefits of not having a state income tax. Residents need to consider these factors when planning their budgets, as they can affect everything from housing affordability to daily expenses.

13. Pro: Iconic landmarks

Living in Miami means having iconic landmarks at your doorstep. From the Art Deco Historic District in South Beach to the vibrant murals of Wynwood Walls, Miami is filled with sites that contribute to its unique character and charm.

Iconic landmarks in Miami

  • Vizcaya Museum and Gardens
  • Freedom Tower
  • Pérez Art Museum Miami
  • Little Havana’s Calle Ocho
  • Miami Seaquarium

14. Pro: Year-round outdoor activities

Miami’s favorable climate allows for year-round outdoor activities, making it a haven for outdoor enthusiasts. Whether it’s boating on Biscayne Bay, golfing at one of the city’s many courses, or exploring the Everglades, there’s always something to do outdoors. Miami’s numerous parks and recreational areas, such as Bayfront Park and Oleta River State Park, provide ample opportunities for hiking, biking, and picnicking. The city’s waterfront location also means plenty of water-based activities like fishing, kayaking, and paddleboarding.

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The best souvenirs become home decor

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Journeying to a new place lets you try on what living in another culture feels and looks like, whether you’re exploring the adobe house-filled streets of Santa Fe or the lantern-lit alleys of an ancient Moroccan city. Many travelers, dazzled by the rug sellers of Istanbul or the pottery workshops of Oaxaca, return with worldly housewares or art to decorate their homes.

“A textile, a clay bowl or an object you pick up at a flea market connects you to a time that you’ve enjoyed, a memory of a place,” says Hilary Robertson, a Brooklyn prop stylist and author of “Nomad At Home: Designing the Home More Traveled.” “If you can’t move to Marrakech or Kyoto, you can at least recreate something of the feeling.”

But snapping up the best items for your particular home requires a bit of strategy and advance planning. Here’s how to shop smartly, how to get your treasures back in one piece, and what to do with them upon your return.

Do your homework

You usually won’t turn up Indigenous handicrafts or interesting local art at an airport store or the hotel gift shop. “So do research before you go, looking up artisan networks, finding out which days flea markets operate, and figuring out what you might even be able to buy in a given place,” says Rachna Sachasinh, owner of Tikkiwallah, an online shop selling fair-trade Thai and Laotian pillow covers, blankets and other textiles.

Seek tips on what to buy and where to shop from your hotel concierge (or short-term rental owner), and via the websites and social media accounts of official tourism boards. You can also flip through old-school guidebooks (Lonely Planet, Rick Steves), which tend to concentrate on local retailers, rather than the location of every West Elm in Mexico City. TikTok and Instagram also offer potential shopping info, but be wary of paid brand placements.

While cool art and vintage home decor are available at most destinations, “you’ll find more handmade items like textiles, rugs and baskets if you travel to places like Morocco, India and Mexico, which still have living crafts cultures,” says Sachasinh.

Consider hiring a shopping pro

To get straight to the treasure hunting, you could hire a tour guide who specializes in shopping for a few hours. Look for market- or retail-specific experiences in your destination on travel booking sites such as TripAdvisor and Tours by Locals; using the name of a specific place (“Istanbul Grand Bazaar” or “Oaxaca pottery workshops”) can further winnow your search.

You can also try a simple online search to turn up market-savvy private guides such as Buenos Aires Shop Hop (guided jaunts to leather workshops and vintage markets in Argentina) or Maryam Montague, the proprietor of Peacock Pavilions hotel in Marrakech, who takes travelers on daylong expeditions through the city’s souks looking for fuzzy tribal rugs, bright pottery and leather poufs.

Or go on a crafts- or shopping-focused trip. Tour companies such as Ace Camps and Thread Caravan host weeklong trips to meet artisans and make things alongside them in destinations such as Perú (try weaving in the Sacred Valley near Machu Picchu) or Japan (learn how to use shibori indigo dyes or make pottery).

Luxury trip-planning company Indagare offers frequent style-centric small group tours to Mallorca, Rajasthan and Paris with dinners in designers’ homes, market excursions and meetups with artists. Grant K. Gibson, an interior designer, leads small groups to destinations such as Jaipur, India, and Oaxaca, Mexico, where they visit showrooms, learn about block printing and woodworking techniques, and usually come back with suitcases full of merchandise.

“Design touches on so many passion points — art, history and culture, food and wine — that trips like these are a great linchpin for learning, exploration and meeting fellow design enthusiasts,” says Indagare founder and chief executive Melissa Bradley.

Know what to look for

To support local artisans, look for fair-trade crafts stores, which pay creators fairly for their products and tend to stock goods representative of a destination. Other top bets: flea markets focused on handmade or antique goods, museum shops, and government-sponsored artisan boutiques or networks. For instance, Artesanías de Colombia shops in Bogotá and Cartagena hawk rope hammocks and palm fiber baskets produced by Indigenous weavers.

“And visiting an artisan workshop might give the deepest connection to something handmade, since you get talk to the crafter or even make something beside them,” says Sachasinh, who recommends the weaving workshops and the blanket- and table runner-stuffed store at Ock Pop Tok in Luang Prabang, Laos. At the Seattle Glass Blowing Studio, artists create the delicate bowls and glasses the Pacific Northwest city is known for — and teach beginners how to make their own.

Think about how you’ll get it home

Serendipity and impulse inspire many souvenir purchases. But if you want a Turkish rug for your living room or a vintage Parisian painting to match your bathroom tile, be sure to travel with photos and measurements of the space you have in mind. “I always bring a measuring tape and swatches of any fabric I want to match, too,” says Montague.

Planning on carrying a lot of items home on the plane? Stash a collapsible duffel (Paravel makes a clever zip-down one) in your luggage, or, for larger purchases, pack an extra, empty hard-sided suitcase. “It’s usually cheaper to pay for an extra checked bag than to ship a lot of things home,” says Montague. Know that oil paintings can be taken off their stretchers and rolled up, and that you can purchase a throw pillow cover that takes up little luggage space and buy the bulky insert when you arrive home.

“I’m wary of checking a bag with breakables, though,” says Bradley, who has ferried glass and pottery back from Cambodia and South Africa in a hard-sided carry-on.

And whether you are two hours away by car or five time zones away by plane, retailers that sell bulky items can generally guide you toward a shipper, even though it’s often not cheap. “I had this great farmhouse dining table shipped from the Paris flea market, and I’ve had people on my trips to India send home inlaid dressers,” says Gibson.

Get creative

Many housewares bought on your travels can be repurposed, and even ordinary goods found in other countries can seem special or elevated compared to what you’d get at home. “I go to Mexican hardware stores, because even basic items like door hooks or storage bins can be so colorful and fun,” says Robertson.

A Navajo rug can serve as a tablecloth; a beaded Maasai collar morphs into a sculpture when displayed on a wire stand. Even the simplest souvenirs — a vintage postcard of Yellowstone National Park, a scrap of fabric — look terrific when nicely framed.

Grouping disparate travel finds on a gallery wall can make them seem cohesive. “I have the most random … stuff hung on the wall of the staircase at my house — a painting from India, a brass bowl I got in Turkey,” says San Francisco interior designer Chelsea Sachs. “It’s like a chronicle of my life, and these things remind me of special moments when I get back home.” Indagare’s Bradley arranges Iranian tiles, Burmese boxes and Peruvian ceramics amid the novels and art books on her shelves.

Fabrics, buttons and other easy-to-transport materials you snap up on the road can turn into home accents, even if you aren’t especially crafty. Bring home a couple pieces of washi — a Japanese mulberry paper so storied it’s recognized by UNESCO — to hot-glue onto a lampshade or inside a wooden tray. A basket or other object can be turned into a light fixture. “I carried a huge antique rattan bird cage home on a ferry from Provincetown once, and now it’s a chandelier,” says Robertson.

And almost any textile — a striped Peruvian blanket, a vintage quilt from a flea market — can be fashioned into a throw pillow or shower curtain by your drycleaner or used to reupholster a chair seat. “Sometimes stuff has to hang around for a while before you know what you’ll do with it,” says Sachs.

You might not want to amass a cabinet full of souvenir teacups, spoons or snow globes like your great grandparents did. But the concept of picking up one small object everywhere you travel still has some validity; it might save you from overbuying, and even kitschy trinkets can summon memories. Think about scoring a holiday tree ornament or small flower vase every time you go on a trip, or save a few coins from each foreign country you visit to pile into a bowl on your coffee table. “Pieces from different places become integral to your home and allow you to reconnect with a destination and its aesthetic,” says Bradley.

Source: dailyherald.com

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Enjoy complimentary access to top ideas and insights — selected by our editors.

In recent years, the U.S. has hit record inflation rates due to factors as wide ranging as labor shortages and the war in Ukraine, but the degree to which prices have risen vary across the country.

WalletHub recently determined how inflation is impacting different communities in the U.S. by comparing 23 major MSAs (Metropolitan Statistical Areas) across two key metrics related to the Consumer Price Index, using the factors to determine a total score out of 100 for each metro area.

“Rising housing and natural gas prices accounted for 70% of the 3.4% increase in the latest monthly CPI report,” David Skidmore, professor of political science at Drake University, said in a WalletHub release. “Older homeowners who have mortgages locked in at low fixed rates are staying put, with the result that fewer homes are available for younger homebuyers to enter the market. This, along with sluggish new home construction, has pushed up home prices. Rents have risen to match.”

Read more: Inflation, housing costs spook consumers 

The metro area on this list with the biggest inflation problem is Detroit-Warren-Dearborn, Michigan, which has the highest CPI change over two months. Other top metro areas include Dallas-Fort Worth-Arlington, Texas, and Urban Honolulu, Hawaii. Honolulu has the highest CPI change over the year. 

Read more about the cities with the biggest inflation problems.

Source: nationalmortgagenews.com

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The latest annual report from The Counselors of Real Estate highlights 10 major issues expected to impact the housing industry in 2024, but developers are painfully familiar with at least two of them: labor shortages and skyrocketing capital costs. 

Today’s market conditions help illustrate the case for green, factory building as an effective solution for developers, especially for those who’ve put projects on hold due to rising interest rates and dried up investor pools. Transitioning to factory building from on-site construction reduces building costs by 20% and significantly improves delivery time; and by using green materials, developers can open up new financing options that, together, turn project economics right-side-up.  

Addressing a dwindling workforce and increased labor costs 

The United States construction industry is facing an extreme labor shortage, falling short of roughly 650,000 workers needed to drive the completion of critical residential and infrastructure projects across the country. The root cause of this shortage is multifaceted – but is largely driven by an aging work population and a lack of interest from young talent. The result is a sharp increase in labor costs, and longer construction times. U.S. developers spent an extra $30 billion to $40 billion in 2022, drastically impacting bottom lines and the ability to get new projects financed. And the problem is only getting worse. 

Factory-built homes aren’t new but are severely under leveraged by developers for multi-family construction. For one, factory-based construction reduces labor costs by making work more efficient and tapping into labor pools that traditional construction can’t access. Traditional construction requires workers to move from house to house and project to project – and less time actually building. And the itinerant nature of the work makes it unattractive to a large part of the workforce. 

Good factory builders, on the other hand, operate like car production lines, where the structure moves to the workers who are specialized and stationary. Those workers produce more per labor hour, which means less labor cost per square foot of structures built. And, because the work is done in one place and in more pleasant and controlled factory conditions, it is easier to attract talent, particularly people who might not usually consider construction as a profession, such as women and younger workers. 

Time is also money. Factory building doesn’t just provide a developer with confidence in delivery timelines by avoiding inclement weather or scheduling delays; it can also cut build times and skilled labor hours by up to 50%.  Shortening the build time means less project overhead, and less interest carry. Those are savings that go straight to a developer’s returns. 

Green isn’t just the color of money – it’s the source of untapped funding 

In addition to higher costs of development, projects are also sidelined because of reduced availability of bank financing, higher interest rates and investors unwilling to pick up the slack. Just a few years ago, a developer could borrow up to 80 percent of a project cost, but in today’s economic environment, only 50-60 percent of a project is likely to be financed – leaving a significant gap. Here, too, green factory building can be a solution. Energy efficient homes open the door to new and better financing options. 

There are innovative factory-based builders who use materials and assembly methods that allow for significant energy savings that will endure for the life of the home or building. The energy efficiency of this type of construction makes it eligible for “green” financing. Green bonds, for example, are earmarked to raise money for climate and environmental projects, and they enable sustainably minded investors to fill the gap that traditional investors have left.  

By reducing the total cost of a project with labor and materials savings and then adding better financing options, a developer can get back to delivering projects that meet financial objectives. For example, consider a project with a total cost of $50M. With traditional onsite construction and today’s capital costs, this project may only deliver an unattractive 15% IRR. But consider a scenario where factory-based construction allows a developer to reduce the total cost of the project by 10% or more and also access green financing to cover upwards of 30% – that same project could be delivering an IRR greater than 30%. 

Given market conditions, it’s no surprise that multifamily construction starts are down substantially– but not for lack of demand: there’s an estimated deficit of 3.8M homes across the U.S. In other words, opportunity is knocking for developers who can structure economically viable projects. With the right factory-based, sustainable builder, it’s possible to get back to strong IRRs and sustainable profits. 

Chris Anderson is the CEO of Vantem.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: [email protected]

Source: housingwire.com

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Ken Kahan makes a living building homes.

A specialty? Luxury apartment complexes in Los Angeles neighborhoods such as Palms and Silver Lake filled with mostly market rate units, but with a handful of income-restricted affordable ones as well.

It can be a good business, but lately less so.

“We have pulled back,” said Kahan, the president of California Landmark Group. “The metrics don’t work.”

Across California and the nation, developers moved to start fewer homes in 2023, a decline some experts say could eventually send home prices and rents even higher as supply shortages worsen.

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Developers cite several reasons for delaying new projects. There’s high labor and material costs, as well as new local regulations that together make it harder to turn a profit.

Perhaps the biggest factor — and one hitting across the country — is the high cost of borrowing. Rising interest rates not only make it more expensive for Americans to buy a home, but they add additional costs for developers who must shell out more money to build and manage their projects.

As a result, fewer projects make financial sense to build and fewer homes are built.

“More than anything it is debt costs,” said Ryan Patap, an analyst for real estate research firm CoStar.

In all, preliminary data from the US. Census Bureau show building permits for new homes nationwide fell 12% in 2023 from the prior year and 7% in California. Drops were recorded in both single-family homes — most of which tend to be for sale — as well as multifamily homes — which are chiefly rentals.

Dan Dunmoyer, president of the California Building Industry Assn., said one major reason for the decline is that many for-sale home builders foresaw “a massive downturn” and stopped buying lots to develop when mortgage rates soared in 2022.

Then a funny thing happened. Demand for their product didn’t crater as much as expected, in large part because existing homeowners didn’t want to sell and rid themselves of ultra-low mortgage rates.

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“Builders kind of woke up and realized ‘Oh, it’s just us [selling homes],‘” Dunmoyer said. “But we don’t turn on a dime.”

As for-sale builders restart their engines to take advantage of a shortage of listings, there are signs of improvement. During the first two months of this year, builders in California pulled 35% more permits for single-family homes than during the same period a year earlier, according to census data.

Permits for multifamily continued to decline — dropping 33%.

The diverging paths are probably due to several factors, said Rick Palacios Jr., director of research for John Burns Research and Consulting.

On a whole, single-family home builders have access to a wider source of debt that isn’t as vulnerable to rising interest rates. In the single-family market, the supply shortage has also worsened and home prices are climbing.

Meanwhile, rents in many places — including Los Angeles — have dropped slightly as vacancies have risen, in part because apartment construction has been relatively robust in recent years.

“Single-family solid, multifamily weak is a pretty consistent theme across most of the country,” Palacios said. “You’re hard pressed to find a market where developers and investors are gung ho on apartments.”

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In the city of Los Angeles, developers must contend with another factor — Measure ULA.

The citywide property transfer tax took effect last year to fund affordable housing and has drawn the ire of the real estate industry.

Though it’s known as the “mansion tax,” except for rare exceptions it applies to all properties sold for more than $5 million, no matter if they are gas stations, strip malls, apartment buildings or actual mansions. Under the measure, a seller is charged 4% of the sales price for properties sold above $5 million and below $10 million.

At $10 million and above, the tax is 5.5%.

Apartment developers and real estate brokers said additional costs from ULA make it even harder to earn a reasonable profit in what can be a risky business.

That’s because when building apartments, developers often sell their finished product, which would probably trigger the ULA tax for any building over 15 units, according to Greg Harris, a real estate broker with Marcus and Millichap. Even developers who hold onto their properties typically need to take out a mortgage on the finished building — and Harris said lenders are willing to give less because they too would need to pay the tax if they foreclose and sell the property.

“ULA is like the last nail in the coffin,” said Robert Green, a Los Angeles developer. “It couldn’t have come at a worse time.”

Many apartment projects got their start under different economic circumstances and have opened in recent years or will soon. That supply should help keep rents down for a while, but not forever, said Richard Green, executive director of the USC Lusk Center for Real Estate.

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In two or three years, as fewer apartments are finished “we will see rent start to go up again,” he said.

That would be a hit for Californians struggling to find housing in an expensive state where thousands sleep on the streets.

Economic cycles, of course, ebb and flow and construction may rebound.

The Federal Reserve plans to cut interest rates later this year, which may help more projects make sense financially, as could rising rents.

Land sellers could also drop their asking prices to adjust for rising developer costs, including ULA in Los Angeles.

Normally, real estate analyst Patap said he’d expect apartment construction to rebound as land costs adjust downward. But he noted developers say they are also cautious about building in L.A. because of a broader political shift in the city that’s more supportive of restrictions on landlords and more supportive of protections for tenants.

In the city of Los Angeles, multifamily permits dropped 24% in 2023 compared with 19% in Los Angeles County, census data show. (Data from the Construction Industry Research Board show even larger drops: 49% in the city and 39% in the county.)

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Laurie Lustig-Bower, a commercial real estate broker with CBRE, said some L.A. landowners have reduced their prices to sell, but “if they don’t have a gun to their head” they are waiting until developers can pay more.

In recent years, state lawmakers have taken action to make it easier to build housing, in part by eroding local control over land use decisions.

Los Angeles Mayor Karen Bass has also fast-tracked 100% affordable buildings under her Executive Directive 1, while the city recently exempted smaller projects from some storm water capture requirements.

Mott Smith, chairman of the Council of Infill Builders, said more must be done to increase the number of new homes in Los Angeles and cited the storm water decision as the kind of steps government should take.

“The city has no influence over interest rates … [but] what it controls is the process to get a project approved,” Smith said. “There are so many opportunities.”

For now, developers say it’s tough to find opportunities.

Kahan said his company runs the numbers on potential land purchases constantly and at least once a week finds it doesn’t make sense to buy and build.

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He expects to purchase some land in Southern California by year’s end, though mostly outside of the city of Los Angeles where Kahan said he’s increasingly looking because of costs from ULA, which unlike current interest rates aren’t expected to change.

So far, Kahan said he’s yet to find a deal that will work — within or outside city borders.

More to Read

Source: latimes.com

Apache is functioning normally

Thinking of making the Golden State your new home? California offers residents stunning natural landscapes, bustling metropolitan areas, and a thriving tech industry, making it a top destination for movers. Whether you’re exploring homes for sale in Los Angeles, considering renting a home in San Francisco, or touring apartments for rent in San Diego, here’s what you need to know before moving to California.

California at a glance

California provides a mix of natural beauty and urban life. From the breathtaking Yosemite National Park to the stunning beaches of Malibu, the state is perfect for both outdoor enthusiasts and city lovers. The largest cities in California, Los Angeles, San Francisco, and San Diego, are bustling hubs of activity. California’s economy is driven by technology, entertainment, agriculture, and manufacturing, with companies like Apple, Google, and Tesla headquartered here.

The state’s cultural scene includes vibrant music, arts, and culinary delights, while its strong educational institutions like Stanford and UC Berkeley, along with a robust job market, make it an attractive place to live. For those seeking affordability, cities like Sacramento and Fresno, offer more budget-friendly living options. Whether exploring the Pacific Coast Highway, hiking in the Sierra Nevada, or visiting the farmers’ markets in San Francisco, California is a great place to live.

1. The cost of living is higher than many states

The cost of living in California is notably high, with San Francisco being a prime example where living expenses are 18% higher than in other popular metros like Seattle. For instance, the median home sale price in San Francisco exceeds $1.4 million, while Sacramento sees a median price of $516,000. In terms of rent, the average monthly rent for a one-bedroom apartment in Los Angeles is approximately $2,653, compared to about $3,597 in San Francisco and $2,822 in San Diego. Everyday living expenses such as groceries, utilities, and transportation are also more expensive compared to national averages. However, there are more affordable cities in California, the more inland you go, where housing and daily expenses are significantly lower.

For those looking to call the Golden State home, it’s essential to consider the pros and cons of living in California to give you a better idea of what to expect.

2. Wine is a big deal in the state

California has an outstanding wine country renowned for its world-class vineyards and wine production. Napa Valley, known for its picturesque landscapes and prestigious wineries like Robert Mondavi and Opus One, attracts wine enthusiasts from across the globe. Sonoma County, with its diverse microclimates and acclaimed wineries such as Francis Ford Coppola Winery and Jordan Vineyard & Winery, further enhances California’s reputation as a premier destination for wine tourism.

Travel tip: To optimize your visit to Wine Country in California, it’s advisable to schedule appointments ahead at wineries, particularly during peak seasons like spring and fall. Planning your itinerary in advance and securing reservations for winery tours and tastings ensures you can enjoy a seamless experience at your preferred vineyards.

3. California has some of the highest taxes in the nation

California has some of the highest taxes in the country, including a top state income tax rate of 13.3%, the highest of any state. Additionally, the state’s sales tax averages around 8.85%, with some localities charging even higher rates. Property taxes, while not the highest in the nation, can still be substantial due to the high property values, especially in areas like the Bay Area and Los Angeles. It’s important to know these tax implications before deciding to move to California, as you’ll need to work these costs into your budget.

4. The technology sector is thriving in California

California is well-known for Silicon Valley, a vibrant hub of technology and innovation that fuels numerous high-tech jobs across the state. From tech giants like Apple in Cupertino, Google in Mountain View, to Facebook in Menlo Park, these companies are joined by a thriving startup scene with companies such as Airbnb and Uber originating here. This dynamic ecosystem drives advancements in computing, software development, artificial intelligence, and biotechnology, influencing industries globally and creating diverse career opportunities in California.

5. You’ll need to prepare for potential earthquakes

Living in California requires preparation for potential natural disasters. The state is seismically active, and being earthquake-ready involves having an emergency plan, securing heavy furniture, and keeping essential supplies like water and non-perishable food stocked. Familiarizing yourself with evacuation routes and understanding earthquake safety protocols are essential for residents to stay safe during seismic events.

6. The outdoor recreation opportunities are abundant

California offers abundant opportunities for outdoor recreation, catering to a wide range of interests. Hike among ancient redwoods in Muir Woods National Monument, surf the waves at renowned spots like Huntington Beach, explore the stark beauty of Death Valley National Park, or hit the slopes in Mammoth Lakes during winter. Whether you prefer biking along scenic coastal routes, camping in the Sierra Nevada, or kayaking in Lake Tahoe’s clear waters, California’s natural beauty provides endless adventures for outdoor enthusiasts year-round.

Insider scoop: If you’re heading to Malibu for surfing, Zuma Beach is an excellent choice to avoid crowds, especially for beginners and intermediate surfers. Plus, it’s famous as the filming location for Baywatch.

7. There are many educational institutions to choose from

California has a wealth of prestigious educational institutions, including the renowned University of California system and Stanford University. These institutions offer top-tier academic programs across various disciplines, attracting students and researchers from around the world. Whether you’re considering higher education opportunities or seeking excellent K-12 schools, California’s educational landscape is rich with options.

8. California deals with wildfire seasons

California experiences wildfire seasons, primarily during the dry summer and fall months, with peak activity from July through September. The state’s diverse terrain, including dense forests in the north and chaparral-covered hillsides in the south, is particularly susceptible to wildfires due to hot temperatures, low humidity, and occasional Santa Ana winds. It’s crucial for residents to stay informed about fire conditions, adhere to local fire safety regulations, and have evacuation plans ready.

9. You’ll find many pet-friendly establishments throughout the state

California is known for being exceptionally pet-friendly, with numerous amenities and accommodations catering to pets and their owners. Many cities boast extensive networks of dog parks, pet-friendly beaches like Carmel Beach and Huntington Dog Beach, and even restaurants and cafes. Additionally, the state hosts events such as pet parades and adoption fairs, reflecting its commitment to fostering a welcoming environment for pets.

Insider scoop: Some wineries have designated areas where well-behaved pets can accompany their owners during tastings, allowing both humans and pets to enjoy the scenic vineyard views together.

10. Drought is a significant concern in California

Drought is a significant and recurring concern in California, impacting various aspects of life across the state. In recent years, regions like the Central Valley and Southern California have faced severe water shortages, affecting agriculture, urban water supplies, and ecosystems. For instance, cities like Los Angeles and San Diego have implemented water conservation measures, while agricultural areas have struggled with reduced irrigation allocations. The state regularly encourages residents and businesses to conserve water through initiatives such as rebates for water-efficient appliances and landscaping.

11. California hosts well-known annual festivals 

California hosts a plethora of festivals throughout the year, catering to diverse interests and cultural celebrations. From the iconic Coachella Valley Music and Arts Festival in Indio, which draws music enthusiasts from around the globe, to the vibrant San Francisco Pride Parade celebrating LGBTQ+ pride, the state offers something for everyone. Additionally, food lovers can indulge in events like the Gilroy Garlic Festival or the LA Food Fest, showcasing California’s rich culinary diversity.

12. People flock to the state’s national parks

California’s national parks are some of the most sought-out destinations in the U.S., renowned for their awe-inspiring landscapes and diverse ecosystems. Yosemite National Park, home to iconic landmarks like Half Dome and Bridalveil Fall, offers extensive hiking trails amidst towering sequoias and pristine alpine lakes. Joshua Tree National Park, famous for its surreal rock formations and the distinct Joshua trees, provides a playground for climbers and a prime spot for stargazing under its clear desert skies. These parks not only showcase California’s natural beauty but also serve as vital habitats for a variety of wildlife.

Travel tip: To hike one of California’s iconic trails, Half Dome, you’ll need to secure a permit. With only 225 permits available per day, it’s essential to plan well in advance. For more details, visit the National Park Service website.

13. California boasts an active lifestyle

California embraces an active lifestyle, offering residents abundant opportunities for outdoor activities and fitness. From surfing along the Pacific coast to hiking in the Sierra Nevada mountains, the state’s diverse geography encourages a wide range of physical pursuits year-round. Additionally, cities like Los Angeles and San Francisco promote fitness through numerous parks, bike lanes, and fitness studios, fostering a culture where staying active is both enjoyable and accessible.

14. California has some of the worst traffic in the nation

California grapples with some of the worst traffic congestion in the nation, particularly in major metropolitan areas like Los Angeles, San Francisco, and San Diego. Commuters often face gridlock on highways such as the I-405 in Los Angeles or the Bay Bridge in San Francisco during peak hours. The state’s high population density, extensive urban sprawl, and reliance on cars contribute to the challenging traffic conditions experienced by residents and visitors.

Methodology

Population data sourced from the United States Census Bureau, while median home sale prices, average monthly rent, and data on affordable and largest cities are sourced from Redfin.

Source: rent.com

Apache is functioning normally

Philadelphia, often referred to as “The City of Brotherly Love,” is a city steeped in history and brimming with cultural vibrancy. From its iconic landmarks and historic sites to its bustling neighborhoods and thriving arts scene, Philadelphia offers a unique living experience. However, like any major city, it comes with its own set of challenges. Whether you’re considering a historic row house in Old City or a modern apartment in Rittenhouse Square, you’ve come to the right place.

In this ApartmentGuide article, we’ll explore the various pros and cons of living in Philadelphia, helping you decide if the City of Brotherly Love is the right place for you.

Fast facts about living in Philadelphia

  • Population: Over 1.6 million residents
  • Average rent: $1,847 per month for a one-bedroom apartment
  • Median home sale price: $270k
  • Subway stations: 75, providing extensive public transit options
  • Public parks: More than 300 green spaces for recreation and relaxation
  • Languages spoken: Over 100, reflecting the city’s rich cultural diversity
  • Annual tourists: Approximately 45 million visitors each year
  • Restaurants: Over 7,000, offering a wide variety of cuisines from around the world

1. Pro: Rich historical significance

Philadelphia is a treasure trove of American history, offering unparalleled access to historic sites like Independence Hall, the Liberty Bell, and the Betsy Ross House. The city played a pivotal role in the American Revolution and the founding of the United States. Walking through its historic districts, residents can feel a deep connection to the past, which adds a unique charm and educational value to living in the city.

2. Con: The housing market can be competitive

While Philadelphia’s real estate market is more affordable than many other major cities, it can still be competitive, especially in desirable neighborhoods. The average rent for a one-bedroom apartment in Philadelphia is $1,847 per month, and the median sale price for a home in Philadelphia is around $270k. While these prices are lower compared to cities like New York, finding the perfect home can still be a challenge due to high demand. Renters and buyers may need to act quickly and be prepared for bidding wars in popular areas.

3. Pro: Thriving job market

Philadelphia has a diverse and robust job market, with opportunities in various industries such as healthcare, education, finance, and technology. Major employers in the city include the University of Pennsylvania, Comcast, and Children’s Hospital of Philadelphia. The city’s economy is bolstered by its numerous universities, research institutions, and a growing startup scene, providing ample career growth potential.

5 of Philadelphia’s top employers

  • University of Pennsylvania
  • Comcast Corporation
  • Jefferson Health
  • Children’s Hospital of Philadelphia
  • Temple University

4. Con: Higher taxes

Pennsylvania has relatively high state and local taxes, including income, property, and sales taxes. The combined state and city income tax can be substantial, and property taxes can also be burdensome. For example, the city wage tax for residents is around 3.75%, and property taxes can add significant expenses to homeownership. Residents often find themselves paying more for everyday expenses, such as groceries, utilities, and transportation, which can strain budgets, with utilities being 9% more, groceries 2% more, and transportation 8% more than the national average.

The cost of living in Philadelphia is further impacted by the 8% sales tax on goods and services can add up quickly, affecting daily living costs. For businesses, the high corporate taxes and regulatory costs can impact overall profitability and growth, potentially making it more challenging to thrive in the competitive urban market.

5. Pro: Extensive public transportation system

With a transit score of 86, Philadelphia offers a comprehensive public transportation system, including buses, trolleys, and subways operated by SEPTA (Southeastern Pennsylvania Transportation Authority). With 75 subway stations and extensive bus routes, getting around the city is convenient and affordable. The city’s walkability and bike-sharing programs like Indego also make commuting without a car feasible for many residents.

Additionally, regional rail lines connect Philadelphia to the surrounding suburbs and cities like New York and Washington, D.C., making it easy to travel for work or leisure. SEPTA’s 24-hour service on some routes ensures that residents have access to public transportation at all times, enhancing the city’s accessibility and reducing the reliance on personal vehicles.

6. Con: Aging infrastructure

Philadelphia’s aging infrastructure can be a challenge, with issues such as potholes, outdated public transit systems, and older buildings in need of maintenance. Frequent water main breaks and electrical grid issues can cause disruptions, impacting daily life for residents. While the city is making efforts to modernize and improve its infrastructure through initiatives like the Rebuild program, which focuses on renovating public spaces and facilities, residents may still encounter inconveniences related to these issues. Upgrading infrastructure is a slow and costly process, often requiring significant investments and causing temporary disruptions during construction phases.

7. Pro: Diverse neighborhoods

Philadelphia is known for its diverse and distinct neighborhoods, each offering its own unique character and charm. From the historic streets of Old City, with its colonial-era buildings and cobblestone streets, to the vibrant energy of Fishtown, known for its hipster vibe and creative community, there’s a Philadelphia neighborhood for everyone. Explore the artistic scene in Northern Liberties, home to numerous galleries and studios, or enjoy the culinary delights in South Philadelphia, famous for its Italian Market and authentic eateries. Relax in the green spaces of Fairmount, which offers easy access to the Philadelphia Museum of Art and scenic Fairmount Park.

This diversity also means a wide variety of cuisines, festivals, and cultural experiences are available year-round, such as the annual Philadelphia Flower Show, the Odunde Festival, and numerous ethnic food festivals.

8. Con: Weather extremes

Philadelphia experiences all four seasons, which means hot, humid summers and cold, snowy winters. While some enjoy the variety, others may find the weather extremes challenging to handle. Snowstorms can disrupt daily life, affecting transportation and causing school and work closures. Summer heat waves can be uncomfortable, leading to increased energy costs for cooling. The transition seasons, spring and fall, can also be unpredictable, with sudden changes in temperature and weather conditions.

9. Pro: Access to quality education and healthcare

Philadelphia is home to some of the best educational institutions in the country, including the University of Pennsylvania, Temple University, Drexel University, and Thomas Jefferson University. The city also boasts top-notch healthcare facilities such as Jefferson Health, the Children’s Hospital of Philadelphia (CHOP), and the Hospital of the University of Pennsylvania (HUP), which are renowned for their cutting-edge medical research, specialized treatments, and high-quality patient care.

This access to quality education and healthcare is a significant advantage for residents, contributing to a strong community of lifelong learners and well-cared-for individuals. The presence of these institutions also fosters a robust job market in education and healthcare sectors, further enhancing the city’s appeal.

10. Con: Limited nightlife options

While Philadelphia has a vibrant cultural scene, its nightlife options can be limited compared to larger cities like New York or Los Angeles. The city’s nightlife tends to be more low-key, with a focus on local bars and smaller music venues. For those seeking a more bustling nightlife with a wide variety of clubs and late-night entertainment, Philadelphia might feel a bit underwhelming.

11. Pro: Abundance of green spaces

Despite its urban environment, Philadelphia offers numerous green spaces where residents can escape the hustle and bustle of city life. Fairmount Park, one of the largest urban parks in the country, provides ample opportunities for outdoor activities. Other popular parks include Rittenhouse Square, Wissahickon Valley Park, and Penn’s Landing. These green spaces provide a much-needed respite from the city’s fast pace and are perfect for recreation and relaxation.

Popular Philadelphia parks:

  • Clark Park
  • Schuylkill River Trail
  • Pastorius Park
  • Bartram’s Garden
  • Belmont Plateau

12. Pro: Iconic landmarks and cultural institutions

Living in Philadelphia means having iconic landmarks like Independence Hall, the Liberty Bell, and the Philadelphia Museum of Art at your doorstep. These sites are not only great for sightseeing but also contribute to the city’s unique character and charm. Residents can enjoy exploring historic sites, taking in the city’s rich history, and participating in various cultural and educational events.

Iconic landmarks in Philadelphia:

  • Independence Hall
  • Liberty Bell
  • Philadelphia Museum of Art
  • Reading Terminal Market
  • Eastern State Penitentiary

13. Pro: Rich cultural diversity

Philadelphia is known for its cultural mosaic of vibrant diversity, home to people from around the world. In neighborhoods like South Philadelphia, Chinatown, and Germantown, residents can experience a wide array of cuisines and traditions from different cultures. This blend of backgrounds creates a unique environment where diverse perspectives and traditions thrive. Cultural institutions, festivals, and parades throughout the city highlight this diversity, from the annual Mummers Parade to the Odunde Festival and the Italian Market Festival.

Apache is functioning normally

It has long been the norm in real estate transactions for the buyer’s and seller’s agents to be paid with a commission fee — typically 5% to 6% of the house price — that was split between the two agents and paid by the seller. But in early 2024, the National Association of Realtors®, a real estate trade association, agreed to settle a group of lawsuits that challenged this commission structure for violating antitrust laws and contended that commissions were artificially inflated.

NAR will pay out $418 million in damages. But more importantly for homebuyers, the fallout could trigger big changes in how homebuyers work with real estate agents to make their purchase — and maybe even save buyers and sellers a little money. NAR Realtors handle the majority of sales in the U.S., so this settlement could have a significant impact on real estate transactions going forward.

How might real estate agent fees work in this new environment? If you plan to buy or sell a home, it’s important to understand. Let’s take a closer look at how homebuyers and sellers might be affected.

What’s Changing About Real Estate Commissions?

The NAR settlement, which was preliminarily approved by a judge in April 2024, means that as of August 2024, sellers’ agents will no longer be required to offer to share commissions with buyers’ agents. If a commission (paid by the seller) is compensating the seller’s agent but not the buyer’s agent, homebuyers will likely be responsible for paying their own agent.

This isn’t all bad news for buyers. Sellers might reduce home prices if their costs associated with paying a broker are lower. It’s also possible that buyers’ brokers will compete for customers by keeping their fees low. But it’s too soon to say what exactly will happen.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

What Does a Buyer’s Real Estate Agent Do?

If you’re a homebuyer, especially a first-time homebuyer, you may be wondering what services you would be paying for when you hire a real estate agent. Agents can perform a variety of services on behalf of their clients. If you’re buying a home, an agent can help you:

•   Narrow your search to the most desirable properties for your budget

•   View the homes in person or virtually

•   Make an offer on a property

•   Navigate the home inspection process

•   Negotiate any contingencies you’d like to include in the home contract

•   Prepare for closing

Who Pays the Agents’ Commissions?

It remains to be seen whether real estate agents will charge by the hour or bill customers a flat rate — or if some agents will continue to work on commission that is perhaps paid by the buyer.

Buyer’s real estate agents might begin to charge a fee (vs. a commission) for showing homes and shepherding clients through the purchase process. For buyers, this would add to the cost of a home purchase. Buyers have long suspected that sellers baked the commission fees into a property’s price, so that, in effect, buyers were already paying the commission. But while buyers could cover those baked-in costs out of their home mortgage loan, new fees paid by the buyer to the agent would come from the buyer’s pocket.

And they aren’t the only fees a buyer has to pay to finalize the purchase of a home. Closing costs can include:

•   Attorney fees

•   Title search and title insurance fees

•   Credit check fees

•   Upfront costs paid to cover homeowners insurance and/or property taxes

•   Home mortgage loan origination fees

•   Mortgage points, if you choose to purchase them

•   Recording fees

Closing costs typically run between 3% and 6% of the home’s purchase price. So if you’re buying a $300,000 home, you might pay anywhere from $6,000 to $15,000 at closing, not including the down payment.

Closing costs are usually the buyer’s responsibility, but it’s not unusual for buyers to persuade sellers to share some expenses that are paid in advance.

All this may lead some buyers to consider shopping for a home without the help of an agent. If you’re thinking of going this route, be prepared to spend lots more time researching potential properties, reaching out to schedule viewings, and vigorously advocating for yourself if you’re in a seller’s market. And be ready to be your own best representative in negotiations.

Recommended: Cost of Living By State

What Does a Seller’s Agent Commission Cover?

Real estate commissions compensate a seller’s agent for the work the agent puts into helping sell the home. What this specifically entails can depend on the agent you’re working with and your needs. But again, this often involves researching listings, preparing comparative analyses, guiding home viewings, and helping to negotiate offers.

Here is how the commission fee has typically worked in the past: Say a home sells for $366,000 (the average home price in Fresno, California) and the commission is 6%, or $21,960.

If the sellers owe $250,000 on the home’s mortgage, they’d be poised to pocket $116,000 in profit. But first they have to subtract $21,960 to cover the commission fee. It’s likely that the commission fees will be lower now that the commission is not shared between the buyer’s and seller’s agents. But exactly what percentage a seller’s commission fee will be is up in the air.

Commissions are paid out once the transaction is complete. This typically happens after the buyer and seller have signed their closing paperwork. The seller will receive a check for any profits due to them from the sale, while the agent receives a check for the commission. Exact amounts of commissions, like home sale prices, vary widely by state.

It’s worth noting that there are still other costs involved in selling a home. You may pay a separate fee for professional staging or photography to get it ready to list, for example.

Recommended: Home Appraisals 101: What You Need to Know

Flat Fee vs Real Estate Commission Fee

There are real estate brokerages that advertise listing services for a flat fee. Usually, the flat fee is very low and may only include a listing with photos on the MLS (the Multiple Listing Service, a list of available properties). Real estate agents who charge a flat fee usually don’t offer to schedule showings or manage the listing in other ways.

Are Real Estate Commissions Negotiable?

More than ever, thanks to the NAR settlement, real estate commission fees may be on the table for negotiations. A seller may be able to ask for a reduced commission if you’re working with an agent to sell multiple properties. The agent may be open to accepting a slightly lower fee per deal if there are multiple deals in play. This, of course, depends on how likely those properties are to sell at your desired price point.

As a buyer, how you might negotiate paying your agent in this new payment structure remains to be seen — and it will be up to you to start that conversation. Remember that you can also still negotiate a house price in other ways, such as by tailoring your offer price and asking the seller for help on closing costs.

Why Even Involve Agents?

You could buy a house without a Realtor® but having a professional’s help can be invaluable, especially if you’re a first-time homebuyer. (Realtors® are real estate agents who are members of the country’s largest trade association, the National Association of Realtors®. They subscribe to a strict code of ethics.)

A real estate agent or Realtor® can help you navigate the ins and outs of the homebuying process so that you can feel confident about your purchase.

Real estate agents are legally obligated to put their clients’ best interests first. They are trained to negotiate price and contingencies, handle legally binding documents, prepare and show properties for sale, and market homes through the MLS.

And if you’re thinking about selling your home on your own, it’s worth considering that homes for sale by owner usually sell for an average of $100,000 less than agent-assisted sales.

The Takeaway

Changes in the way that real estate agents are paid are underway, and while sellers will continue to pay their agents a commission, buyers may increasingly need to pay their agents themselves. Whether buyers come out ahead financially in this changed compensation structure remains to be seen. Bottom line? If you are in the market for a new home, make sure you discuss an agent’s fee structure and payment process before signing on.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is commission and flat rate the same?

No. A flat rate is a specific rate negotiated for a certain service, while a commission-based fee is based on a price, such as the sale price of a home. For a seller, a flat rate typically covers only basic real estate agent services such as listing the property in a database.

What fee do most Realtors charge?

Historically, most real estate agents have worked on commission and would split an amount equal to 5%-6% of a home’s price, which was paid by the seller. Now, seller’s agents may still be paid on commission (albeit a smaller percentage) but buyer’s agents will increasingly be paid by the buyer. This means buyers will need to negotiate a fee with a real estate agent before agreeing to be represented by that agent in their home search. The amount of the fee will vary based on factors such as location, services provided, and time spent.

What is the difference between a flat fee and a fixed fee?

Yes, a flat fee and a fixed fee are the same when it comes to how a real estate agent is paid.

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com