New Forms and Practice

We’ve been working on revisions to our Standard Forms Library to help our members adapt to practice changes required by the National Association of REALTORS®’s recent nationwide settlement agreement. This episode introduces those practice changes and the forms we’ve created or revised to help our members adapt. 

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© 2024 by Hawaiʻi Association of REALTORS®. All rights reserved.
1259 Aala Street, Suite 300
 Honolulu, HI 96817
 Phone: (808) 733-7060.
 Email: har@hawaiirealtors.com 

Introduction

E komo mai. Welcome to Hawaiʻi Real Estate, a podcast on the buying, selling, and leasing of property in Hawaiʻi. Each episode of our podcast consist of a Real Data Report, which analyzes Hawaiʻi’s most recent real property data, and a Focus Piece, which provides legal and other special insight into a matter of major and contemporary concern for Hawaiʻi real estate transactions. 

The Hawaiʻi Real Estate podcast is produced by the Hawaiʻi Association of REALTORS®, with support from its Legal Kokua program. New episodes are released the first Wednesday of each month. 

This podcast, however, is the first since May. We’ve been working on revisions to our Standard Forms Library to help our members adapt to certain practice changes required by the National Association of REALTORS®’s recent nationwide settlement. This podcast introduces those practice changes and the forms we’ve created or revised to help our members seamlessly adapt their practices to the settlement agreement’s required practices changes. 

But before we get into the settlement agreement’s required practice changes, or the revisions to our Standard Forms Library, we give you Hawaiʻi’s most recent real property data and describe changes to national economic indicators that could affect your business. This is our Hawaiʻi Real Data Report: 

Real Data Report

Price

First up, let’s talk prices. We have the latest median and average listing price data from across the islands, and we compare our local insights to the broader national trends to give you a competitive edge. 

In the City and County of Honolulu, the median listing price for a home in May 2024 was $727,000, down from the prior month by 2.28%, and down from the prior year by 10.41%. The City and County’s apparently cooling market presents a potential opening for buyers who were previously sidelined by higher prices. 

Over in Hawaiʻi County, however, we see general upward pricing data. The median listing price for a home in Hawaiʻi County in May 2023 was $651,750, up from the prior month by 0.62%, and up year-over-year by 8.76%. Hawaiʻi County’s market could attract both residential upgrades and new investments. 

Maui County recorded a median listing price in May 2024 of $1,359,660, down from the prior month by 2.85%, and down from the prior year by 2.53%. 

Kauaʻi County, meanwhile, exhibited a more significant pricing adjustment. In May 2024, median listing price in Kauaʻi County was $1,431,000, down sharply from last year’s median listing price of $1,846,250. 

Compared to the median and average listing prices across the islands over the past month and year, which could be quite volatile, national prices have remained largely stable. The median listing price for a home in the United States rose over the past year by only 0.33%, and the average listing price declined over that same period by only 0.44%. By contrast, during that same period, average or median listing prices changed by double digits in three of Hawaiʻi’s four counties. 

Affordability (Mortgages)

Everyone wants to know when the Federal Reserve will being to lower interest rates. To answer that question, one must remember the Federal Reserve’s dual mandate: to keep both inflation and unemployment low. If inflation gets too high or unemployment too low, the Fed. will raise interest rates to cool the economy.  

The Fed. last raised interest rates during its Federal Open Market Committee’s July 2023 meeting. To determine when those rates will finally begin to fall, again, we must look to recent unemployment and inflation data. 

Unemployment 

Let’s start with unemployment. 

The unemployment rate in May 2024, according to the most recent report from the Bureau of Labor Statistics, was 3.5%. That was a slight increase from previous months, indicating a mild cooling in the labor market, and perhaps a reason for the Fed. to consider lowering interest rates. 

Inflation

Now, let’s shift our focus to inflation, the Fed.’s second mandate. 

The Bureau of Economic Analysis reported that personal consumption expenditures, a key measure of inflation, increased in May 2024 by 0.2%, a very modest increase, which itself followed similarly modest month-over-month changes in the first four months of this year of 0.1, 0.6, 0.7, and 0.1 percent. 

The Federal Reserve aims for 2% inflation. In the first five months of 2024, the PCE index registered in the mid-twos. Inflation appears to provide insufficient justification for continued elevated interest rates. If inflation was the Federal Reserve’s only mandate, then we should expect to see interest rates to fall. 

Forecast

As we’ve said, however, the Fed. also cares about unemployment. It wants to achieve “maximum employment,” or the lowest level of unemployment that the economy can sustain without causing inflation to rise above 2%. Generally, in the Fed.’s view, that means that unemployment cannot be allowed to fall below 4%. Because inflation remains above slightly above 2% and unemployment remains slightly below 4%, there is little evidence to support the conclusion that the Fed. will cut interest rates when it meets later this month. 

But this Friday the Bureau of Labor Statistics should release its June unemployment report. If that reports shows unemployment above 4%, there will be at least some evidence to conclude that the Fed. will lower interest rates when it meets later this month. 

Without a report showing higher unemployment in June, however, the market does not expect the Federal Reserve to cut interest rates in July. The ten-year treasury note yield, which almost by rule parallels the course taken by federal interest rates, continues to rise. Unless that 10-year note begins to fall, the market does not expect the Federal Reserve to cut interest rates later this month. 

So watch for this Friday’s Bureau of Labor Statistics June unemployment report. If that report shows a June unemployment rate above 4%, the Fed. might cut interest rates later this month. You can confirm that conclusion by watching the ten-year treasury yield leading up to the Federal Open Market Committee’s July 30th and 31st meeting. If it begins to fall, so too might federal interest rates—finally. 

Time on Market

Now let’s look at how quickly properties are selling across Hawaiʻi. In the City and County of Honolulu, properties sold in May 2024 after being listed a median 54 days, that’s 6.9% faster than the prior month and 7.6% faster than last year. 

Kauaʻi County properties were also selling more quickly. Properties that sold there in May 2024 were on the market for a median 77 days, or 6.1% less than properties that sold the prior month and 23.7% less than properties that sold the prior year. 

Properties in Hawaiʻi County and Maui County, however, are selling slower. Median days on market increased year-over-year in Hawaiʻi County by 12.4% and by 2% in Maui County.  

And that concludes our Real Data Report. Now, it’s time for our Focus Piece. 

Focus Piece

Introduction 

Welcome to the Focus Piece. Today, we discuss the coming practice changes required by NAR’s recent nationwide settlement agreement, as well as forthcoming changes to the Hawaiʻi REALTORS® Standard Forms Library that will help our members of Hawaiʻi REALTORS® adapt their practice to meet these new requirements. 

Written Agreements

First, we discuss the requirements to have in place certain written broker service agreements. 

Before August 18, 2024, every REALTOR® working with a buyer of residential real property must enter into a written buyer-broker agreement with their client or customer before touring a home with them. The agreement must conspicuously disclose the amount or rate of compensation that the REALTOR® will receive for services that they render in furtherance of their client’s or customer’s contemplated purchase, or at least disclose how that amount will be determined. 

The compensation must be “objectively ascertainable” and not “open ended.” It cannot be tied, for instance, to whatever cooperating broker compensation the seller or the seller’s listing agent offers. Whatever the amount the written buyer-broker agreement sets, the broker representing the buyer cannot accept any compensation—from any source—that exceeds that amount. 

Like REALTORS® working with buyers, who are required to enter into a written buyer-broker agreement with their client or customer before touring a home with them, REALTORS® working with sellers must enter into a written listing contract with their client or customer before paying or offering to pay any amount to any broker, agent, or other person representing a buyer of the seller’s property, and that agreement must specify the amount or rate of that payment.

To help our members adhere to these new requirements for written broker service agreements, we’ve updated both our standard form Buyer Representation Contract and standard form Exclusive Right-to-Sell Listing Contract. Those revised forms will be released to our members on August 12, 2024, five days before the settlement agreement’s August 17, 2024 deadline for having these agreements in place. 

For our members who are already a party to a written buyer broker agreement or listing contract we will release a standard form buyer broker agreement notice and standard form listing contract notice that they can issue to their clients or customers. These standard form notices, which we will release to our members on August 1, 2024, can help our members adhere to the settlement agreement’s written broker services agreement requirements without amending their existing contracts or entering into new contracts. 

Again, look for these notices on August 1, 2024, and ensure that you provide a copy to your clients and customers before August 18, 2024. 

MLS

MLSs must also change their policies to align with the settlement agreement’s required practice changes before August 18, 2024, although some MLSs, including HI Central, will change their policies sooner. 

As of the date that your MLS’ adopts the NAR settlement agreement’s required practice changes, offers of cooperating broker compensation on your MLS will be prohibited. Your MLS’s cooperating broker compensation field will be eliminated, and offers of cooperating broker compensation made anywhere else on your MLS will be prohibited. Cooperating broker compensation will be allowed, however, off your MLS. Members will be allowed, for instance, to offer cooperating broker compensation on their brokerage firm’s website. But there will be no requirement to offer cooperating broker compensation; nor will there be any requirement that cooperating broker compensation, if offered, be offered on the same terms to all REALTORS®. 

To help members enter into written cooperating broker compensation agreements that comply with the NAR settlement, we will include in our August 12th release a revised standard form Cooperating Brokerage Firm’s Separate Contract. 

Other New Forms & Education 

In addition to the revised standard-form buyer broker agreement, listing contract, and cooperating brokerage firm’s separate contract, we will release other forms August 12th to help keep your business running smoothly. 

Details on all the forms to be released this August will be offered during webinars that we will provide for our members later this month. Webinars for principal brokers and brokers-in-charge will be offered July 12th and 22nd, and webinars for agents will be offered July 26th, as well as August 2nd and August 9th. 

Conclusion

That’s our episode. 

Look for the new buyer representation contract notice and listing contract notice to be released August 1st. If you have a buyer representation contract or listing contract that straddles the periods before and after the NAR practice changes take effect, ensure that you complete the appropriate notice and transmit it to your client or customer before August 18, 2024. 

To enter into contracts after the NAR practice changes take effect, look to our revised buyer representation contract, listing contract, cooperating broker contract, and other revised forms that we will release August 12, 2024 to help you navigate NAR’s practice changes. 

Educational webinars on NAR’s practice changes and the corollary changes to our Standard Forms Library will be offered throughout July to our members. Watch our weekly e-news for details on how to attend. 

Thanks for listening. 

A hui ho.