Every new year brings a blank canvas and prompts a natural curiosity regarding what is ahead. Cornerstone always keeps a close eye on the state of mobility, especially any anticipated changes. By staying ahead of trends and shifts, we can better navigate change when we need and position ourselves for success in an evolving landscape.
Housing is a critical part of any decision to relocate and relocating employees have had to navigate a series of challenges from high mortgage rates to changing real estate practices throughout 2024. In part one of our look at the state of mobility, we will explore the conditions of U.S. and Canadian Housing in 2025:U.S. Real Estate Litigation
In the U.S., the settlement to the buyer broker compensation case of Sitzer/Burnett received formal court approval in late November 2024. As part of the settlement, requirements were put in place that included written buyer agency agreements and the removal of broker compensation information from most Multiple Listing Services. At least seven appeals to the settlement have since been filed and other related lawsuits continue to percolate through the court system. Large shifts or major adjustments to the requirements established by the settlement are not expected in 2025. However, smaller adjustments and/or new state laws related to broker compensation may occur creating additional complexity for U.S. relocation programs that span the nation.U.S. Buyer Agency Agreements and Compensation
Buyer Agency Agreements
Written buyer agency agreements in real estate transactions have become the norm for most brokerages, even in those markets where there is no state law requiring such an agreement. These agreements will vary depending on factors such as state law, brokerage requirements, and MLS guidelines, but should clearly and transparently outline responsibilities of and compensation to the buyer’s agent. The buyer is typically responsible for their agent’s compensation in any purchase transaction, depending on the negotiations with the seller. For most, a signed agreement is required before an agent can show a buyer a property. As 2025 progresses, we expect that these forms will continue to be shaped by changing state laws, brokerage standards, and local practices. Buyers must exercise caution when signing agreements to ensure they understand their legal obligations to their agent.
Buyer Broker Compensation
Buyer broker compensation is fully negotiable. Some states and brokerages have more clearly decoupled the compensation that the seller pays to their listing agent from the compensation that will be paid to the buyer’s agent. While real estate is hyperlocal, in many markets sellers are still agreeing to pay at least some of the buyer’s broker’s compensation as part of the sale negotiations. We expect that over time, and as market conditions change, this practice may change. Companies will need to stay agile and consider adjustments in their home sale and home purchase programs that can support varied practices.
Canadian Real Estate Litigation
Canada’s Competition Bureau (an independent federal law enforcement agency) is investigating potential anti-competitive conduct by the Canadian Real Estate Association (CREA). Very similar to recent U.S. lawsuits and U.S. Department of Justice inquiries, the Competition Bureau is investigating whether CREA's rules discourage buyers’ agents from offering lower commission rates. Additionally, it is also looking into whether CREA’s policies makes it more difficult for alternative listing services to compete with the Multiple Listing Service (MLS). CREA owns and operates realtor.ca, which is used by agents to list homes for sale.
Class action litigation, similar to the U.S. lawsuits regarding buyer broker compensation, is still working its way through Canadian courts and any impact is yet to be determined.Canada’s Prohibition on Home Sale
In an effort to increase housing availability and affordability for Canadian citizens, Canada implemented a ban on the purchase of homes by foreign buyers, which was set to expire at the end of 2024. But in February 2024, the government extended the ban; the prohibition is now set to expire at the end of 2026. As U.S.-based relocation companies are included in the definition of foreign buyers, guaranteed purchase home sale programs in Canada (such as guaranteed offer, or buyer value option programs) have not been available. This disruption will continue to require alternative strategies such as direct reimbursement or property management in addition to increases to benefits such as temporary living. Relocation trade groups such as the Canadian Employee Relocation Council (CERC) are actively advocating for an exemption for relocation management companies, but to date efforts have been unsuccessful.
U.S. Real Estate Market
The U.S. real estate market ended 2024 with a mixed bag. The good news nationally is that supply has increased, resulting in some price moderation. However, as we know, real estate is hyperlocal, so some markets continued the pace set in 2023 where low supply and high demand equaled multiple offers and higher prices. Other markets finally balanced, with supply and demand evening out. Inventory in 2025 is expected to continue to increase. While this may provide buyers more choice, we may begin to see longer marketing times impact home sale programs.
Thirty-year fixed mortgage interest rates in the U.S. in 2024 continued to trend between 6% and 7%, occasionally climbing above that 7% mark. Industry analysts are predicting more of the same in 2025, with no expectations that rates will go below 6%. While many home buyers have adjusted to this new normal in interest rates, homeowners with current rates below 6% are still hesitant to give up those low rates (aka the “lock-in” effect), which affects supply and may impact decisions related to the relocation.
U.S. Rental Market
Similar to the “lock-in” effect that homeowners are experiencing, renters are also staying put to avoid moving costs and increased competition for rentals. The nationwide occupancy rate has held steady at about 93%. Rents continue to rise nationally and are significantly higher than in 2019 (before the pandemic). However, some areas in the South are seeing rent decreases due to the increase in supply during 2024. High interest rates and higher building costs will slow the rate of new construction in 2025, which may impact supply of rental properties in the future. Areas with recent natural disasters, such Los Angeles with thousands of people displaced in an already tight market, will be more impacted by rental competition and affordability. Providing rental support during a home finding trip is cost-effective and provides value to employees in locating rentals, particularly in tighter markets.
U.S. Insurance
Insurance rates and the availability (or lack thereof) of insurance is another factor impacting the housing market in the U.S. for both renters and homeowners. Rising insurance rates, particularly locations with a high-risk of natural disasters, are affecting affordability and impacting relocating employees not prepared for higher costs.
Dropped coverage can be especially problematic if other insurers are not willing to take on the coverage risk. State-level legislators are examining solutions to the crisis, but so far, new laws have not been passed or if they have, are not especially effective. Clients should be aware of the potential impact on mobility of the insurance situation; these can include:
- Homes that can’t be sold due to the lack of available insurance
- Affordability problems due to the very high cost of insurance
- Rents may increase and rental supply drop due to a tighter rental market as homeowners turn to renting instead of buying
- Reluctance to relocate to areas where the insurance issue is the most pressing.
It will be important for relocating employees to confirm availability and cost of insurance before finalizing their housing decision.Canadian Real Estate Market
In Canada, the real estate market saw both supply and sales increasing in the latter half of 2024. Home prices continue to be elevated though they are lower than 2022’s highs. Mortgage rates decreased in 2024 with a few more rate cuts expected in 2025, which should help boost real estate sales and make it easier for relocating employees to purchase.Canadian Rental Market
Canada’s rental market saw rents decrease to a 15-month low in late 2024, though overall rents remain elevated. Industry analysts are expecting some downward movement in rents in 2025 as the number of new immigrants to Canada are reduced, essentially shrinking the population and increasing the supply of rentals. However, affordability remains an issue for many renters despite the increased availability of rental housing.
This two-part series explores key trends that are shaping mobility today and for the year to come. Cornerstone encourages global mobility teams to keep internal stakeholders informed of potential barriers to relocation and options that can better support employees. In part one, we dove into the evolving housing landscape in the U.S and Canadian markets. In part two, we will broaden our scope to examine global topics, such as immigration trends and their impact on workforce mobility. Stay tuned for more.
Cornerstone is your source for relocation insights and will help you determine the best course of action and approach for your global mobility program. Please reach out to our Consulting Team for any assistance or questions you may have.