Broker Fees on Trial

October 24, 2023

THE BIG SPLASH

Broker Fees on Trial

What you can’t miss today

A jury trial in Kansas City, Mo., is challenging the longstanding broker fees system in the U.S. real estate market, which could redefine the National Association of Realtors' (NAR) dominance and the way Americans buy homes.

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  • The trial is part of antitrust class-action suits targeting major brokers and the NAR; Anywhere Realty and Re/Max have already settled for $139 million.

  • Central to the case: NAR's broker fees system, which plaintiffs argue artificially inflates home prices.

  • In 2020, Americans shelled out over $85 billion in residential real estate commissions.

  • Despite technological advances in homebuying, broker fees have remained consistent, averaging around 5%.

  • NAR defends its practices, suggesting changes could destabilize the housing market.

  • The trial's outcome is eagerly awaited next month.

A SCOOP OF MARKET DATA

The number you should know

53,000

Rising mortgage rates resulted in 53,000 real estate deals being canceled last month, the highest in nearly a year.

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  • 16.3% of U.S. home purchase agreements were canceled in September.

  • Key U.S. mortgage rate recently peaked at 7.63%, its highest in over two decades.

  • Buyers are backing out due to rising borrowing rates and disagreements over repairs.

  • Closed home sales have significantly decreased compared to the previous year.

A SCOOP OF INSIGHTS

Something you’ll learn

The U.S. housing market requires over a million additional homes to meet the rising demand and stabilize soaring housing prices.

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  • The current inventory of existing homes is at 1.1 million, a decrease from the 1.8 million reported pre-COVID in 2019.

  • Despite a population growth of 8 million since 2019, the housing inventory hasn't kept pace.

  • The gap between household formations and single-family home construction has expanded to 6.5 million homes since 2012.

  • High mortgage rates, currently at 7.63%, have deterred many homeowners from selling, exacerbating the inventory shortage.

  • Policy changes, such as raising the index capital gains exemption for primary homeowners, could potentially boost housing supply.

A SCOOP OF CONTROVERSY

Everyone will talk about it

In the realm of TikTok, landlords are unabashedly showcasing the harsh realities of their profession, often emphasizing their tough decisions and business acumen.

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  • Tom Cruz, a landlord who went viral on TikTok, openly discusses evicting tenants, including single mothers, emphasizing the need for respect and authority in the landlord-tenant relationship.

  • Cruz, who claims to earn roughly $1 million per month from over 650 homes, uses his platform to offer investment tips and flaunt his wealth, portraying the housing market as a competitive game.

  • Social media is rife with landlords highlighting their stringent actions, from evictions to property rehabilitations, often seeking validation and respect for their business choices.

  • Historically, landlords have been depicted as villains, especially during the Industrial Revolution, but modern media rarely portrays them, focusing instead on property sales and luxury.

  • These TikTok landlords, while showcasing the harsh realities of the housing market, also seem to seek validation and respect, positioning themselves as savvy players in a challenging game.

How was today's shake?

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