A federal jury in Kansas City last week in the Sitzer/Burnett case found the National Association of Realtors (NAR) and other national brokers guilty of “colluding to inflate real estate commissions,” according to Axios. According to many publications, this could change how Americans buy homes and pay broker fees. That said, there will likely be appeals to this verdict. The jury ordered NAR, HomeServices of America, and Keller Williams to pay $1.78 billion in damages to the sellers of 260,000 homes in Missouri, Kansas, and Illinois who were the plaintiffs in the case.

Brooklee Han, Sarah Wheeler, and James Kleimann of HousingWire outlined the possible outcomes in this case, which could effectively “ban the cooperative compensation rule nationally on the multiple listing services, which would prevent listing agents and home sellers from predetermining buyer agent commission rates. Listing agents would also be prohibited from sharing commissions with buyer agents, and buyer agent commission rates would not be published in the MLS.”

NAR issued a statement in response to the verdict, with other defendants stating that they will appeal the verdict:

“The lawsuits claim that NAR rules violate antitrust laws and inflate the fees paid to buyer’s agents by requiring a listing agent to compensate a buyer’s agent for listing a property on the MLS. NAR argues that the lawsuits misrepresent association rules as anticompetitive. The rules direct listing brokers to determine, in consultation with their clients, the amount of compensation offered to a buyer’s agent in connection with their MLS listings. Further, NAR says buyer’s agents are free to negotiate compensation with the listing broker that is different from what appears in the MLS. Neither NAR nor the MLS has any say in setting broker commissions.”

Fortune quotes Michael Ketchmark, one of the attorneys representing the plaintiffs in the lawsuits, saying: “What’s at issue nationwide is costing Americans about $60 billion in extra real estate commissions.”

Debra Kamin of the New York Times comments on the verdict, highlighting that it “has the potential to rewrite the entire structure of the real estate industry in the United States, lowering the cost of moving homes by reducing commissions…sellers would no longer be required to pay their buyers’ agents, and agents would be free to set their own commission rates, which could be slashed in half or less.”

Finally, Laya Neelakandan of CNBC reported following the lawsuit verdict that NAR CEO Bob Goldberg will step down effective November 30 and will be replaced by Nykia Wright while the NAR searches for a permanent replacement. No specific reason was given for the departure; however, it comes on the heels of this verdict and other sexual harassment allegations against the association.

Peak rates?

Following the latest Fed meeting, where they again paused interest rate increases, Sarah Marx of HousingWire reports that mortgage rates stabilized, with the 30-year fixed-rate mortgage averaging 7.76% last week, down slightly from 7.79% the previous week. 

According to Christine Stuart of the National Mortgage Professional, the 30-year rate paused its multi-week climb to hover under 8% amidst economic uncertainty and rising bond yields. Further, Stuart quotes a Realtor.com analyst who notes that the lack of information to fuel another increase in interest rates is relatively positive.

Source: National Mortgage Professional (November 2023)

Hannah Jones of Realtor.com joins the conversation by outlining that “[t]his week’s economic developments are slightly on the positive side of neutral for mortgage rates. The shift in bond issuance did not take significant pressure off of longer-dated bond yields, but neither did it apply much additional pressure. Similarly, the Fed’s pause on rate hikes signaled that the FOMC will continue their ‘wait and see’ approach to future hikes, which means future policy is dependent on incoming economic data, which is currently unknown.”

Kate Wood of NerdWallet believes that mortgage rates in the short term will stay flat or even decrease slightly due to the Fed pause and other economic conditions. Overall, Wood feels the outlook for long-term lower rates is positive; however, we will never see the same near-zero rates we’ve enjoyed over the past decade.

Melissa Dittmann Tracey of Realtor Magazine notes that despite the possible interest rate relief, which may encourage more buyers and sellers to enter the market, limited housing supply will continue to keep housing prices elevated. This will likely put downward pressure on home sales activity.

Jobs data

Reade Pickert of Bloomberg reports on the recently released jobs data showing that growth slowed more than expected in September and that the unemployment rate unexpectedly jumped to an almost two-year high of 3.9%. Pickert reports that this data shows that cracks are beginning to form in the US jobs market, hinting at a normalizing of the labor supply and tempering of the pace of hiring. 

Source: Bloomberg (November 2023)

According to Pickert, as a result of this data:

“The S&P 500 opened higher, Treasuries rallied and the dollar weakened, as investors judged it more likely the Federal Reserve is finished with its run of interest-rate hikes. Traders marked down chances of a rate increase in coming months and boosted bets on an earlier cut next year.”

On the construction side, Robert Dietz of the National Association of Home Builders (NAHB) reports that amidst worries about limited supply, the job openings in the building industry continue to rise from 375,000 in August to 431,000 in September. 

Source: NAHB (November 2023)

Danielle Halle of Realtor.com comments on the jobs data and what it means for rentals: “With a notable amount of rental housing supply still under construction, this financial advantage of renting is likely to continue. Households trying to evaluate their options will want to look not only at today’s costs, but costs over time to determine which choice is likely to offer the best financial return.”

Jeff Cox of CNBC reports that the new data will be further fodder for the Fed to keep rates where they are. Reportedly, the markets predict that the Fed is done with its rate increases as inflation continues its gradual downward trend and more economic data points to a cooling labor market.

Indeed, Kathy Jones, Charles Schwab & Co.’s chief fixed-income strategist, is quoted in Bloomberg as commenting: “This is a really good report for the Fed…Softer job growth with slightly higher unemployment and slowing wage growth. No change in Fed policy in December is likely. The Fed’s rate hiking is probably done.”