
💼 Homebuying Will Change
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COMMISSION LAWSUIT SETTLED

Courtroom Setting: A Grand Hall of Debate
⚖️🙋🏾♀️ Barrister Betty (For the Plaintiffs): "Ladies and gentlemen of the jury, we stand here in the wake of a landmark decision against the NAR. They've been ordered to pay a staggering $1.8 billion for what? For artificially inflating agent commissions through illegal collusion! This case, dear jurors, isn't just about dollars and cents; it's about fairness and transparency in the real estate market.
⚖️🙋♂️ Solicitor Sam (For the Defendants): "Hold your horses, Betty! Let's not get carried away. These accusations of 'illegal collusion' are baseless. At the center of this storm, the NAR's Cooperative Compensation Rule requires listing agents to offer buyer agents compensation to list on a Realtor-affiliated MLS. There’s no conspiracy here, just standard industry practice.
⚖️🙋🏾♀️ Barrister Betty: "Standard industry practice? Sam, you're missing the forest for the trees! The Moehrl suit and several similar filings argue that this rule spikes sellers' costs and violates antitrust law. The potential damages are estimated at a jaw-dropping $41.1 billion! We're not just talking about a slap on the wrist here; this could reshape real estate.
⚖️🙋♂️ Solicitor Sam: "Reshape the landscape, you say? Let's not be melodramatic. Sure, there's talk about the impact on NAR’s 1.5 million members, but let’s be real—many MLSs require NAR membership. And look at places like California, Colorado, and Florida—they have record numbers of Realtor members without mandatory NAR membership. It's more about inertia than injustice.
It’s the courtroom drama we all wished to see play out, but the National Association of Realtors (NAR) settled its billion-dollar commission lawsuit late last week, and will pay $418 million in damages. Here are the key takeaways as the dust settles on the settlement:
🙈 Increased Transparency in Agent Commissions: The settlement bans NAR from establishing rules allowing a seller’s agent to set compensation for a buyer’s agent, leading to greater transparency in determining agent commissions. This could empower homebuyers to negotiate better rates or understand more clearly what they are paying for regarding agent services.
📉 Potential Reduction in Agent Commissions: Analysts predict the changes could significantly reduce the total amount of agent commissions, affecting the income of real estate agents. This commission reduction might be passed on to homebuyers through lower overall transaction costs.
😓 Impact on Real Estate Agents: The settlement is expected to accelerate a decline in the number of working real estate agents due to the potential decrease in commission earnings. This could lead to a more competitive market with potentially higher service standards among remaining agents.
🔁 Changes in MLS Practices: The settlement requires eliminating fields displaying broker compensation on MLS listings and banning agents from needing to subscribe to MLSs to offer or accept compensation. This could lead to a more open and less restrictive environment for listing and selling properties, potentially benefiting buyers and sellers by facilitating a wider range of real estate transactions outside the traditional MLS framework.
What is clear is that these changes will reshape how sellers and buyers transact and how agents get paid.
NAR's legal counsel has approved the settlement agreement, but it has yet to be filed in court. It is expected to be filed in the coming weeks and will require court approval. This settlement resolves all claims brought by home sellers, but lawsuits filed by homebuyers will continue.
Curious to learn more? We will do a deep dive tomorrow into the ins and outs of the new homebuying landscape. Stay tuned!
HEADLINES

Moody Blues: Moody's recently downgraded the credit rating of another prominent housing developer in China. This action serves as a clear indication of the persisting challenges within the country's property sector. Vanke, a company that has long been regarded as financially stable, has unfortunately joined the ranks of several other major Chinese developers who have encountered difficulties. Moody's downgraded Vanke's credit rating to "Ba1", a classification highlighting the presence of "substantial credit risk." The alarming decline primarily influenced this decision in the firm's contracted sales, which plummeted by approximately 40%, amounting to a staggering 34.5 billion yuan ($4.8 billion) within the first two months of this year alone. (Moody’s)
Read More: China's Serious Real Estate Problem
Agents of Unhappiness: Before the NAR lawsuit settlement, real estate agents' optimism about the market outlook was already decreasing. According to the Inman Intel Index survey, buyer pipelines fell short of expectations in February as mortgage rates increased. The share of agents reporting unchanged buyer pipelines from last year decreased from 39% in January to 31% in February, while those reporting substantial annual declines increased from 17% to 23%. (Inman)
Manufacturing Fiesta: Nearshoring, or moving manufacturing closer to the US, is a growing trend, with annual imports from Mexico surpassing those from China for the first time since 2002. This shift is driven by factors such as geopolitical forces, manufacturing costs, and rising shipping costs, which have increased by 184% in two months, from $1,700 per container in December to $4,800 in February. Shipping to the US East Coast is even higher, at $6,700 per container. Insurance costs for ships in the Red Sea have also risen by 600% to 900% in two months. (Globe St)
BY THE NUMBERS

3.2%: The Consumer Price Index (CPI) rose 3.2% in February from the previous year, slightly up from the 3.1% annual increase in January, according to the U.S. Department of Labor. Over 60% of this increase was due to housing costs and gasoline prices. The shelter index within the CPI was up 5.7% annually and 0.5% monthly, rising faster than our collective eyebrows. The rent index rose 0.5% from January, and the ownership index rose 0.4%, with annual increases of 5.8% and 6%, respectively. These figures suggest that the Federal Reserve may need to maintain high-interest rates to control the economy. Despite President Biden's assertion that inflation is decreasing, the data indicates it is still rising more sharply than anticipated. (CO)
Home Overlord Associations (HOAs): It is expected that over 3,000 HOAs will be created in 2024, which would increase homeownership costs due to maintenance fees for common areas and neighborhood upkeep. Around 75.5 million Americans, over 30% of the U.S. housing stock, reside in communities governed by HOAs, including homeowner and condo associations and housing co-ops. Although homes in HOA communities tend to be valued 5% to 6% higher than those without, dissatisfaction among residents is notable, with 57% expressing discontent mainly due to rising HOA fees amid inflation. (NAR)
Read More: HOAs: The Good, Bad, and Snugly Lawn Gnomes
Housing Supply: More houses are listed for sale as sellers adjust to higher mortgage rates. However, the increase in supply is not enough to slow down the growth of home prices. Many potential buyers are still hesitant due to the high costs of housing. New listings rose by 3.8% in February compared to the previous month, marking the largest increase in six months. This brought the number of listings to the highest level since September 2022. New listings were up by 14.8% compared to the previous year, the biggest annual gain since May 2021. (Redfin)

BAD LANDLORD

Today in, ‘Giving Us All A Bad Name’: A New York City landlord, Daniel Ohebshalom, twice named the city's worst landlord, has been ordered to be arrested and brought to Rikers Island for up to 60 days due to hundreds of building violations. The city's Civil Court issued the warrant due to the poor condition of his properties, which included issues such as peeling lead paint, roach and mice infestations, inadequate electricity supply, and mold. The city has been trying to fix hazards at two of Ohebshalom’s properties since 2021 and is seeking $3 million in civil penalties. Ohebshalom, who may be living in Los Angeles, is known for neglecting buildings, earning him a notorious reputation. (Inman)
At least he gets free rent.