Jane Sheppard reporting for North Florida news. There’s a buzz in the air amongst Suwannee County’s aspiring homebuyers and sellers. The recent National Association of Realtors’ (NAR) class-action settlement over agent commissions has sparked a debate on what this means for the housing market. While President Joe Biden and former Treasury Secretary Larry Summers hail the settlement as a potential boon for homeowners, the actual benefits for first-time buyers remain unclear.
The housing market is currently traversing a precarious path, with last year witnessing the lowest level of sales in nearly three decades due to high mortgage rates. This has been particularly challenging for first-time buyers who are seeking to enter one of the most unaffordable markets in history.
The recent settlement has sparked hope that the reduction in agent commissions could translate into lower home prices. However, experts, such as Steve Murray, senior adviser to data provider and consultant Real Trends, express skepticism over this belief, stating, “No seller I’ve encountered will lower the price just because their transaction cost went down.”
Impact on the Market?
Experts are locked in a heated debate about how these changes will impact the market, largely due to the unpredictability of the situation. The U.S. agent compensation structure, which has been controversial for decades, typically involves sellers paying a commission of 5% or 6% to their agent. This commission is then split between the listing agent and the buyer’s representative.
In October, a verdict by a Missouri jury found the NAR and others liable for colluding to keep prices high. To settle the case, the NAR agreed to pay sellers approximately $418 million and announced that it would modify some of its rules. The most significant change is the prohibition on sellers including compensation details on the multiple-listing service, a crucial tool for marketing homes.
This change could potentially encourage sellers to negotiate lower commissions. However, there is speculation that agents might find alternate ways to discuss commission splits, such as through brokerage websites. According to Mark Zandi, Moody’s Analytics Chief Economist, “I expect commissions to get bid down to 4% to 5% over time with variation by home price and geography.”
Possible Outcomes and New Rules
The settlement was a hot topic at the American Real Estate Society’s annual gathering of academics in Orlando this week. According to Ken H. Johnson, a real estate professor at Florida Atlantic University, the question of who benefits from lower commissions does not have a simple answer.
- The seller could pass on some savings to the buyer, particularly in a seller’s market.
- It could encourage more first-time homebuyers, who sometimes lack the cash to pay brokers upfront, to go it alone.
- More buyers are likely to go directly to listing agents to avoid paying commission costs. However, this might result in more agents with potential conflicts of interest, representing both buyers and sellers.
Larry Summers, a paid contributor to Bloomberg Television, expressed that the settlement is a start, but most observers don’t expect huge changes overnight. He stated, “Right now, everyone is turning this ruling into what they want it to be.”
As the dust settles on the NAR settlement, the future of Suwannee County’s housing market remains uncertain. Only time will tell how these changes will impact first-time buyers, sellers, and the real estate industry at large.
