Baron Briefs

REALTORS® once again made the opinion page of the Wall Street Journal earlier this week regarding the anti-trust lawsuit brought by the Department of Justice:

At issue is the Realtor practice of preventing Internet competitors from having access to the properties for sale on the local “Multiple Listing Service,” or MLS. Justice is certainly correct that the Realtors have used their political clout to suppress competition in local real-estate markets…yet we have to admit the Realtors have a legitimate claim that they created and own the local MLS database of homes for sale.

It’s more criticism of the Justice Department than support for the National Association of REALTORS®. Regardless, they’ve got a point. If the MLS is privately owned, there’s no justice in forcing REALTORS® to open it up at their own peril. We say let free enterprise solve this one. If a privately owned MLS fails to satisfy consumers, it seems that an alternative would rise up in its place.

Justice v. Realtors [WSJ]

Real estate agents and their sales commissions were clobbered in a CNN/Money poll earlier this summer when 84% of respondents said real estate commissions were too high. Well, it looks like another landslide victory for…whoever…thinks sales commissions are too high, we suppose. And this time, agents have lost ground–89% voted for the ‘too high’ candidate. But polls remain open so let’s see some voting power, REALTORS®.

Are real estate commissions… [CNN/Money]

• Baton Rouge prices soaring

  Baton Rouge Mayor Kip Holden has been “hearing stories of people bringing cash in and saying ‘I don’t care what it cost, let me have the house.’”

  “Buyers started the bidding war,” Judy Burkett, president of the Greater Baton Rouge Association of Realtors, said with prices rising between 20 and 30 percent in the last week.

• Florida and New York continue sizzle

  Said Matthew Martinez, who owns rental properties in Boston and Florida: “I’ve looked at 22 apartment buildings in Miami in the past two weeks and bought none. The economics just don’t make sense anymore.”

  “What we’re seeing (in New York) is that fall is off to a running start, a sprint really,” said Corcoron’s CEO Pam Liebman. “We have seen very strong buys from the superwealthy, especially hedge fund operators. This year we had more transactions above $10 million than ever,”.

• Record prices in Bay Area

  “We’re a bit surprised at how stable the market is in all categories. Usually one segment of the market will be outperforming the others. Right now, though, the same trends apply to all parts of the market, from entry level on up to the prestige market,” said Marshall Prentice, president of DataQuick.

In response to the DOJ anti-trust suit, the National Association of REALTORS® is citing evidence from researchers at Pennsylvania State University that suggest the real estate market is a rough business:

“What we find is that selling real estate is intensely competitive. Consumers have more information, they demand more services, and they have more agents and business models to choose from than ever before. Consumers are demanding more services and agents are responding by providing an ever-widening range of services,” said Professor Steve Sawyer of Penn State’s School of Information Sciences & Technology.

NAR’s Chief Economist David Lereah was stoked by the findings and likely angered Realtors everywhere as he appears to invite consumers to shop around for a lower sales commission:

“This is big news for consumers. Home sellers and buyers are in the driver’s seat today when it comes to finding real estate services on attractive terms. This is a great time to look for a Realtor who will deliver the best service and the best price.”

Study Finds That Competition Is Fierce [NAR]

The Department of Justice have sued the National Association of REALTORS® on grounds of anti-trust activity due to new rules governing Internet listings put in place by NAR earlier this year. The DOJ states that the new rule…

…prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting

Initially, REALTORS® were at a loss “to understand why the Department of Justice would bring a legal action” but today have gone on the PR offensive by accusing the DOJ of suing over a policy that was recently scrapped…uh, just yesterday, in fact:

In the 14-page complaint, only one paragraph mentions the new Internet Listing Display (ILD) policy enacted by the association last week. The balance of the document refers to a former policy, known as Virtual Office Websites (VOW). The suit primarily challenges three provisions of the former policy, two of which are not part of the new ILD policy.

U.S. sues realtors group [Reuters]
Justice Sues Over Wrong Policy [NAR]

PIMCO’s Bill Gross included some not-so-kind words about the housing market in his September Investment Outlook letter to investors. His belief is that Greenspan is targeting the housing bubble and that anemic wage growth will frighten home buyers leading to downturn that will feed on itself:

…real estate, not manufacturing, has been the economic impetus in recent years in terms of net growth. Once price momentum slows or ceases for home prices, job growth will slow or disappear in the sector as well. How many more mortgage brokers or real estate agents do we really need or can we legitimately support? Once the cautionary momentum begins, job and wage growth will not support a continuing housing boom, leading to further caution and an economic slowdown at the minimum.

Also included is a nifty chart (below) that seems to indicate that your newly-minted real estate agent likely has some experience on a factory floor somewhere.

Investment Outlook 9/05 [PIMCO]

Seven and eight percent sales commissions are popping up around the New York real estate market according to the New York Post. But a big commission isn’t the only thing enticing brokers to bring buyers around:

Selling brokers use incentives of various kinds to draw in their counterparts, who, in turn, draw in the buyers,” says Prudential Douglas Elliman broker Harry DiOrio. And lately, he notes, he’s seen an increasing number of incentives offered. Today, some brokers are fetching higher commissions, plasma TVs, airline tickets, hotel rooms, and, in the case of a multimillion-dollar mansion, a brand-new luxury car.

Sellers could offer more money to listing brokers for a variety of reasons–to ensure a quick sale, to attract more buyers in a softening market, etc. But brokers in the story swear it’s only temporary during the slow season.

CLIMBING COMMISSION [NY Post]

A new loan product in the Bay Area looks to join interest-only loans as a favorite punching bag for the bubble crowd:

CMG’s new mortgage product, the “Home Ownership Accelerator,” sets up the loan like a checking account, whereby a person’s regular income is directly deposited each time they are paid and deducted from the balance of the loan. The person can then write checks against the loan for day-to-day expenses and other bills, which pushes the balance back up.

Broker rolls out new mortgage [Marin Indy Journal via Lenderama]

Not sure if this is a scoop or not, but intriguing if you’re plugged into real estate blogging. Terra Non Firma may have uncovered plans for a Los Angeles version of the popular real estate blog, Curbed. We’re big fans of the gang at Curbed NY and, if true, can’t wait to read their edgy musing about real estate in yet another city we don’t actually live in.

curbed comes to CA? [terra non firma]

Robert J. Schiller, a Yale economist, appears in the NY Times again and “predicts that prices could fall 40% in inflation-adjusted terms over the next generation and that the end of the bubble will probably cause a recession at some point”. Yikes. However, what burst our bubble the most was learning that real estate is fake:

“A whole lot of the price increases you see in houses is imaginary, because it’s just inflation,” said Mr. Eichholtz, a professor at Maastricht University. “People say, ‘I have a house. It protects me against the economic imbalances or misfortunes of the country.’ The big lesson is that real estate does not give you the protection that people think it does.”

Be Warned: Mr. Bubble’s Worried Again [NY Times]