I have been getting asked a lot lately about how business is going amidst high interest rates and the recent class-action lawsuit in Missouri where the plaintiffs have received a judgment for billions of dollars as remuneration from multiple large real estate agencies. The answer for me—as with many other established agents—is that we are as busy as ever, while newer agents tend to be suffering.
True, there was an accompanying shock in response to the rate hikes that saw our countywide home sales drop to 79 homes in April, down over 50% year-over-year (YOY) from April 2022 when 180 homes had sold. This of course made headlines, but many people are unaware of how the numbers rebounded in the subsequent months as buyers and sellers adapted to the new market conditions. By June, our countywide sales had jumped to 150 homes, compared to 143 homes in June 2022. This overage was repeated in July (125 vs 119), and the YOY numbers in the months since then have been similarly stable.
So why are many agents reporting continued low activity? There could be a correlation with the increasing number of offers we are seeing contingent on the sale of the buyer’s property. When you consider that these parties often have the same agent represent them in both the purchase of their new home and the sale of their old home, it results in both of those transaction sides being handled by a single agent. We also see increasing numbers of buyers dealing directly with the listing agents for the homes that they find online, cutting the number of agents involved in those transactions in half as well.
These types of trends result in an increasingly smaller pool of established agents who handle the majority of sales, while newer agents who tend to live on buyer leads they get off of home search portals see a sharp drop in new buyer activity as established property owners tend to drive more of the sales. Not surprisingly, this has many larger brokerages starting to downsize in spite of the number of transactions remaining largely consistent with where they were a year ago.
In the midst of all this, we are seeing headlines in publications such as the Wall Street Journal proclaiming “The Way You Buy a House is About to Change” in response to the recent class action ruling alleging conspiracy to inflate commissions under the traditional system where the Seller ends up paying the commission for both sides, when in fact this type of system is what makes buyer agency affordable for those who typically need it the most.
It is premature for the headlines to be already calling the results of that suit when the decision is under appeal, and if you follow the money funding that lawsuit, it could reveal a larger industry player with a profit motive to cut Realtors out of transactions, as opposed to a small group of plaintiffs in Missouri. And in any event, it strikes me as particularly poor timing to be attacking buyer agency in light of the current market conditions, when you consider its impact on newer agents already struggling to establish the very real value they can bring to what is many people’s largest purchase of their life.
