What is the change in the US real estate market and how could it affect you?

The real estate market in the United States could soon change course. In 2023, home purchases fell to their lowest level in 30 years due to various factors, ranging from the rise in mortgage rates to prohibitive home prices.

However, this trend could change thanks to a landmark multibillion-dollar antitrust ruling against the National Association of Realtors (NAR), the largest trade group in the US real estate market.

The expected change in the US real estate market

NAR has agreed to a settlement that would get rid of commissions collected by real estate brokers, which usually amount to up to 6% of the purchase price.

The $418 million settlement is expected to benefit a group of home sellers, who filed a lawsuit against NAR charging that the organization’s rules unfairly inflated agent commissions.

This new ruling seeks to put an end to a series of guidelines and standards established by the NAR that have been one of the main causes of the rise in housing prices. The commissions shared between the buyer’s and seller’s agents may be reduced, suggesting a possible significant drop in prices.

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Ruling to shrink agent commissions

Typically, commissions are 6% and are usually split by the seller’s agent and the buyer’s agent. The revised NAR rules will give home buyers and sellers some leeway to negotiate lower commissions.

Currently, the average price of a home in the United States is $387,000, 6% of which would be about $23,000 in commissions. Such a considerable amount causes an inevitable increase in the price of a home. The new ruling also seeks to eradicate other agent tactics that are anti-competitive.

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How will the changes in the real estate market affect you?

Experts on the subject assure that the drop in commissions will be reflected in a corresponding drop in sales prices, resulting in more affordable homes for American buyers. According to projections from TD Cowen Insights, the new measure is expected to reduce commissions by between 25% and 50%.

However, there is another side to the story. Some in the real estate sector believe that by reducing commissions, there is the possibility that buyers will now have to pay that extra percentage directly to their agents. This payment would no longer be part of the mortgage, meaning that it can not be deferred.