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Beyond the Arches

Beyond the Arches #17: What’s the future of realty commissions? Learn about the NAR settlement and how to invest in real estate tech

March 28th, 2024 By Emily Norwood

Featured Story

NAR lawsuit settlement and commission impacts

Everyone who buys or sells a home knows that Realtor commission is a factor in your total price. For decades, rules set by the National Association of Realtors (NAR) have set the customary commission at 6 percent of the selling price. 

Exploring Trends in Real Estate: A Look at the National Average Commission Rates from 1991 to 2022.

Complainants brought a series of lawsuits alleging that the NAR’s commission and broker payment policies violate antitrust laws. With the settlement of these suits and NARs agreement to pay over $418 in damages, the new question is: What comes next for home sales and and agents’ fees? Some speculate the changes to the commission structure could result in significant savings for home buyers and sellers.

Breaking Down the Total Economic Impact of the Real Estate Sector in 2022: A Pie Chart Analysis of Income, Expenditures, Multipliers, and New Construction Contributions.

In other news affecting the housing market, the Federal Reserve this week maintained its current rates, but indicated plans to proceed with three scheduled rate cuts in the next three quarters of the year. The decision came after the Fed’s two-day policy meeting to discuss the central bank’s rate-setting. With the federal funds rate at its highest point in over 23 years, homebuyers, auto consumers, credit card holders, and investors will closely watch the rate situation and its impact on consumer and commercial lending.

Charting the Path of Monetary Tightening: A Timeline of Federal Funds Rate Hikes from 2022 to Early 2024.

How to invest in real estate technologies

Changes to the structure and business model of the real estate industry will spur innovation and opportunity within this important investment sector. Even before these changes take shape, there are plenty of opportunities for investors interested in real estate and loan servicing technology:

  • There’s stiff competition for homes in most residential markets. With low supply, buying without a sales contingency (the need to sell your house to fund the new property) can give buyers an edge. Knock offers buyers innovative bridge loan solutions to fund their new purchase without relying on immediate funds from selling their current home. The Atlanta, GA-based startup features Sean Black, CEO and founding member of Trulia, Jamie Glenn, fellow Trulia founder and COO, And former Zillow Product Design Lead Allie McKinley.
  • AI-powered discovery is a popular and versatile use of new technology. With LookyLOO, consumers in the real estate relocation market can use AI insights to find the perfect neighborhood to call home. The platform offers a one-stop shop for buyers and renters looking to pull up stakes and find a perfect property in a new locale. LookyLOO’s team includes multi-exit founder and CEO Edmond Dilworth, award-winning Chief Creative Officer Mike Fung, and Chief Marketing Officer Michele Hobbs. Michele’s work with Fortune-500 brands includes Cisco, eBay, Lowe’s, Merck, and Microsoft. 
  • With many finance industry businesses moving into the cloud, it’s no surprise that mortgage services use technology to produce better outcomes for lenders and customers. Sway Compass, chosen as Forbes 100 fastest-growing startups for Mexico, is a cloud financial infrastructure startup whose innovative API helps mortgage originators and homebuilders make the best decisions for ranking and approving potential borrowers. Sway Compass’s team features CEO Joel Antonio Cruz Garzia, Chief Research Officer Litzia Marivi Contia, and financial solutions designer and Chief Compliance Officer Diana Isabel Cruz Garcia. 

On Our Radar This Week

  • Bitcoin has had a tumultuous week. The price of a coin dipped to around the $60,000 mark before regaining its over-$65,000 price on positive news from the Fed. Although cryptocurrency is decentralized, its price still responds to economic and traditional market conditions. Other prominent coins, including Ethereum, DogeCoin, and Solana, experienced similar fluctuations. Cryptolinked stocks like Coinbase and MicroStrategy fared better. Crypto investors are now closely watching the imminent halving of Bitcoin mining rewards (the money earned using your PC’s processing power to help build the blockchain decentralized ledger).
  • The S&P 500 closed at a historic high 5,200 mark for the first time in response to the news that Fed rates would continue to support expected corporate profits. The rates, back on track for the first time since early 2020, remain at current levels on indications that consumer prices are coming down. Calmer prices prompted the Fed to ease off of further rate increases. 
  • UK inflation rates are cooling. The inflation rate fell to its lowest level since September 2021 and is trending toward meeting Bank of England targets in the next few months. Global unrest, food and energy supply chain disruptions due to the Ukraine invasion, and energy concerns have stoked inflation, particularly in the energy and food sectors. This new low is a welcome reprieve from rates reaching 6.7% just six months earlier.

Macro Bites

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