Is a crackdown coming for Realtors?

Make Me Smart October 16, 2023 Transcript

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Kai Ryssdal 

All right, you ready?

Kimberly Adams

Yeah. Let’s go ahead.

Kai Ryssdal

All right, Juan Carlos. Hi everybody, I’m Kai Ryssdal. Welcome back to Make Me Smart where we make today make sense.

Kimberly Adams 

Hello. I’m Kimberly Adams. Thank you, everybody for joining us on this Monday, October the 16th. Happy start to your week.

Kai Ryssdal 

We’ll do some news I should tell you, we don’t have any smiles because we’re both a little cranky. Well, I’m cranky, I won’t I won’t speak for my partner here. Okay. So this news, and then maybe we’ll shoot the breeze on the back end. I don’t even know. What do you got Kimberly Adams news wise?

Kimberly Adams 

Um, I think it’s really saying something that when there is a pro-business stance, and The Wall Street Journal editorial board is like, Nah, man, not we’re not even on board. So The Wall Street Journal editorial board has a piece out, it actually came out yesterday. But it’s about the real estate industry saying Realtors face an antitrust reckoning. So federal trial, starting this week, one of many cases that has been brought against the National Association of Realtors, basically arguing that the whole thing is a scam. And with people who say there is no way that having the, you know, the realtors saying that you must pay X commission, and that the seller has to pay the commission for the buyer and all these things, and they have to be, you know, at 3% or whatever, that that is not anti-competitive practices. And then there are other legal cases, talking about how, you know, they’ve tried to set up alternatives to the multiple listing services, which is what the National Association of Realtors and official realtors use this big database, that having access to that database is sort of how they are able to say that members must follow the rules or you get fined or you get punished. And so there have been alternative setup for this. But you know, the accusations are that the National Association of Realtors will penalize people if they try to use those services, even if they are better. So lots of complaints back and forth. But depending on the outcome of this case, it can could completely upend the way that real estate transactions work in this country, because the fundamental argument is this idea that sellers should have to pay 6% of roughly, of whatever the sale price is, so that each side Realtors get a commission is effectively anti-competitive, and that if left to the open market and not for the National Association of Realtors, that there could be other systems that could save consumers money. And there’s a couple of different cases that are coming up for the courts. This one I believe is with some Missouri and Illinois I think this one is Missouri. Yeah, Missouri home sellers are arguing in a lawsuit, that a rule requiring them to make a blanket officer offer of compensation to any potential buyers broker violates the Sherman Antitrust Act. And I just want to skip to the end of this editorial which just made me chuckle. So maybe there’s my smile. This is The Wall Street editorial board. “We’re no fans of most antitrust suits. But the evidence is strong that realtors practices are classic antitrust violations that harm consumers. The realtors may own the US Congress, but perhaps independent courts won’t be so intimidated.” And what do they mean when they say the realtors may own the US Congress? Well, I went to OpenSecrets which tracks money in politics, and the National Association of Realtors. So first of all, groups themselves like this usually cannot make organizations, can’t contribute directly directly to the candidates and party committees. But they can have affiliated funds or they can have members and all those other things. So OpenSecrets kind of tracked sort of affiliated groups. Anyway, contributions by the National Association of Realtors and their associates $15,589,590 in the 2022 cycle, lobbying aid more than $81 million in 2022, outside spending more than $14 million in 2022 and OpenSecrets ranks where this spending sits relative to other interest groups in Washington or in the country on contributions to political parties and candidates. They’re number 40 out of 31,955 lobbying National Association of Realtors and their associates number one out of the 9,452.

Kai Ryssdal 

Is that right? Is that right? That’s so interesting. Wow.

Kimberly Adams 

Well it is because think about it. You know, realtors can be like the pillars of their communities all over the country. Is they’re, you know, sponsoring yearbooks, they’re running ads in local papers. They’re all over Nextdoor, they’re organizing a first time homebuyer workshops. These are people that we know and most, you know, that you’ve worked with, and they can be your friends. And they’ll say, no little calendars and things like that. And they have a lot of political power. It’s sort of like car dealerships, right. You know, you don’t want to piss off the car dealers, because they have a vast network all over the country. Look, I am not here to trash realtors. I’m not saying that realtors are, by default, bad or anything. But this is a system that has some pretty strong evidence that there are some anti-competitive practices at play here. And it has remained and I remember a couple years ago, I did some reporting, because I think the FTC was looking at it. And I know that there have been, I think, in this Wall Street Journal editorial, they also talk about previous investigations, I don’t know if it was the Department of Justice or another group. But it’s definitely been investigated in the past. And the National Association of Realtors has a bunch of different resources on their own website for their members, as well as some public facing sources, trying to encourage people to say like, this is not how it works, it’s not an anti-competitive, and that by guaranteeing this sort of universal kind of flat fee, it levels the playing field for everyone. One of the arguments they often use is that if not for this system, you’d end up with a lot of what are called pocket listings, where realtors or sellers only advertise to people they want to advertise to, which can contribute to discrimination. And maybe not everyone having access to all of the homes available, because a seller or a realtor would only offer a home to you know, the people that they wanted to. And so any who. Yeah, the Department of Justice had an agreement with the National Association of Realtors in the past. So the Department of Justice is appealing because they didn’t like the way that ruling went anyway, it’s a big deal. And it can fundamentally change the way that real estate works in this country. Depending on how this case shakes out. It’s very interesting to look at what the realtors have to say, very interesting to hear what you know, these plaintiffs have to say, and to see sort of how money and politics can perpetuate the status quo.

Kai Ryssdal 

Yeah, that was a good find. That was a good find. I sort of saw it go by, but I didn’t really click into it. So good for you. That’s yeah, 6% man, I remember. Yeah. And if it doesn’t, if it doesn’t, rankle listeners now way to try to buy a house then, or sell.

Kimberly Adams 

Well, I remember when I was buying my place, I kept trying to figure out, you know, how the incentive works. Like, what possible incentive do you have to help me get the price of my home lower? If that means you make less money? Right. Right. Right. And it just never made sense to me. But would I have been able at that point or would I have been willing at that point, to pay out of pocket, say, a flat fee for the services of someone to do all the things that a realtor did? And then what would that fee have been? And then does that just mean that if you have a ton of money, you get a better experience? You know?

Kai Ryssdal 

I think it does. I think if you have a ton of money it does get you a better experience.

Kimberly Adams 

Yeah, always okay, what’s your news?

Kai Ryssdal 

Alright, so here’s mine is a little dorky, but work with me because it is kind of important. It’s from the Axios Macro newsletter this morning from Neil Irwin and Courtenay Brown at Axios. Really just sharp observers of the macro economy and today of the nation’s finances, I will just read it to you. And then I will discuss, it’s talking about the rising effect the effect of rising interest rates on the government and the government’s fiscal picture. And as we know, the Federal Reserve has raised rates from zero to more than 5% in the past 18 months. What happens when the federal government borrows money is they borrow in various durations, right, everything from one month T bills all the way to 30 year bonds, right? So they borrow on varying scales at varying durations. But what happens is that those bonds come due. And when those bonds come due, the federal government doesn’t just reach into the treasury department and pay those bonds and retire them and call it a day. They can’t do that because they don’t have enough money. What they have to do is issue new bonds, take that money pay off the old one, and then they have that new bond to service at the higher interest rate. So with that as background, here’s what Axios pointed out this morning, some $207 billion in Treasury notes matured this month alone originally issued in 2021, 2020, 2018, ‘16, and ‘13. Here’s the important part, their weighted average interest rate was 1.2%, according to Axios calculation, so across the whole yield curve, from one month to 30 years, if they waited it out, the government was paying 1.2% to borrow money. Here comes bullet point number two, they will be replaced by newly issued debt in the ballpark of 5%. The same thing is on track to happen every month for years to come. So the federal government, as we know, doesn’t retire its debt, it just keeps on borrowing, because that’s the way that Congress has decided to run our finances. The challenge, of course, is that until two years ago, the government and everybody else in this society could borrow for almost nothing. Now, it costs you 5%, and 5%, is more than nothing. And when you’re borrowing trillions of dollars, that really adds up. That’s all I wanted to say. Crazy, right?

Kimberly Adams 

So, you know, I’ve done all these stories about like, what portion of federal spending is actually controlled by the appropriations process and how that compares to like, the portion that we spend on interest on the national debt. And I’m visualizing that pie chart in my head right now. And it’s like exploding in one direction. And that is, that is not good. And I’m wondering what that’s, go ahead. Go ahead.

Kai Ryssdal 

Go ahead. interest on the federal debt this year is $660 billion. Right? So yes, for the coming fiscal year, it will be $850 billion, and not very long after that, it will be a trillion dollars a year just in interest, and growing. Now, eventually, rates are gonna go back down, and we will be the beneficiaries of the yield curve. But in the meanwhile, there’s a freaking there’s a pig going through the Boa Constrictor, that has higher interest rates that is costing the government a chunk of money. Yeah, there we go.

Kimberly Adams 

Ha, there we go. Yeah, that’s gonna cause a lot of consequences. Yes. In a lot of different places. And yes, sort of right. Seeing all sorts of bad things. Okie dokie? Right. We’ll break and then we’ll come up with something else to say. We’ll come up with some kind of some oh, wait, no, we don’t have to do a break. We’re gonna make.

Kai Ryssdal 

Juan Carlos hit that hit that sting. Just to change the pace.

Kimberly Adams

Just to change the pace. Okay I actually do have something that made me smile.

Kai Ryssdal

Okay we actually have 3 or 4 minutes to kill. Go, go ahead. Go ahead.

Kimberly Adams 

You know what, um, so I saw this write up, I want to say it was in Poynter, a newsletter about journalism, about how on SNL this weekend, Pete Davidson, really struck a nice tone, just sort of acknowledging how hard of a week it’s been. And like, just awful, awful things that people have seen and experienced this week, and how sometimes you just have to turn to laughter to deal with traumatic situations. And it’s jumped out at me because one of my friends organizes comedy shows here in DC, and in the area, including the series called the Funny Arabs Comedy Show, and I know her from all the way back when I lived in Egypt. And now she’s in the United States organizing all these comedy shows, and they’re, they’re doing great, and they always sell out. But it’s called the Funny Arabs Comedy Show. And, you know, she was telling me, they were really torn as to whether or not they should even do their show that they had planned this Saturday. And I had already planned to go because you know, want to support my friend and everything like that. And they went ahead and did it. And people were just there saying how important it was for them to be in a shared space where they could find a way to have some laughter have some joy. And everybody acknowledged how rough it was, and that this is a tough time. And, you know, there were some people, even performers who are really struggling to get through their material because they were sad. But everybody was very grateful for the space. And I think that even in the darkest times, the fact that people can find a way to laugh is it’s something worth noting and acknowledging.

Kai Ryssdal 

Yeah, I totally agree. It’s a little bit like I said this on September 11. It’s a little bit like the John Stewart show. When they came back. The Daily Show came back after September 1, 2001, which I mentioned, because just to give Pete Davidson his street cred his father was actually killed on September 11. He was a firefighter. Yeah. And that’s why Pete was, while on the face of it, you’re like Pete Davidson, but then you realize he knows what he’s talking about deep down.

Kimberly Adams

Yeah, yeah. Yeah. All right. I think that’s about as close to a smile as you’re gonna get today. Yep. And by tomorrow, shifting gears, we are going to do our weekly deep dive. And on the, over the next few weeks, we’re going to look at yet another wonderful uplifting topic, which is climate change but also climate solutions. Because we do try to focus on the solutions. That’s why Marketplace has “How We Survive,” shout to Molly Wood and Amy Scott on that. But we’re going to look at some climate solutions starting with nuclear energy. And we’re going to talk about why it’s getting a lot of buzz right now and some of the challenges to revitalizing the US as nuclear energy sector concerns and all the other jobs about it.

Kai Ryssdal 

So until we get to Tuesday, keep the questions and the comments coming in we’re at makesmesmart@marketplace.org. 508-U-B-SMART is our phone number. Make Me Smart is produced by Courtney Bergsieker. Today’s program was engineered by Juan Carlos Torodo. Ellen Rolfe writes our newsletter. Our intern is Niloufar Shahbandi.

Kimberly Adams 

Marissa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts and Francesca Levy is the executive director of Digital.