Real-estate industry rocked by $1.8 billion verdict

Good morning. Let's muddle through the midweek together. Today’s newsletter is 643 words, a 3-minute read.

1. Jury awards $1.8 billion in realty case

A federal jury ruled yesterday that the NAR and several large brokerages had conspired to artificially inflate the commissions paid to real estate agents.

The Realtors’ group and brokerages were ordered to pay damages of nearly $1.8 billion. The verdict allows the court to issue treble damages, which means they could swell to more than $5 billion.

• Under the verdict, home sellers would no longer be required to pay their buyers’ agents, and agents would be free to set their own commission rates, which could be slashed in half or less.

• Before heading to trial, both Re/Max and Anywhere Real Estate opted to settle, with Re/Max paying $55 million and Anywhere Real Estate paying $83.5 million.

How the ruling plays out remains to be seen, but N.A.R. said it plans to appeal the verdict, and in an internal memo sent to some members, the current N.A.R. president, Tracy Kasper wrote, “We remain confident we will ultimately prevail, this case will likely not be settled for a long time.”

2. Same lawyers sue more brokerages

Minutes after the verdict, another class-action lawsuit was filed against other residential brokerages, also related to buyers’ agent commissions.

The complaint, filed by attorney Michael Ketchmark, names Compass, Douglas Elliman, eXp, Redfin, Weichert Realtors, United Real Estate, and Howard Hanna Real Estate Services as defendants.

The suit is much like the Sitzer/Burnett case filed against NAR. It alleges that brokerages conspired to force sellers to pay buyers’ brokers, and inflated those commissions. We should expect more suits to follow.

3. Real estate stocks plunge following the verdict

Shares of Zillow fell 6.9%. While the company doesn’t rely on commission income directly, its core business is selling marketing services to buyers’ agents. Opendoor stock fell by 9%.

Brokerage shares also sank, with Compass Inc. falling 6.2% and Redfin Corp. dropping 9%, but recovering back to -5.7% by closing.

4. Catch up quick

💸 loanDepot’s new FHA DPA program lets borrowers put zero down. (MarketScreener)

🗂️ WeWork reportedly on the verge of filing for bankruptcy. (TechCrunch)

🏡 Builder incentives are creating a surprising surge in new home sales. (Fortune)

✍️ Biden’s AI order pushes bank regulators to curb bias: Explained. (BloombergLaw)

5. Home prices set record with a seven-month streak of gains

A national gauge of prices increased 0.9% in August from July, according to seasonally adjusted data from S&P CoreLogic Case-Shiller. Cities reaching all-time highs include New York, Boston, Miami, and Atlanta.

Higher borrowing costs have weighed on potential buyers and limited the number of homes for sale, with owners becoming reluctant to list properties and give up lower interest rates. Tight inventory has helped push up prices.

Regional differences are substantial. On a year-over-year basis, the three best-performing metropolitan areas in August were Chicago (+5.00 percent), New York (+4.98 percent), and Detroit (+4.8 percent). Chicago has topped the leaderboard for four consecutive months, and New York moved up this month to the silver medal position. The bottom of the rankings still has a western focus, with the worst performances coming from Las Vegas (-4.9 percent) and Phoenix (-3.9 percent).

The Midwest (+3.9 percent) continues as the nation’s strongest region, followed by the Northeast (+3.8 percent). The West (-0.9 percent) and Southwest (-0.8 percent) remain the weakest regions.

☀️ See you on Friday!

Coming up: The Federal Reserve is poised to hold interest rates steady for a second meeting later today, while leaving open the possibility of another hike as soon as December.

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