Our system of MLS’s is a wonder of businesspeople getting together to expand competition and serve the public, while also serving their own interests. Broker reciprocity is a wonderful idea that has created an enormous real estate industry which, because real estate agents are all independent contractors, also remains vibrant and competitive. So, you’d think that a Republican administration who loves big business would leave us alone, right?
Nah. Not so much.
The FTC has been trying to treat the MLS as a publicly-owned and regulated utility (which, as a stockholder of our local MLS, truly amazes me) by telling these organizations who can be members and trying to have their rules and regulations overturned in court. In October 2006 the government filed suit against a Detroit-area MLS because they had prohibited “exclusive agency” listings from appearing in the database. The current crop of discount brokers love to use these type of listings for a variety of reasons, but to try and get around legal jargon, these type of listings basically turn the MLS into a bulletin board for properties that are glorified “For Sale By Owner” properties. Most of these brokers want you to contact the owner directly to set up showings, and if a buyer contacts the owner directly, that owner has no obligation to pay any commission. Since buyers routinely surf housing sites that pull information directly from the MLS, the possibility that a buyer could contact a Seller directly and completely avoid the services of a real estate agent, or paying for those services, is fairly high.
Now, there are quite a few “FSBO” websites out there, so there really is no reason why the stockholders of the MLS should have to provide another opportunity for Sellers to evade paying for their services. Thank goodness a judge has finally had a chance to look this case over and basically agree with the real estate industry. Judge Stephen J. McGuire found that the government’s assertion that the MLS had tried to “unreasonably” restrain or “substantially” lessen competition had not been adequately proven, since discount real estate services still remained widely available in the region.
The story, in today’s version of the Wall Street Journal, is some good news in the middle of a bleak real estate outlook. The government will appeal the case, unfortunately, but a first round win is a sweet one, indeed.
Today’s Wall Street Journal gives us a glimmer of hope as far as existing home inventory is concerned. According to figures compiled by Zip Realty, inventory in eighteen metropolitan areas (including Washington and Baltimore) declined in November.
Washington had a significant 4% decline in housing inventory. Since its the heat from rising Washington prices that have made Baltimore’s cauldron boil over the last few years, this figure is at least as important as the fact that Baltimore’s inventory also declined by a smaller — but still larger than average — 2.6%. This is the second month in a row that monthly inventory figures have declined. While this is a normal trend for this time of year, its nice to know that there is SOMETHING about the current market that is returning to NORMAL.
Unfortunately, today’s Baltimore Sun contained information that is more worrying. The story has to do with a dispute between RealtyTrak and local auctioneers over the amount of increase in foreclosure auctions in the Baltimore marketplace. Local auctioneers (probably the more accurate source of information, in my opinion) estimate that foreclosure auctions have increased on the order of 48% in 2007 over 2006. RealtyTrak came up with the amazing figure of 344% increase for the same period.
As someone who routinely peruses the auction page of the Sun, I do not believe that the number of auction ads have increased by that order of magnitude. But 48% is still ominous, dangerous, and something that we hope does not continue as we head into the spring.
The last few months have been discouraging, to say the least, in the way that the economy and our government has responded to the sub-prime mortgage issue, and the spreading instability in other areas of credit and financing.
At first blush, the concept of preventing the re-setting of mortgage rates for a period of time could have the effect of reassuring financial markets and the consumer that the worst is over. I’ve felt for quite awhile that the main problem — at least in our market in Baltimore — is that the consumer was scared to jump in. Consumer confidence numbers have sagged to very low figures, even as rates stayed reasonable and the employment data remained strong.
But preventing these financial instruments from re-setting on schedule might also just kick the can down the road until the end of the freeze. (Might that be long enough to prevent the current Administration from bearing the political brunt of the resulting damage to the economy? I hate to be so much of a skeptic… and yet, nothing in Washington in the last 7 years have given me any reason to be charitable.)
The other result could very well be that the investment funds and institutions who bought into these financial vehicles because of the out-year prospect of increasing return on their investments might also be destabilized by the freeze of rates at their introductory levels. This could have the opposite of the intended effect, further increasing the uncertainty and moving the country into a full-fledged recession.
How nice it would have been if there had been some regulation of these investment practices at the start. Wall Street will always find a way around current regulation, it seems, to create some new product that blows up in people’s faces (after the traders have made their commissions, of course!).
It should be an interesting winter.