Boomer’s Blog

A three-year standoff between the U.S. Justice Department (DOJ) and the National Association of Realtors (NAR) over the association’s attempts to virtually monopolize its multiple listing service (MLS) data is one legal hurdle away from resolution. Both litigants have consented to a settlement agreement just weeks before the case was slated for the Federal docket in Chicago.

DOJ launched its anti-trust suit against NAR in 2005, over anti-competitive policies revolving around NAR’s proprietary MLS database listings of real estate properties for sale. Keeping the listings under wraps, the Fed said, keeps consumers’ costs artificially high and inhibits competition among traditional and online brokers for home and condominium sales.

WWW Infoscape Changed while NAR Battled DOJ Anti-Trust Charges
In its lawsuit, DOJ aimed to open access to the data beyond NAR’s broker network to include consumers, data aggregators and property discounters who don’t meet state-mandated minimum requirements for providing real estate services to sellers.

While DOJ and NAR have been fighting it out, Web 2.0 technologies offering free on-line property information have transformed the real estate business and quietly built a mighty market presence that imperils the relevance of the traditional real estate business model. They also bring into question the future of the 6 percent broker commission.

Innovation, Free Online Data Jeopardize NAR’s Proprietary Model
By democratizing real estate data, Web sites such as Redfin, Trulia and Zillow have shattered NAR’s MLS-intrinsic business model and showed online real estate shoppers a new and easier way to do business: A way that doesn’t require buyers to sit in the back seat of a broker’s car, or sellers to trust that their broker always has their best interests at heart.

Online Brokers Win Right to Distribute Electronic Tear Sheets
NAR has been widely criticized for allowing brokers to block their listings from being displayed on Web sites that offer discounted commissions or standard broker fees on real estate transactions. In the settlement with DOJ, NAR agreed to adopt policies that don’t discriminate against on-line real estate brokers. Specifically, the agreement requires that online brokers be able to provide the same information online that traditional brokers offer to folks who visit their offices.

Pending final court approval, a process likely to take three months or more, the settlement agreement could provide consumers with easier access to MLS data, which could enhance their market research and help them save money on real estate purchases. It also could alter some current trends in how MLS data are obtained and used in the virtual real estate marketplace.

The changes NAR agreed to likely won’t have a dramatic impact on the real estate marketplace as a whole, but it might affect those who have capitalized on NAR’s ongoing stabs at keeping MLS data secret.

Realty Times predicts that the following practices are likely to change dramatically when the settlement agreement is finalized:

• Lead generation services such as Lending Tree may have to stop filtering MLS data through broker shell companies.
• Data mining companies such as Home Buyers Marketing (HBM2.com) may have to stop reselling MLS data for profit.
• More open access to MLS data could detract from the credibility of values attached to property listings in real estate communities such as Zillow.

Registration Requirement Reinstated for MLS Data
Also as a result of the settlement agreement, NAR says it will reinstate an updated version of its virtual office Web (VOW) policy, and resume requiring customers to register before they can search MLS home listings online. NAR says it rescinded that policy in 2005, when its provisions were first challenged by DOJ.

As a growing number of homeowners dangle over foreclosure’s jagged edge, many lenders have historically been slow to approve short sale deals, but there are signs that they’re changing their ways.

The short sale is a long-standing investment technique that can benefit buyers, lenders and homeowners alike. According to the National Association of Realtors (NAR), Short sales currently account for about 18 percent of overall home sales. But as the housing market continues to stall, some major lenders and loan servicers are streamlining their processes for accepting short sale deals, and this may make short sales a more viable option for investors than it has been in the recent past.

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The National Association of Realtors (NAR) has issued more startling data regarding the U.S. housing market that may serve as a spoiler alert for sellers hoping the season will blossom in Spring. Here are selected highlights of NAR’s most recent report:

National Market Overview
Overall, February homes sales slid nearly 24.0 percent from the same period last year. Sales of existing homes fell nearly 13.0 percent in 2007, to 5.65 million, the largest decline in 25 years.

• The median sales price for single-family homes and condominiums dropped 8.2 percent in February from last year, to $195,900.
• The median price for single-family homes dropped nearly 9 percent from a year ago: the worst decline in 40 years.
• Total housing inventory rose 1.0 percent at the end of March to 4.06 million existing homes available for sale. This represents a 9.9-month supply at the current pace, up from a 9.6-month supply reported in February.
• Single-family home sales fell 2.7 percent to a seasonally adjusted annual rate of 4.35 million in March from 4.47 million in February, and are 18.4 percent below the 5.33 million-unit pace reported in March 2007. The median existing single-family home price was $198,200 in March, down 8.3 percent from last year.
• Existing condominium and co-op sales rose 3.6 percent to a seasonally adjusted annual rate of 580,000 units in March, up from 560,000 reported in February, but still 25.5 percent below the 779,000-unit level reported for last year. The median existing condo price was $219,400 in March, which is 2.8 percent lower than March 2007.

Regional Snapshots
Data indicate a that a mix of market conditions prevails throughout the U.S., but areas showing healthy price gains include Des Moines, Iowa; Austin, Texas; and Durham, N.C. Because the slowdown in sales from last year’s rate is more pronounced in expensive areas than in low-cost markets, the national median price is suffering. Regionally, home sales rose in the Northeast and West but fell in the Midwest and South.

• Regionally, existing-home sales in the Northeast rose 2.2 percent to an annual pace of 910,000 in March, but are 18.8 percent below figures for March 2007. The median price in the Northeast was $284,300, up 4.6 percent from a year ago.
• Existing-home sales in the West rose 2.2 percent in March to a level of 940,000 but are still 22.3 percent below a year ago. The median price in the West was $285,100, which is 14.7 percent lower than it was in March 2007.
• In the South, existing-home sales fell 3.5 percent to an annual rate of 1.92 million in March and are 20.0 percent below sales closed in March 2007. The median price in the South was $167,200, down 7.1 percent from last year.
• Existing-home sales in the Midwest dropped 6.5 percent to an annual rate of 1.16 million in March, and are 15.9 percent below last year’s rate. The median price in the Midwest was $152,600, down 5.3 percent from March 2007.

MSNBC: Stimulus Act Offers Hidden Perks for Landlords
The new federal Economic Stimulus Act offers a provision for landlords and commercial tenants that has not yet been widely publicized. Congress has increased the amount of construction costs that can be written off in the first year for improvements on commercial or residential rental properties. With the change, landlords and commercial tenants can now write off 50 percent of “qualified leasehold improvements” in the first year alone, if the improvements are completed by the end of this year; the rest can be written off in declining increments over 15 years. In previous years, only 2.5 percent of the costs of those improvements could be written off in the first year and the declining increments spanned over three decades. The new “bonus depreciation” schedule provides faster relief by reviving the more generous depreciation rules that were in place after the turmoil that followed the terrorist attacks on Sept. 11, 2001.

New York Times: JP Morgan Feeds the Bear
JP Morgan has quintupled its offer to buy troubled investment bank Bear Stearns. The sweetened offer of about $1 billion, is intended to win over stockholders who vowed to fight the original fire-sale deal, brokered last week by the Fed. Under the new terms, JP Morgan would pay $10 a share in stock for Bear, up from its initial $2 a share — a figure that represented an estimated one-fifteenth of Bear’s going market price.

Reuters: Newly Formed Penny Mac to Feast on Distressed Mortgages
Money management firm BlackRock Inc., and hedge fund Highfields Capital Management are backing a new firm that will buy up distressed mortgages, betting that investors are ready to snap up bargains in the beaten down sector. The new company, Private National Mortgage Acceptance Company, which will be known as PennyMac, plans to raise capital from private investors and will help borrowers restructure loans to avoid foreclosure. Penny Mac will star Stanford Kurland, who spent 27 years at mortgage giant Countrywide Financial Corp., as its chief executive officer and Morgan Stanley global residential mortgage veteran David Spector as its chief investment officer.

U.S. News and World Report: Fed Frees Mac to Supersize Mortgage-Backed Value Meals
A week after restrictions were eased on Fannie Mae and Freddie Mac to allow them to gobble up a minimum of $200 billion in mortgage-backed securities, the federal home loan banks have been freed to follow suit.

Forbes.com: Bank of England Snubs Mortgage-Backed Securities from Ailing Banks
The Bank of England has rejected pressure to follow the U.S. Federal Reserve in buying beleaguered mortgage-backed securities from banks that have been hard hit by the credit crisis.

Bloomberg: Existing U.S. Home Sales Rise In February
In defiance of many analysts’ predictions, existing home sales rose in February for the first time in more than six months. For some, his unexpected spike in activity eases concerns that credit restrictions and falling prices would diminish market demand.