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.

National Real Estate Investor: Bloated Condo Market Ills set to Worsen
It appears that the days of the seven-figure condo are history. Investors in residential condominiums should sell before an additional new 100,000 units join the massive national inventory later this year, analysts say. The bottom line for investors is the growing glut on the condo market likely will hit the hardest in some of the markets that saw the greatest price gains during the boom. Chicago, for example, is expected to add 16,000 condos this year; New York has 14,600 condos currently under construction and Phoenix has 13,000 condos nearing completion. These units are expected to flood the burgeoning condo marketplace, already plagued with excess inventory, high construction loan delinquency rates, rising construction costs, fewer buyers and falling prices. Even platinum markets such as San Diego, Las Vegas, San Francisco and south Florida are expected to take huge hits on condos because their only interested buyers are likely to be investors waiting for prices to hit rock-bottom. In the past month, condos in downtown Miami have gone to auction with no minimum bid requirements. Many entrepreneurs consider this to be an engraved invitation to invest. But there are as many survivors of the price drops and and painful recovery in the wake of the Resolution Trust Corp. disaster. These folks warn that investors who wait for higher prices on their condo units may be in for a long, strange trip.

CNN: Wall Street Bets on Superman to Help Builders?
This report explores the Superman-like, “Bizarro World” disparity between the losses reported by many major home builders and their earnings on Wall Street. Analysts usually advise a “buy” when earnings are expected to be low, yet many of these stocks have rallied. Are fund managers throwing caution to the wind when they bet on a rebound in this sector? According to analysts at FactSet Research, which tracks institutional investments, several funds at Fidelity, T. Rowe Price, Manning & Napier and State Street have increased their stakes in Lennar, KB Home and other home builders in Q4, 2007. Also, Citadel Investment Group, a Chicago-based hedge fund, has shown increased holdings in KB Home, Ryland Group and Toll Brothers. These data suggest that the bottom for home builders may have an upside for investors willing to risk exposure to housing market kryptonite.

Bloomberg: HUD Secretary Quits Under Fire
Targeted by a federal investigation and under fire by legislators, U.S. Housing and Urban Development (HUD) Secretary Alphonso Jackson resigned today. Jackson has no immediate replacement, and the news comes as the White House works to ease the housing crisis. As HUD Secretary, Jackson advocated an industry-led program to encourage lenders to voluntarily refinance troubled loans rather than using federal funds to tackle the mortgage crisis. He came under fire in the U.S. Senate when he refused to answer questions regarding accusations that he improperly directed his staff to steer federal housing contracts to his associates. The Justice Department is investigating whether Jackson told the truth when he denied directing federal housing contracts to friends and political allies. The National Journal reports that investigators also are probing Jackson’s ties to a golfing partner who received more than $485,000 to manage construction work in New Orleans after Hurricane Katrina in 2005. Jackson received his post in 2001, and is credited with building the FHA Secure program, which increased federal financing for sub-prime borrowers.