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This week’s big news in real estate was the settlement of the class action lawsuits directed against the National Association of Realtors (NAR) and several of the largest brokerages and brands in the industry. NAHREP released a statement yesterday in response to the news. At the center of the settlement was an agreement to eliminate any reference to broker cooperation on MLS systems nationwide. Broker cooperation is a century-old practice in which a listing agent who represents the seller of a property shares their commission with the agent who brings them a successful buyer.
Despite what you may have heard from the media, if the settlement is approved, this would be a modest victory for both realtors and homebuyers. The lawsuit’s deeply misguided proponents, including Steve Brobeck from the Consumer Federation of America, have been calling for an outright ban on broker cooperation. In that regard, they didn’t get what they wanted.
Brobeck and company believe buyers should pay for their real estate agent services out of pocket rather than through seller proceeds. I have blogged that the ban on broker cooperation would be devastating for Hispanics and other first-time home buyers. Regarding affordability, we are in the midst of the toughest housing market in U.S. history. Forcing buyers to pay out-of-pocket for an agent to represent them through the process would only exacerbate affordability challenges and put homeownership out of reach for millions of would-be buyers. Despite what Brobeck and CFA think, a ban on broker cooperation would benefit no one but the wealthiest among us.
Per the settlement terms, listing brokers can still share commissions with buyers’ agents, but the terms of the cooperation must be communicated outside the MLS. It becomes solely a transparency issue, and I’m not sure what that accomplishes.
The terms of broker cooperation can still be communicated on broker websites, social media, or by phone. I have said all along that sellers have had the power to negotiate commissions for decades, and discount brokerages have been a thing for years. Yet, commissions have remained fairly stable for one primary reason: real estate agents provide value that equals or exceeds the price sellers pay. Full Stop.
All things considered, the impact of the settlement is a setback for an industry that has operated fairly efficiently for decades, but when it is all said and done, Latino homebuyers will still be the driving force in the market. Below are ten reasons why Latino homebuyers will overcome this new obstacle.
The Home is the Center of the Family Experience
Latinos have a passion for homeownership. There are many reasons for this, but family drives almost all aspirations for Latinos, and the home is the center of the family experience. This will never change.
Resiliency: Latinos Have Repeatedly Overcome Tough Setbacks
Despite inventory shortages, affordability challenges, and other headwinds, the Latino homeownership rate has increased for nine consecutive years. Latinos will move to where there are more affordable homes and will often pool their resources with other family members to achieve their homeownership goals. Compared to past obstacles, this setback is a mere speed bump.
Rising Incomes and Educational Attainment
Latino household wealth has tripled in the last eight years, and income and educational attainment are on the rise – easily outpacing the overall population. Rising wealth and income means stronger purchasing power.
Latinos Gravitate to the Tangibility and Utility of Real Estate
While Latinos underinvest in the stock market and retirement programs, they have shown a strong affinity for investing in real estate. Unlike the stock market, real estate is a tangible asset with a high level of utility. Expect Latinos not only to drive first-time homebuyer activity but also investments in real estate in the coming years.
Latina Real Estate Professionals are Emerging as an Economic Power
Never bet against Latinas. For the first time ever, NAHREP has Latinas in all three top national leadership roles: president, president-elect, and immediate past-president. Nora Aguirre, Oralia Herrera, and Nuria Rivera are not only great leaders, but they are also powerhouse real estate professionals and business owners. The Real estate sales industry has always had an abundance of successful women. Still, the market hasn’t seen anything like they are about to see with the emergence of Latinas in the industry.
Latino Work Ethic is Second to None
Latinos have the highest workforce participation rate in the country. Call it grit, toughness, or whatever you want, but Latinos have shown time and again that they are willing to do just about anything to get what they want.
The Youth of the U.S. Latino Population
The Urban Institute estimates that 70% of net new homeowners over the next 20 years will be Latino, and the primary reason they believe this is the youth of the U.S. Latino population. With an average age of 30, Latinos are just entering their prime homebuyer years.
Latinos are Quick to Adopt New Technologies
The youth of the Latino population also means they are the quickest to adopt new technologies. As new technologies impact how people buy and sell real estate, expect Latinos to respond quickly to technology and innovation in the market.
Immigrants Get the Job Done
Immigrants have higher rates of business ownership and homeownership than most U.S.-born populations. I have said many times that Latino immigrants don’t come to this country because they love our food, music, or culture; they come for one reason and one reason only: for economic opportunity, and purchasing a home is at the top of that list.
Supply and Demand Principles
People will always need a place to live, and as our population grows, there will be a strong demand for homes. Since the 1990s, population and household formation growth in the U.S. have been dominated by Latinos. This trend is not expected to stop anytime soon. Latinos had a net gain of 377,000 homeowners in 2023, the largest single-year gain since 2005. As the market stabilizes, expect Latino homeownership gains to double and even triple in the coming years.
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