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August 12, 2005

The Realtor Racket

An editorial in today's Wall Street Journal attacked Governors of numerous states for protecting realtors from competition.

The editorial asks, "Why are Governors and state legislatures enacting regulations to make buying and selling homes as expensive as possible?"

Good question. They go on, "Real estate brokers are under increasing price pressure from Web-based home-buying services and other discount brokers. With state lawmakers so often bellyaching about the decline in 'affordable housing,' one would expect politicians to salute these low-fee entrants to the market.

Instead, state legislatures and real estate commissions -- which happen to be populated by Realtors -- are enacting laws that make price competition illegal and thus treat Realtors as if they are members of a closed shop union."

But the best part of the article comes later. "If any industry is ripe for this, it is the $70 billion-a-year real estate brokerage market. Yes, fees have fallen modestly to about 5.1% on average in recent years. But a new study by the Brookings Institution and American Enterprise Institute concludes that in an unimpeded free market, fees should be dropping much faster -- particularly amid a real estate boom that has doubled home values over the past decade. Many, if not most, of the services that Realtors provide don't vary with the sales price, so the percentage fee should fall as home price rises." (emphasis added)

To download the study referred to in the Wall Street Journal click here. The paper is by Robert Hahn, Robert Litan, and Jesse Gurman of the Joint Center. Posted by the Joint Center at August 12, 2005 9:22 AM