The Big Equations

The real estate industry braced for major changes after the National Association of Realtors (NAR) settled a $418 million lawsuit last year, but so far, homebuying and selling look largely the same.

The settlement, which took effect in August 2023, was supposed to make commissions more competitive by banning sellers from offering compensation to buyer’s agents in MLS listings and requiring buyers to sign agreements outlining their agent’s pay. Many expected these changes to lower fees and shake up the industry, but commission rates have remained around the same 5%-6% range as before, according to agents and market experts.

While there’s now more transparency in how commissions are set, most sellers are still covering the cost of buyer’s agents, and the practice of buying or selling without an agent hasn’t gained much traction. Critics have long pointed out that U.S. real estate commissions are much higher than global averages (which are typically between 1% and 3%), but the NAR insists that fees were always negotiable. Despite the hype, the expected “earthquake” in real estate has turned out to be more of a tremor, with little impact on overall housing costs so far.

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Job Market Analysis = Lower Rates?

Logan Mohtashami, a highly regarded writer from HousingWire, has been emphasizing labor over inflation since late 2022, and his latest analysis suggests that while the job market is softening, it’s not collapsing.

The February jobs report showed 151,000 new jobs, with unemployment ticking up slightly to 4.1%, signaling that while hiring is slowing, we’re not at a breaking point yet. Mohtashami predicts 2025 job growth will range between 133,000 and 151,000 per month, but warns that if we dip below 133,000 and labor force participation remains strong, unemployment could rise above 4.3%, a key trigger point for Fed intervention.

Government jobs, which played a big role in last year’s employment numbers, won’t have the same impact in 2025 due to reduced economic spending. Meanwhile, residential construction jobs are stagnating, as builders face challenges from high mortgage rates and potential lumber tariffs.

According to Mohtashami, mortgage rates dropping to 6% could help builders stabilize, but this year is shaping up differently than recent ones. He emphasizes that labor market trends are more crucial to watch than inflation, and the private sector’s ability to absorb displaced government workers will be key. Historically, mortgage rates have adjusted to support builders, but with supply and margin pressures mounting, 2025 presents new risks for both housing and employment.

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