Lawsuit settlement not a panacea for rising house prices

In this photo capture from a video, New Hampshire Association of Realtors president Joanie McIntire, right, discusses with NHAR counsel Matt Johnson, left, ramifications from a lawsuit settlement involving the National Association of Realtors.

There is speculation that the settlement of a lawsuit involving the National Association of Realtors (NAR) and how commissions are paid will drive down the price of residential real estate.

Not necessarily, according to Joanie McIntire, president of the New Hampshire Association of Realtors (NHAR).

“The lawsuit itself was never about home prices, which will continue to be set by traditional market forces, such as interest rates, inflation, supply and labor costs, and the ongoing inventory crisis we face in New Hampshire,” said McIntire, a broker with Coldwell Banker J. Hampe Associates.

“Our concern remains the shortage of available housing that is continuing to make homeownership more difficult than ever for those workers needed to make an economy thrive,” she added.” We’re encouraged by any downward pressure on pricing, but the real impetus for that is a focus, both locally and at the State House, on less restrictive zoning in the state.”

The class action lawsuit — which was filed, heard and decided in Missouri — argued that the National Association of Realtors and some of the country’s largest brokerages conspired to inflate commissions on home sales to an artificially high level.

The NAR agreed to settle the case for $412 million. Also, under the settlement terms, sellers’ agents will no longer be required to offer to share their commission with buyers’ agents, typically between 5% and 6%. This uncoupling of commissions from home prices, according to some experts, should ease home prices since they believe that commission costs are factored into home listings prices. Lower commissions could mean lower home prices, they say.

The news comes at a time when New Hampshire’s median price of a single-family home reached $500,000 for the first time ever.

According to McIntire, the settlement preserves the choices consumers have and have always had. Sellers can still offer compensation for buyer broker services — the offer simply can’t be communicated on the MLS.

The MLS is the multiple listing service, a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another’s listings of properties for sale with the goal of connecting homebuyers to sellers.

The NAR in a statement said it agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.

The NAR also said it agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home.

New Hampshire has already been doing this, according to McIntire.

“New Hampshire is ahead of the curve as one of 18 states which already mandates the use of a written buyer agreement, which clearly defines compensation,” she said.

A video discussion between McIntire and Matt Johnson, legal counsel to the NHAR, lays out some of the issues brought by the settlement.

Johnson said he expects the changes wrought by the lawsuit to start taking effect in July. He noted the need for a written buyer agency agreement, which New Hampshire already requires.

As for the MLS part of settlement, Johnson said: “Under the settlement agreement you are no longer allowed to put offers of compensation in the MLS. That is going to be forbidden. However, you are still allowed to put offers of compensation on your company website for your own listings. Nothing in the settlement agreement precludes that.”

As to what agents can put on the MLS listing, according to Johnson, “is that the seller will offer or consider concessions, so long as it is not conditioned on that money being paid to a buyer agent.”

He emphasized, as did McIntire, that compensation is negotiable.

“There is no standard commission rate. Commission remains negotiable under the settlement, as it has always been,” said McIntire.

The newest monthly report from the NHAR finds that the median price of a single-family home climbed to $500,000 in April, an all-time high in New Hampshire and 11.6% more than April 2023.

The number of closed sales, meanwhile, was down by 2.2% compared to last year.

The median price approached half a million in June 2023 when it reached $499,000.

Prices indeed fluctuate, but consider this. In February 2012, the median single-family price in New Hampshire was $177,500. That’s a 181% increase in 11 years.

The affordability index tied its worst rating ever of 59. The affordability index is a measure of an average person’s ability to purchase a house in a particular region, based on housing prices and income in that region. A value of 100 means a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.

An index of less than 100 means the property in a particular area is less affordable.

The price of a residential condominium in April was $409,950, up 14.4% from last year. The number of closed sales went up by 9.2%. The affordability index for a condo was 73.

The April trends report shows Rockingham County was the continued leader as priciest county with a median home price of $665,000. Within Rockingham County, the Seacoast region is pricier still.

The Seacoast Board of Realtors reported a single-family median price of $795,000, the highest since November.

“Our market continues to be constrained by lack of single-family inventory and stubbornly high mortgage interest rates,” said Lynn Lagasse, president of the Seacoast Board of Realtors. “Interest in Seacoast real estate remains as strong as ever and multiple offer scenarios are abundant.”

With a single sale of $986,000, Coos County had the highest price condominiums in the state in April.

The NHAR, as with many policymakers and watchers in the state, has been monitoring what the NH Legislature is doing this term in order to help solve the affordable housing dilemma in the state.

It cited and hailed the House passage of two bills — one that allows a property owner greater ability to construct an accessory dwelling unit (ADU), including one which is detached from the primary structure (HB 1291). The other (HB 1399) allows property owners two residential units allowed by right, without special application, discretionary review or a hearing, if the proposed development meets certain requirements.

NHAR said current law allows a municipality to require that the property owner seek a conditional use permit or special exception from the town in order to gain approval for an ADU. HB 1291 would allow an attached unit “by right” while still allowing a town to require a permit or special exception for a detached ADU. This change should reduce costs for the property owner.

Existing law also currently allows towns to limit the size of the ADU to 750 square feet. HB 1291 expands that to 1,000 square feet for the first unit and 850 square feet for the second unit. Under HB 1291, towns retain existing authority over septic, water, parking, building codes, and all setback requirements.

Both bills are now under review by the state Senate.