Dave:
Today we’re diving into the housing market headlines that are dominating the news. I’m your host, Dave Meyer, and I am joined today by our usual panel of experts, Henry, Kathy and James Henry. Happy birthday, man.
Henry:
Thank you very much, man. I appreciate that.
Dave:
I’m going to out you because I know you went to Vegas, so tell me, were you up or down, up or down on the weekend? I mean,
Henry:
Which day
Dave:
Down? Yeah,
James:
Yeah, down for sure. Yes.
Kathy:
Okay. All right,
James:
James, how are you? I’m doing good. I get my fulfillment out of real estate. I don’t need a gamble on the table.
Kathy:
Oh, I don’t know. I’ve been at a table with you, James, and you worked it all out there.
Dave:
Well, James just is immune to losing money. He doesn’t know how to do it. He been at a casino. He has better odds somehow.
Kathy:
Yeah.
Dave:
Kathy, how are you?
Kathy:
I’m doing great. And it was just Henry’s birthday, so he’s probably doing even better or worse.
Henry:
Yeah, getting old is, it’s good and bad, right? You don’t want the alternative, but
Kathy:
Yeah, there you go.
Dave:
Well, I am definitely glad to have you all here to talk about today’s headlines. We are going to be talking about whether right now is actually a healthy housing market. Let’s talk about a niche that is performing really well right now. We’ll also talk about one of the largest markets in the entire country and what’s going on there and more news about the NAR lawsuits and some domino effects that are taking shape because of them. Let’s start off, and I’m actually, I’m going first for once because I want to talk about mine. I was reading an article by one of our favorite guests here on the market, Logan Moi, who works at Housing Wire. He is one of the smartest and most often correct people about the housing market, and I was taken back by the headline where he said that the housing market is actually healthier in 2025, and he goes on to state that basically everything, despite all the noise out there, things are actually moving in a direction that most people would want and most people would consider a healthier housing market.
These are things like demand still going up year over year, despite all the talks of recession risk, the trade war going on, it has fluctuated a little bit, but there are more people applying for mortgages this year at this time of year than there were a year ago. That’s pretty encouraging to me. Inventory is going up, which might slow down appreciation, but as he points out, that’s probably a good thing if we’re getting back to a more normal level of appreciation, and actually surprisingly pending sales are actually up modestly, so we’re starting to see volume recover. Now, of course, we don’t know how things are going to shape up for the rest of the year, but Kathy, let’s start with you. Do you think we are actually in a relatively healthy housing market right now?
Kathy:
I really do. You have to kind of look at wages. We’ve seen wage growth, we’ve seen price growth slow down, mortgage rates have kind of been bouncing all over the place, but there was a moment where they were pretty low and there were lots of mortgage applications. Just right before the Liberation Day terrorists were announced, the rates were pretty low. They went back up, but now they’re kind of coming back down again for fear of recession. So no, it doesn’t surprise me because one of the things that Logan says a lot is home buyers aren’t Wall Street people. They’re not looking to do quick trade, quick money. They’re looking for a home.
When you look at demographics alone and the largest generation is that first time home buyer age between the ages of 30 and 40 something, this is when you settle down. Basically you look for a home, you want a yard, and if you’re going to make that commitment, you’re really looking at more as lifestyle, not I’m going to just buy this and quickly sell it. They’re not flippers. They’re looking for lifestyle. So yeah, I mean it just kind of makes sense that there’s more inventory. It’s maybe not as great for sellers in some of those markets, but it’s great for buyers.
Dave:
James, what about you? What do you consider a healthy housing market?
James:
Yeah, I think everyone’s definition is different depending on what you’re trying to do right now, buy and hold, not the healthiest market. Still pricing is not where it needs to be, haven’t seen the rent. Growth rates are still too high, but overall, I think we’re getting a lot more balanced and people are just getting used to it. I will say, I don’t know. I think it’s going to go into a buyer’s market, which could be healthy for a lot of people looking for a house, but I mean this summer I think is going to slow down quite a bit. We’ve seen quite a since the tariffs and the issues with the stock market coming down, buyer demand and buyers actively looking, and we probably lost 75% of showings
Dave:
Really
James:
Pretty quickly
Dave:
Just in the last month or so.
James:
Yes, in the last month, if I look at one listing, we were averaging 15 to 20 in the first couple of weeks when we rolled out, and we’re getting four to five right now on that listing. Oh, wow. Which going into the spring, it was going to be hot no matter what, but that also doesn’t mean that four to five buyers a week is a bad thing either, right. They’re just taking their time to select. So I think for buyers it’s a lot better they can make a decision. I do feel bad for people that have to rush in and buy that house they didn’t really want, but in the short term, if you’re a seller, you need to be prepared to just wait for your number and get used to the new conditions, whether it’s healthy or not. Days on market should not be five days or less.
Dave:
Yeah, exactly.
James:
Days on market should be typically 45 to 60 days, and selling for 10% over list on every house you sell is not reasonable. And so I don’t know if I’d call it healthy, but I would say it’s more reasonable of a market and you just got to really, that’s why it’s really important to hire the right representation, whether you’re buying or selling. They can educate you on what you’re looking at and what you need buy and how you need to structure your offers or how you structure your listings.
Dave:
I guess for me, what’s healthy is there’s some balance between buyer’s market and seller’s market. It’s not good for, in my opinion, the housing market when one party of a deal or in just the marketplace has all the negotiating leverage, and that’s what sellers had for a long time. And even though I think we’re just moving more towards something where there is just some give and take and different properties are going to perform differently, but maybe that’s just me. I don’t know. Henry, what do you think? I
Henry:
Think I’ve been saying this for a while on this show that this is a fairly healthy market. In a healthy market. There’s going to be some level of healthy competition, and you’re starting to see that with new listings increasing over time when people have options, it forces professionals in this space like us to perform better, to produce a better product because we want to make sure that we’re taking advantage of the limited eyeballs and also for your buyers, of course, it’s a healthier market because they can demand better from sellers. Even non-professional sellers have to do things a little differently if they want their product to sell. That’s why I think it was James who just said it. That’s why hiring a professional to help you understand what it is you need to do as a seller to get your house sold and then actually doing those things. I mean, that’s what you want in a given industry. A lot of people, this is their largest financial decision that they’re going to make. I think it is healthy when they have an appropriate amount of time and there’s healthy competition on the market for them to make the best choice for them. This is what you should want. That
Dave:
Said, I am curious if demand is going to stay as high as it has, and we’ve seen in this article that Logan wrote, he was showing that it has been up year over year. And just so everyone knows, I think the best way to measure demand in the housing market is something called the mortgage purchase application index. Basically how many people are applying for mortgages each and every week, and it’s still up over 2024, which is what’s so encouraging. It has been falling a lot for the last couple of weeks, and so it’s getting closer to the 2024 number and we’ll see what happens. We’re talking a lot about potential recession that doesn’t necessarily turn down demand. If rates start to go down, it could go the other direction, so we’ll have to see. But I was encouraged because when I saw rates start to go up like a month ago, I was worried, not necessarily for me or my own investing, but this whole industry has just been rocked for the last few years with super low transaction volume, and it’s tough for the whole industry whether you’re an agent, an investor, a loan officer, whatever.
And I was hoping that the spring season would still materialize, and so there is some good news here whether what happens at the rest of the year, we don’t know. All right, so that was my story. Let’s move on now to our second story, which Henry, you are up now. Tell us about it.
Henry:
Yes. The article and or interview that I brought is related to student housing. So it says that student housing stays strong, a recession resilient niche, so this is done by CNBC, and what they’re essentially saying is that student housing has come around as a new-ish more standout asset class, and it’s been performing very well. They have very high occupancy rates. In the article, it says that pre-leasing for the 20 25, 20 26 academic year has reached 94.5% occupancy, and the Yardi data is showing that it could be up as high as 99% occupancy when September comes. And on top of all this, seeing rent growth, I know James mentioned that rent growth hasn’t been really going up across the country, but in this particular niche, rent growth has been going up. For example, the national average rent per bed rose to over a thousand dollars, $1,001 per bed.
Dave:
What For college kids?
Henry:
For college kids. Wow.
Dave:
I am glad I don’t go to college. Dude, a thousand of bed not afford that.
Henry:
A thousand of bad. And the other thing is there’s supply constraints. In other words, universities only have so much university housing, and so when we’re talking about this student housing, what we’re talking about are third party companies coming in and building student specific housing next to the universities. And I live in a college town or close to a college town, and we have seen this over the past. I’d say I’ve been here for 10 years and it wasn’t until about five years ago where I started to see more student housing, third party student housing going up. I actually have an eight unit building that’s a stones throw away from the University of Arkansas. And all around it, student housing has been going up and these things are full. They are full. I specifically know of a company who is building more student housing now and is applying to get permits and approvals to build even more student housing.
And when I sat down and talked with them, they said that enrollment is actually going up, which I think this article kind of hints in that college enrollment is going up. And then you have some other factors that play into this because we all know college sports is a big frick fracking deal, and with the NIL and college players now being able to make money while they’re playing college sports, I think that’s going to play into players not leaving to go to the pros so early, which makes college sports more competitive, which will also help enrollment. So I think it’s a pretty interesting niche now. It’s not the most affordable niche to get into as a new investor because you probably can only get into it if you’re going to invest in some sort of fund. You need a lot of money to do a project like this, but it’s just an interesting niche to watch because man, there is a ton of money being made in this
Dave:
Space. Are you saying you just need to have a ton of money or be in a fund to do multifamily? Right, but you could still buy single family homes or small multifamily, right around a college
Henry:
You could buy smaller projects. Yes, that’s what I have. But it’s interesting. I have an eight unit building across the street from the university, and of the eight units, I think only one or two of them are college students.
Kathy:
Interesting. Yeah. Yeah. I cater to the parents of students who like to come and visit their students and they stay in our Airbnb and it’s amazing how many our parents just visiting. You have that too, Henry?
James:
Oh yeah, all the time. Yeah. The thing about student housing, we actually own a lot of student housing. I think we have about a hundred doors, right by Seattle u, university of Washington. And the cool thing about you don’t need a lot of money to do student housing now to build the big complexes going on, there’s a lot of development going on. That’s also why rooms have gone up in rent growth because they’re better quality units that are out there forever. The average rate was like 800 bucks a room because you were really going into a place that had been lived in for 50 years. They played a lot of beer pong and they’re a little beat up and it feels kind of like a frat house inside. Now what’s happened is for our units, we take a single family house and we can renovate that house, so we can buy a single family house pricing and we can install up to eight bedrooms per house by our university.
That allows us to buy a lot cheaper. A house in the area next to University of Washington is going to be about 800 grand, which is expensive, but it’s also an expensive market. A duplex is going to be one three to one five. And so we’ve actually done best because the financing’s a lot easier. You can get traditional financing on them. You can actually bur those properties because typically when you’re renovating into a high caliber, it’s going to drastically increase that value. And then that’s how you get that higher room rent is by giving a better product. There’s a big difference when you’re looking at the comps, whether you’ve got to slap together, painted lived in place, or are you offering a nice living, but there’s definitely high demand in there. You just have to really run it like a business though. If you miss your lease up, you are toast
Dave:
Because
James:
Nobody wants to live next to the RET house as traditional renters. And so you have to have those things. You got to structure your leases, you got to make sure that they are getting leased up in June and getting full for the year, or you can get in deep, deep trouble. And I can also tell you during the pandemic rooming housing and student housing was terrible. Oh gosh, it was the worst of the worst. And that hurt in our portfolio quite a bit, but they’re really good cash cows. They can generate a lot of income on purchase basis.
Dave:
And are you doing rent by the room?
James:
Yeah, we rent by the room or we actually have some that are from overseas and they actually take the whole lease down as a family and then they sub the rooms out and they’re paying for their whole housing and they kind of become the house manager at that point. That’s great. And it’s the best thing because they’re quiet, they kind of run the right house. And so we have two of our buildings like that and they’re actually the easiest ones to run.
Henry:
And you got to check your zoning and your state laws because in Arkansas, we can’t have more than four unrelated people in a house, so you have to go get a special use permit in order to do this kind of living, which is very difficult to get in sometimes. And that’s specific to Arkansas. So if you already live in a place where they do kind of rent by the room model, then this could work for you. But if that’s not something that’s prevalent where you are, you really have to check if you are permitted to use the property in that way.
Dave:
That just seems like one of those things that’s going to change though, Henry. I don’t know. With all this, I feel like that’s one of those things that’s going to get nixed at some point to try and make rent a little bit more affordable.
Henry:
I think it’s a state versus local thing too, because I think the city of the college town that I live in, I think they’re pretty much on board with infill and trying to get more housing. It’s a state rule that you have to overcome.
James:
The real question is, is there a workaround?
Henry:
James always knows
James:
The workaround or really big rooms and then put down some partitions with a couple different beds. Does that work? Can you run with the fort? There’s always some sort of workaround. I was just
Dave:
Describing a prison, James, what are you envisioning
James:
When a college student has to pay a lot for their room so you can reduce their room rate and you give ’em financial freedom? So I look at it as financial freedom, not
Dave:
Yes. Okay, fair enough. Well, I do like this niche, Henry, because one thing that I think people miss, but it’s actually kind of interesting, is that if we are going into a recession, more people go to college or specifically grad school, a lot of people choose to leave the workforce if they don’t think they’re going to get a promotion or maybe they’re not going to get a raise in the next year and they’re like, I’ve been thinking about going to grad school level up my skillset, increase my earning potential, now’s the time to do it. And to me just judging my own behavior when I was undergrad versus grad student, I would much rather rent to grad students is a little bit more mature.
Speaker 5:
Agreed.
Dave:
The brain
Kathy:
Is more developed.
Dave:
Yeah, brain is definitely more developed, went the wrong way in undergrad it was developing and then it declined for a few years. But I think that does create an interesting dynamic, at least for the next few years. If we are in, who knows if we do wind up going into a recession,
James:
And here’s a little hot tip for people that are interested in getting into rooming houses, a great person to reach out to are fraternities and sororities because they’re trading out their buildings and they already have the rooms and they will wheel and deal.
Dave:
Interesting.
James:
There’s a little tip. It’s already built out that way, way less construction. It’s zoned that way and they are constantly consolidating, so it makes for great opportunities on a low price per square foot.
Dave:
This is a new type of motivated seller because at least when I was in colleges, a lot of the frats were getting kicked off campus pretty regularly and then they would have to sell their house. So maybe James, you’re onto something, you need to find out who’s on probation or who’s getting suspended, and then go contact these motivated sellers. Alright, well those are our first two stories here. We talked about how the housing market might actually be healthy right now and a niche of student housing that is very promising in today’s day and age. We have to take a quick break, but we’ll be back with more headlines right after this. Welcome back to On the Market. I’m here with Kathy, James and Henry talking about real estate related headlines. So far we’ve talked about the health of the housing market and student housing. Let’s move on to Kathy. What is the headline or story you’re following this week?
Kathy:
Well, I chose a story from a company you may have heard of, it’s BiggerPockets and it’s Los Angeles Real Estate. Why do people continue to invest there? It was written by Austin who a lot of,
Speaker 5:
Yes.
Kathy:
Yeah, he’s on here. So that caught my eye of course because I now live in the Los Angeles area. I’m from northern California and there was a big comparison that Austin made between the two areas. I just thought it was really interesting. One is because California gets a lot of hate for a lot of reasons and much of it well deserved, but it is the world’s fourth largest economy. That’s incredible. Right?
Dave:
I saw that the other day. That is wild.
Kathy:
It’s crazy. The San Francisco, San Jose Bay area has a 1.2 trillion economy with about 6.7 million people, but the LA Metro has 13 million people so double and yet it has about the same economy. So at 1.3 trillion. So that was interesting. That kind of explains why per capita, there’s so much more money in the San Francisco Bay area than la so keep that in mind. That’s why we keep seeing home prices rise in the San Francisco Bay area, not so much in the city itself and in LA the job market is barely back to 2019 levels. So it’s not necessarily a booming economy compared to NorCal. NorCal is going to get a lot of those AI jobs,
So that’s just going to keep booming. The majority of the Fortune 500 companies in California are Northern California, more Fortune 500 companies than Texas and New York, but most of ’em in northern California. So again, very interesting, but at the same time, the median home price has tripled in the last 12 years since 2012. The median home price was $372,000 in 2012, it is now over a million dollars and you’re not going to get much for a million. So it’s like why? And it’s really hard to explain, but I live here and I see it, and so I am experiencing it and he’s right, even though it’s not the robust economy, it’s like half the economy of Northern California, the appreciation is insane. So is it because it’s geographically constrained? Is it because it’s so hard to bring on new supply now? We have had massive fires with so many 14,000 homes are so gone.
So even more demand. I just see it personally. Like I said, I helped my daughter, I encouraged her to buy a house kind of at the peak at the beginning of 2022. And she was nervous, but she still got the low rates, but the high home price and it was kind of like, well, you’re locked into a low payment, you’re going to be here a long time. If prices go down, it’s okay. You’ve still got that low price, you’re going to be here a while, don’t worry about it. Well, instead, the opposite has happened and the values have gone up tremendously yet the people buying the houses next door to her, their mortgages are double. They’re in the 10, $12,000 for starter home. So I keep wondering, where are these people coming from?
Dave:
Yeah, how do you afford that? That just doesn’t make sense.
Kathy:
How do you afford it? And so I look at the people next to her who, like I said, are paying 10 to $12,000 for their mortgage and Corina’s paying half because she got in at lower price and lower rates just a couple of years ago. But it’s dual income, husband and wife working. And I think because there’s this massive millennial generation that was probably loving living in LA when they were single and ready to mingle, but now that they’re settling down and want to be in good schools and safe neighborhoods, they’re kind of moving into the suburbs outside of LA and those neighborhoods are really taking off. So same thing with our Airbnbs in California and in the LA area, they’re just constantly rented and prices keep going up. It’s crazy. So I can’t explain it, but it was just an interesting article that I wanted to share. I don’t necessarily recommend investing in the LA area, but if you were looking for something different, but there’s one more thing I thought was really interesting, and I don’t think people realize this, that because of the high prices, if you got an FHA loan as a first time home buyer, just putting down 3.5%, you can get a fourplex and that FHA loan will go up to $2.2 million.
Dave:
Wow,
Kathy:
That’s crazy. It’s crazy because 1.2 million is what you can get on a single family on a FHA loan just three and a half percent down. That’s kind of doable. But to get a fourplex where you could rent the other three units out and maybe have your unit for free, you could go up to 2.3 million. That’s crazy. It’s kind of an interesting opportunity.
Dave:
To me, this sort of defies some of my personal beliefs because I look at markets like Seattle James for example, or New York where prices are high, but the economy is just so strong in those markets and there’s no reason to believe that the economy is going to slow down. And so I don’t know, it just worries me to hear this and you hear all this stuff. I’m not as in tune to California politics as you are Kathy, but you hear a lot about how it’s not a great business environment. And so it just makes me wonder if this will end at some point. Or is the weather just that good in southern California that no one will ever leave?
Kathy:
Well, it can’t be that bad. It can’t be that bad a place to do business if it’s the fourth largest economy in the world.
Speaker 5:
That’s
Kathy:
True. You just have to know how to do business I suppose, and you’re paying a lot of tax and rich and I kind of look at each other and we’re like, it’s okay. We’re willing to pay the tax. But if you’re a business owner in California, remember you can take and so you can make it work.
Henry:
I don’t think California is a surprise to anybody. If it’s a place where you want to invest in wealth growth in equity and appreciation over time, clearly I think California is going to continue to go up in value a lot because of what you said. It’s just tough. If you have money to invest, then yes, buying real estate in California, especially if you can get any kind of a discount, you’re going to walk into equity and then continue to see it grow over time. I think that that’s pretty cool. I think the tough part is ensuring those properties or making sure that those properties continue to stay properly insured based on where you are buying that property because the costs have been going crazy. Insurance providers have been pulling out of California and saying they’re not going to
Kathy:
Insure
Henry:
Properties in the States. So you got to watch that.
Kathy:
You just don’t get to have it. You just have to learn how to be a firefighter
Henry:
And you can house hack in California, but you really got to run the numbers on your house hacks in California too, because sometimes yes, you can get that two point whatever million dollars to buy that house hacking property, but sometimes you’re still going to end up covering a portion of that mortgage just for your unit that still might be more expensive than if you go rent something
Dave:
Or rent and then use the down payment to go invest somewhere out of state. I get a lot of people asking me that
Henry:
Question all the time.
Dave:
And to Henry’s point, there’s no right answer. You got to run the numbers. For some people, it might work for some others. It’s not a layup though. There was a time and place where house hack was just like any market, any person go house hack
Henry:
Live for free. But
Dave:
I think markets, James, I dunno what you think like Seattle la, it doesn’t always make sense. It’s not as simple as it once was.
James:
No. I mean Seattle was a lot easier to house hack in, but I mean it just depends on location, location, location, right, price points. And I think when you’re looking at expensive areas like California, you do need to pay attention to what’s going on for affordability, insurance, taxes, those things because it can really squeeze some of the submarkets and the affordability out of there. But when you’re on that coastline, they only make so much of it. And I was there for a little while. It’s awesome. And the reason I invest in California as a flipper is because there is growth. And I can tell you there is so much money there and when you are in an exclusive neighborhood, when I get my Newport Beach flip, someone paid cash for that thing, true cash as a secondary home,
Henry:
There’s levels to this
James:
Thing. And I’ll never see, oh dude, it is real money down there where it’s old and it’s big and it’s deep and it goes in waves and that’s why it’s going to continue to grow. And a lot of that money that floats around and recirculates around California, they’re done paying their taxes on a lot of things. They’ve sold their businesses and it’s just a bucket full of money that they’re moving around for tax purposes. How do I get one? I want a bucket full of money. I don’t get that.
Kathy:
When you’ve got a lot of the NorCal money, gosh, they can make so much money just in
Dave:
Selling a business and tech and stuff. And then they move down.
Kathy:
Well, they just like to have their vacation homes here. It’s just warmer weather and warmer ocean.
James:
Yeah, and that’s the question, if you want to invest in California, should you or should you not? It’s whether you want to deal with the pain that goes with it. Overregulation insurance issues, tough tenant laws, but the growth is there. And just like, I mean, Seattle’s got tough tenant laws too, and it’s not the easiest person to be a landlord in, but the benefit’s there. And if you don’t want to deal with those issues, then go buy in. Some other markets that are great for cashflow, lower entry, the middle America is great for that, but there is a reward, but you got to earn it and you got to be prepared to have some thick skin.
Henry:
I think you got to be prepared to hang on to the property for a substantial period of time as well. Because a lot of what we’re saying about California right now, people were saying about Florida five years ago, but now property values are going down, insurance costs are crazy. People are upside down in their homes that bought recently. It’s the people who bought 10, 15 years ago that are like, yeah, it’s not a big deal. Right? Because 10%, 15% property value decrease isn’t the end of the world for them. So if you’re going to buy in hopes of equity and appreciation, then you got to be able to sit on it for a while.
Kathy:
But I’m glad you brought up that comparison because if you do compare Florida with California, first of all, mosquitoes and bugs, let’s just start there. We don’t have them. They
James:
Love me Florida.
Kathy:
But beyond that, you can build fairly easily. That’s why so many builders poured themselves into the southeast. It’s a lot easier to get it done. It’s not like that here in California. It’s super hard to bring on new supply and as long as the ability to bring on new supply is that difficult with all the regulation, you’re going to have supply demand issues. And I think that’s That’s a fair argument because there’s enough land, there’s land you just can’t build on.
Henry:
There’s land in California, but it’s all designated like national parks and farmland.
Kathy:
Exactly.
Dave:
Yep. Yeah. Alright, well that is our third story. We do have to take one more quick break, but we’ll be right back after this. Look back to on the market here with James Kathy Henry talking about headlines, talked about Kathy’s story. We’ve gotten to the economy and investing conditions in California, the healthy housing market and student housing. James, what do you got for us?
James:
Okay, I do want to premise that this is not a NAR lawsuit article. I know that has been beaten to death, but I think this is important because this is a fallout from that lawsuit and how that went down. So the article I’m bringing in is from HousingWire and it’s Compass files an antitrust suit against the northwest MLS over its CCP. And so what this article talks about, and I think this is why this is important, is after the NAR fallout companies are starting to look at some regulation and going, I think we can challenge this, which they didn’t before.
And so this is why the lawsuit has been filed is Compass. And from what I know from people that work at Compass about six, seven months ago, roughly, they go in the northwest MLS. It is the most strict MLS in the entire nation as far as rules and regulations. We are not allowed to presale coming soon signs. You’re not allowed to market in a property unless it’s inputted into the MLS. And what Compass said was, you know what? I don’t really like that rule, and what’s the worst that can happen? You can fine us. And so from what I’ve heard from some brokers that I know that worked there, they said about six months ago that they want to start marketing listings internally through their office as a presale to a help the seller, but also to get pricing feedback on them to see. So they’re basically trying to sell the listing internally through their office, which is a violation of the northwest MLS. You’re not allowed to do that. Typically, those fines can be anywhere between 250 bucks to $1,500 or actually it goes up to $2,500. I have been fined for this before and I got fined because my sign went up 24 hours early. You’re not even allowed to put a sign up unless it’s been inputted and live on the MLS.
Henry:
Who’s monitoring that?
James:
Oh, they monitor it. Trust me, I get my notices all the time. Northwest MLS is the strictest. And so what Compass said, well, that’s not fair. That is causing sellers to not able to market their properties in the way they want. And it’s limiting the buyer pool and it’s kind of a monopoly. And they decided to just deal with the fines and start this dual marketing purpose three point marketing. The MLS goes, they start fine, and then they go, well, these fines aren’t doing anything. So then they cut the access to their IX their brokerage. So no listings were getting brought into that compass from the northwest MLS, and it was a posture move. And then from there, now Compass has filed a lawsuit challenging these rules, and this is going to be a big deal because this all stems from the nar, these MLS is, they have different regulations per area, and Washington is one of the worst or the most regulated.
And then there’s a few other ones that you are just not allowed to do certain things, which limits the buyer exposure. What brokers have a problem with is they’re losing to wholesalers because some sellers do not want their properties listed for sale. They want to market the property off market, and now brokers are losing to wholesalers and now they’re stepping up and they’re challenging it. And so this lawsuit is going to be very interesting to see because if they do win, this could send a domino effect through other MLSs, not NAR on challenging their rules, which could change the whole landscape for brokers, wholesalers, and honestly for sellers too. I do agree sellers should be able to market and sell their property, whatever, which way they want. And if they want to use a broker to do it, allow ’em to do it. And so I’m eagerly waiting for this and I am curious to see if they end up winning this lawsuit. This could send a shock wave through all thes.
Henry:
But James, I thought the whole point of agents and brokers and rules and regulations was to make sure that we’re doing the right thing for the sellers. But it sounds like all of this, the people who lose in all this are the sellers and the home buyers.
James:
That’s how I feel. Because you never know, the sizzle of an off market property will make people pay a premium sometimes. I mean, a good example, I’ve referenced this before. I gave an offer to an off-market seller. They said, no, we’re going to list it. And I ended up buying that house for 15% cheaper than my offer to ’em on a net on market. So I was the highest offer and the most competitive, and the seller lost 15% because the probate attorney goes, Nope, we’re going to list it. That’s how much they lost by not picking our off market offer in term. And at the end of the day, this is an open trade country. You should be able to sell your house whichever which way you want. I mean, the broker’s working for the seller, not for the
Henry:
MLS.
James:
And if the seller wants you to do that job a certain way, then allow ’em to do it. So I fully do agree with Compass on this one that they need to loosen up, but I am surprised the MLS took such a stance. They’re really trying to keep this firmed up so they don’t lose their traction.
Dave:
Well, it’s their whole business, right? Yeah. I mean, what are they if they don’t hold up these ridiculous laws?
James:
No, and I’m all for the laws and rules. I do think there needs to be, I think a lot of buyers and sellers don’t know what they’re getting themselves into a lot of times. And to have that regulated and controlled and having professionals working with people is essential.
Dave:
Oh, for sure.
James:
But it should be a choice. Yes, there needs to be a seller’s choice. And that’s what they’re saying that Northwest M Ls has pulled away from em.
Dave:
Oh, I agree. I just mean MLSs, of course, they’re going to hold onto this because it’s their whole income is having this exclusivity and being able to dictate what agents are allowed to do. And that doesn’t necessarily really help anyone.
Kathy:
If I were to make a prediction, I think the MLSs are going to be extinct in a decade.
Dave:
I think you’re right, Kathy, but everyone’s been saying that forever and true. It doesn’t keep happening, but it has to happen sometime. All I know is I wish I was a real estate attorney and could work for Compass and just those sue people, the ones who are really winning out of all this, it’s just these attorneys who are probably collecting outrageous fees,
Henry:
Billable hours are going
Dave:
Nuts. Just going crazy. They’re just making tons of money. And you’d have to be a lawyer, which I would not want personally. I know there’s a lot of great lawyers out there, but man, they’re probably cleaning up
James:
Well, and honestly, what a great piece of marketing for Compass though. Hey, we’re working for you sellers. We want to make it to where you can get exactly what you want. We’re here for you. And the MLS is stepping all over. It’s a good way to get yourself in the news too though. They’re good at that.
Dave:
I feel like that’s Compass’s business model. It’s just like, how do we get in the news this week? Let’s sue someone.
Henry:
But that’s my point. The MLS stepping all over them. Yeah, it hurts the agents getting their commission, but it really hurts the sellers. Those sellers have hired people from Compass to help them sell their house, and now they can’t get their properties on the MLS, which means they don’t get the eyeballs that hurts the people that all this was designed to help and protect in the first place.
James:
Well, and if you think about that too, if they’re not allowed to market off market properties as a broker, you have fiduciary duties. You have to stand by wholesalers don’t a lot of times. And so you’re limiting who people can work with too in a set of standards as well. And there’s nothing wrong with wholesalers. I have no problem with that, but I’m just saying you would think you’d want it to where everyone’s going to the people to have more regulation. They have more licensing and more fiduciary duty to that seller than some random wholesaling company. And so they really should open it up because it’s going to actually make it the most fair for sellers and allow sellers to sell it whatever, which way they want.
Dave:
Alright, well that’s what we got for you all today. Thank you all. These were some really interesting stories. I appreciate it. And James, thanks for being here.
James:
This was good news. MLS changes.
Dave:
Yeah, I know this was more positive, I feel like, than a lot of the headlines we’ve been bringing around the last couple of episodes. So it’s good to have a feel good episode from time to time. Kathy, thanks for being here.
Kathy:
Thank you.
Dave:
And Henry, thank you for being here. You can go sleep off whatever happened to you in Vegas, we won’t ask, but you can go sleep at all.
Henry:
Thank you, man. I appreciate it.
Dave:
And thank you all so much for being here and listening to this episode of On The Market. We’ll see you next time.
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