NAR and Real Estate franchises HomeServices of America and Keller Williams were found guilty by a federal jury in Kansas City of colluding to inflate Real Estate Commissions. After 2 weeks of testimony the Jury spent 2 hrs deliberating before laying down a guilty verdict which ordered defendants to pay $1,780,000,000 ($1.78B) in damages that could potentially be tripled by the judge. Appeals are forthcoming and it may take years to settle the case. To appeal you typically need to post bond, which is a percentage of the penalty, and could be very hefty in this case. It’s worth noting that the DOJ previously investigated NAR for Antitrust but withdrew so a broader investigation could be conducted without restriction. Anywhere Realty and RE/Max were originally named in the case but decided to pair back their relationship with NAR and settled for $139 Million. A final ruling hasn’t been issued but it is possible that cooperative compensation could be altered or banned nationally. This could mean home sellers would only be responsible for paying the listing agents commission, and homebuyers (who rely on quality representation and are struggling to find funds for down payment and closing costs) could be forced to pay buyers agents out of pocket for their services. Alternatively, it could simply add more disclosures to the process or reduce commissions.

Mortgage Rates improved nicely this week (0.5% – 0.75% on some programs) in the wake of lack-luster job reports. Rates are up approximately 0.5% from this time last year.

Jobs – the BLS Jobs Report reported 150,000 job creations in October (weaker than estimates of 180K) and they also made downward revisions to the prior two months totaling 101,000 jobs. Average weekly hours worked declined to 34.3 hours, the lowest number since April of 2020. Weekly earnings rose 0.2% and are up 3.2% year over year, a 0.3% decline from the previous report. This shows that wage pressured inflation is declining, a good sign for mortgage rates.

Manufacturing – the ISM Manufacturing Index came in at 46.7%, a significant drop from the 49% last month. Employment dropped to 46.8% and prices dropped to 45%, all readings pointing to contraction in the sector.

Fed Meeting – the Fed unanimously paused their rate increases for the second consecutive meeting. Powell did leave the door open for a hike on their last meeting of the year (Dec. 13th) but they will be evaluating the next jobs report and inflation reports.

Mortgage Applications to purchase homes fell 2% and are down 22% year over year. Refinances declined 4% and are down 12% year over year.

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