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I have always thought that one of the reasons housing snow-balled in "appreciation" so expotencially over the decades was due to the added costs of commissions that kept raising prices. With people moving every few years, cha-ching.. tack that commission cost on to the price that the buyer eventually pays.
Any thoughts?
That's an interesting theory...but I don't buy it.
As a buyer, I could care less whether or not the Seller pays a commission to a real estate broker. I'm only going to pay what I feel the property is worth. They can inflate their asking price all they want--due to improvements they may have done to the property, or due to their anticipated broker's fee--but they need a Buyer who is willing and able to purchase the property at that inflated price. People do not necessarily recoup the cost of their improvements (it's rare that they ever do) and people do not necessarily recoup the cost of selling through a broker. Despite arguments to the contrary, it is still (predominantly) the Seller who pays the commission. And no only truly NEEDS to pay a commission--they can sell or buy themselves.
Instead, I think the primary cause of rising home prices has been normal inflationary pressures, coupled with increased pressure through simple supply and demand. In more recent years (pre-bubble), I believe that housing prices were primarily driven by the criminal activity of banks and mortgage companies (e.g. creating "mortgage-backed" securities and feeding them with sub-par mortgages), and by developers and builders who put up subdivision after subdivision as if there were no tomorrow. Although all of the real estate industry shares some of the blame, it was primarily the mortgage-induced over-building which led to the bubble bursting. During this time, profits also became more lucrative as builders reduced the quality of their houses (and they've generally been going down anyway, IMO). I had family members who bought a house from CENTEX in 2005, and it is astounding how cheaply it was constructed--in terms of quality of materials, not efficiency!
Again, if I buy a house for $106,000 it's because I valued it as such, and not because the Seller may have paid a $6,000 commission. Same with a FSBO price.
You forget that real estate commissions are negotiable between broker and client, so there is not a fixed percentage a seller has to pay to sell his or her home. Blaming house price increases on commissions just doesn't make sense, if you buy a home and you haven't lived there long enough to build up any equity or if home prices went down since you purchased you would have to pay costs out of your own pocket to sell. The home prices will only bring what the market will bear. Putting the blame on real estate brokers just isn't correct.
The #1 culprit to the housing collapse was government meddling, plain and simple, as well as Alan Greenspan's incompetence.
Realtor commissions had nothing to do with either the boom or the bust; that can all be laid at the feet of Uncle Sam.
Your right Mr. Tea Party, if the banks had more freedom (and less regulations) to peddle their fraudulent mortgage backed securities and credit default swaps, all of this could have been averted.
I have always thought that one of the reasons housing snow-balled in "appreciation" so expotencially over the decades was due to the added costs of commissions that kept raising prices. With people moving every few years, cha-ching.. tack that commission cost on to the price that the buyer eventually pays.
Any thoughts?
Good question. Here's another one for your perusal. Is nationwide inflation due in part to the part you play, by getting paid for whatever it is you do for a living? tsk. Please, work for free and help us all out.
Good question. Here's another one for your perusal. Is nationwide inflation due in part to the part you play, by getting paid for whatever it is you do for a living? tsk. Please, work for free and help us all out.
Good question also. I don't work, but the majority does. I would think that nationwide inflation would be caused more from our spending habits and an over demand for products vs our salaries. However, that said, when we did quit spending, prices didn't seem to decrease very much.. (esp in relation to the devaluation of real estate markets) And now the gov't has to increase spending to help bail us out of this out of balance economic situation. It's a big mess.
I have a lot of questions about the inefficiencies of our spending habits. This one in particular always bothered me.
No. Commissions have been around for ages. That had very little bearing on the bubble.
We all know the real reason for the housing bubble.
1. Wall Street greed/no real oversight on quality of the loans
2. Consumer greed (buying homes they couldn't afford or taking more debt than they could pay back).
It's a combo of 1 and 2 that share the blame.
Looks like you sure bought into the government and occupy mantras, fact is the reason for the housing bubble had as much to do with the government as it did with the consumer greed or the bankers.
Last edited by jwiley; 12-16-2012 at 08:25 AM..
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