The Morning: The Realtors’ big defeat

Plus, Vladimir Putin, pandemic school closures and Irish crushes.

View in browser|nytimes.com March 18, 2024 SUPPORTED BY By David Leonhardt Good morning. We're covering the significance of a real estate industry settlement — as well as Vladimir Putin, pandemic school closures and Irish crushes. In New Jersey.  Tony Cenicola/The New York Times 'They laughed at me' Free-market economic theory suggests that the American real estate market should not have been able to exist as it has for decades. Americans have long paid unusually high commissions to real estate agents. The typical commission in the U.S. has been almost 6 percent, compared with 4.5 percent in Germany, 2.5 percent in Australia and 1.3 percent in Britain. As a recent headline in The Wall Street Journal put it, "Almost no one pays a 6 percent real-estate commission — except Americans." If housing operated as an efficient economic market should, competition would have solved this problem. Some real estate brokers, recognizing the chance to win business by charging lower commissions, would have done so. Other brokers would have had to reduce their own commissions or lose customers. Eventually, commissions would have settled in a reasonable place, high enough for agents to make a profit but in line with the rest of the world. That didn't happen. Instead, an average home sale in the U.S. has cost between $5,000 and $15,000 more than it would have without the inflated commissions. This money has been akin to a tax, collected by real estate agents instead of the government. The situation finally seems to be ending, though. On Friday, the National Association of Realtors, the industry group that has enforced the rules that led to the 6 percent commission, agreed to change its behavior as part of an agreement to settle several lawsuits. The settlement is important in its own right. Americans now spend about $100 billion a year on commissions. That number will probably decline by between $20 billion and $50 billion, Steve Brobeck, the former head of the Consumer Federation of America, told my colleague Debra Kamin. There is also a broader significance to the settlement. It's a case study of a central flaw in free-market economic theory. That theory suggests that capitalist competition can almost always protect consumers from businesses that charge too much. To be clear, competition is indeed a powerful force that frequently makes both consumers and businesses better off. That's why capitalist economies have such a better record than communist or socialist economies. Just look at South Korea and North Korea. (Are you familiar with the satellite images that compare the two Koreas at night?) Or consider the recent economic struggles of Venezuela. Market competition, however, isn't the panacea that free-market advocates claim. Sometimes, businesses can amass enough economic power to squash competition — as real estate brokers did. Power meets power Decades ago, the National Association of Realtors set the standard commission at 6 percent, to be split between an agent representing the seller and an agent representing the buyer. If a home seller tried to negotiate, an agent would often issue a veiled threat: You won't find a good seller's agent to work with you, and buyers' agents won't show your house to clients. Joanne Cleaver, for instance, tried to negotiate with agents when selling her house last year in Mint Hill, N.C., a suburb of Charlotte. "They laughed at me," Cleaver told The Times. The Realtors' hardball tactics succeeded because they operate much of the network that's crucial to the housing market, such as the database of listings. They could keep out agents who would have competed on price. In Chicago. Jamie Kelter Davis for The New York Times The solution to this concentration of economic power often requires political power — namely, antitrust enforcement by the government. After years of refusing to change their tactics, the Realtors' agreed to a settlement now because they were vulnerable to government action. A turning point was a federal trial last year in Kansas City. The jury found that the Realtors' association and several large members had conspired to keep commissions high and ordered them to pay at least $1.8 billion to home sellers in the Midwest. The verdict quickly led to more than a dozen other lawsuits. The Justice Department has also been investigating the Realtors. The new trustbusters That investigation is part of Washington's new focus on the problems with concentrated economic power. Since the 1980s, antitrust enforcement has been unfashionable in the U.S. Free-market economic theory has been ascendant instead. But the results of this laissez-faire era have been disappointing for most Americans. Businesses have grown larger, and corporate profits have surged. Incomes and wealth for most Americans have grown only slowly. In response, both liberals and conservatives have recently shown an interest in antitrust (as I described in a recent newsletter). The Biden administration has embarked on a competition agenda to reduce credit card fees, drug prices and more. The administration has become more aggressive about challenging mergers, too. Some Republicans also worry that big business has become too powerful. This new movement remains in its early stages, and it's too soon to know how successful it will be. But the real estate settlement looks like the movement's biggest victory yet. For more: The Times explains how the process of selling a home may change. Continue reading the main story A MESSAGE FROM APPLE CARD Reboot your credit card. Apply now to see your credit limit offer without impacting your credit score. Terms apply. Apply now THE LATEST NEWS Russia Vladimir Putin Alexander Zemlianichenko/Associated Press Vladimir Putin won another six-year term. The election was the least transparent in recent Russian history. Before he died, the opposition leader Aleksei Navalny called on his supporters to go to the polls at midday yesterday to protest. Many did. Putin spoke about Navalny publicly for the first time since his death, which Putin described as an "unfortunate incident." Many Russians support Putin, but it's not clear what they would do if they had real alternatives. Read Paul Sonne's analysis. Here are other takeaways from the vote. Israel-Hamas War Israel said it was conducting a military operation in Gaza's largest hospital, Al-Shifa, because Hamas had returned there. Benjamin Netanyahu told CNN that Senator Chuck Schumer's call for elections in Israel after the war was inappropriate. "We're not a banana republic," Netanyahu said. More International News In the Red Sea.  Kenny Holston/The New York Times American sailors and pilots are fighting the Houthis in the Red Sea. See onboard their aircraft carrier, the Dwight D. Eisenhower. Niger's junta ordered American troops to leave the country, revoking its military cooperation deal with the U.S. Gambian lawmakers will decide whether to overturn a ban on female genital cutting. Experts said such a move would undo decades of work. In the Philippines, people can make around twice the nation's minimum wage playing crypto-earning games at internet cafes. In Serbia, Jared Kushner plans to build a luxury hotel and apartment complex. Donald Trump was interested in the site more than a decade ago. A.I. Elon Musk released the computer code behind his version of an A.I. chatbot, Grok. He has argued that such important technology shouldn't be controlled solely by tech giants. Homeland Security will be the first federal agency to incorporate generative A.I. in its work, including to help combat drug and human trafficking. Education School closures did not significantly stop the spread of Covid and caused long-term academic harm for children, experts say. Migration to New York is affecting school enrollment. A fight over space between two schools highlights the problem. Other Big Stories Game time.  Hilary Swift for The New York Times Few smartphones, some beer: In the Hudson Valley, members of the Bruderhof — a 1920s Christian pacifist movement — limit exposure to the outside world. Chicago started to evict some migrants from shelters. Officials said more than 2,000 people would be removed by the end of April. In an interview with The Times, former Justice Stephen Breyer discussed Dobbs, originalism and the decline of trust in the court. Opinions Sci-fi-like solutions to climate change, such as blocking the sun, are becoming normalized. Before we trust them, we need to learn more, Jeremy Freeman writes. The army reservist who committed a mass shooting in Maine had brain damage. The U.S. needs to protect its soldiers from injuries to protect its civilians, Daniel S. Johnson writes. Gail Collins and Bret Stephens discuss TikTok and Mike Pence. Here is a column by David French on Trump Republicans' about-face over TikTok. For readers of The Morning, enjoy exceptional savings for a limited time. Take advantage of the complete Times experience with our sale. Save on your first year of unlimited access to news, Games, Cooking and more. Subscribe now. MORNING READS Barbara Walters with Col. Muammar el-Qaddafi in 1989. Kimberly Butler/Getty Images Collection: People recently browsed and bought attire owned by Barbara Walters, the trailblazing TV news anchor. Raunchy Christians: A surprising number of evangelicals are rejecting modesty and turning toward the risqué. Chasing powder: At the Alta resort in Utah, anyone over 80 skis free. Relationships: Many young people are tired of dating apps. Metropolitan Diary: When the city stopped talking. Lives Lived: Margaret Grade was a neuropsychologist who made a sharp career pivot and opened a cozy, eclectic California inn that served farmers as well as film stars. She died at 72. SPORTS March Madness: UConn, last year's champion, was named the No. 1 overall seed in the men's N.C.A.A. tournament. In the women's bracket, undefeated South Carolina is No. 1. Women's bracket: Iowa is a No. 1 seed, but experts say it has a particularly tough draw. Caitlin Clark's squad may have to face L.S.U., which beat her team in last year's championship, to reach the Final Four. Go deeper: The Athletic broke down strengths and weaknesses for all 68 teams in the men's field and the women's field. Join our pool: We've made groups on ESPN's Tournament Challenge for readers of The Morning to compete with one another. Here are links for the men's and women's tournaments. The winners will receive a Times-themed prize. (After you've completed your brackets, let us know with this Google form so we can contact you if you win.) Continue reading the main story A MESSAGE FROM APPLE CARD Reboot your credit card. Apply now to see your credit limit offer without impacting your credit score. Terms apply. Apply now ARTS AND IDEAS Paul Mescal, left, and Andrew Scott. Ryan Pfluger for The New York Times Big Irish energy: Irish actors have starred in some of the biggest movies of the past year — including "Oppenheimer" and "Saltburn." In doing so, Paul Mescal, Andrew Scott, Cillian Murphy and Barry Keoghan have ushered in a moment for Irish crushes. TikTok is now full of videos analyzing why, as one said, "Irish men just hit different." Read more about the internet's latest infatuation. More on culture At the Isabella Stewart Gardner Museum, Boston. Tony Luong for The New York Times Decades ago, two men stole a Vermeer and three Rembrandts in the largest art theft in history. Today, the frames still hang empty. Paul Simon, the singer and songwriter, invited a filmmaker to capture the making of his album "Seven Psalms." Simon struggled on camera because he was losing his hearing. THE MORNING RECOMMENDS … David Malosh for The New York Times Pan-sear chicken with a garlicky, lemony anchovy sauce. Score these deals at REI. Limit your exposure to forever chemicals. Take our news quiz. GAMES Here is today's Spelling Bee. Yesterday's pangrams were nonapology and polygonal. And here are today's Mini Crossword, Wordle, Sudoku and Connections. Thanks for spending part of your morning with The Times. See you tomorrow. — David P.S. On the inaugural episode of the podcast "The Liberal Patriot with Ruy Teixeira," David Leonhardt talked about the 2024 campaign and more. 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