ICYMI: Why Are House Sales Such a Bad Deal for Every American?

REX CEO & Co-Founder Jack Ryan writes in RealClearMarkets about the fight to reform real estate and challenge the National Association of Realtors' anticompetitive behavior

In 1996 the Department of Justice unsettled Wall Street as it dismantled a hidden system of price-fixing among stock traders on the NASDAQ. I was there. I worked at Goldman Sachs as a partner at a time when we realized this entire system was holding back consumers’ access to personal wealth and limiting the overall market’s success. The case remade the American public’s relationship with the stock market and allowed companies new levels of freedom to raise capital and innovate.

The DOJ investigation began with an academic article from two finance professors studying an odd convention within the NASDAQ pricing system: stocks were never priced at eighths. Instead of pricing at the more accurate $20.125, for example, a stock was priced at $20.25. As new traders learned the system, “professionalism” served as rationale for the “pricing agreement”. A dealer would be disparaged by peers or supervisors for the “unprofessional” appearance of a stock price at an eighth. Professionalism was all pretext  — the practice slyly dramatically increased stock spreads and broker profits.

The convention that was designed to and continues to succeed in quelling price competition resembles what the National Association of Realtors (NAR) does every time a home is bought and sold in America. Practices like NAR’s rules against price competition are the driving cause behind the Department of Justice’s antitrust lawsuit just filed against the NAR; the filing alleges that the NAR “established and enforced illegal restraints” on the industry. Who is the NAR? It is made of the firms that you may think as your friendly local realtors: Coldwell Banker, Keller Williams, Redfin, Compass, RE/MAX, Century 21 and the others.

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