Transcript of Conference Call with Jack Ryan and John Tamny on the Recent NAR Settlement and the Future of Residential Real Estate

May 23, 2024

On May 13, The Capitol Forum’s Teddy Downey spoke with CEO of REX, Jack Ryan, and RealClearMarkets Editor John Tamny about the recent settlement involving the National Association of Realtors (NAR) and its implications for the real estate industry and homeowners. The full transcript, which has been modified slightly for accuracy, can be found below.

TEDDY DOWNEY: I’m Teddy Downey, Executive Editor here at The Capitol Forum, joined by Jack Ryan, who is the Co‑Founder of REX Homes and began interacting—I think he’s been in communication with the Department of Justice and State Attorney General since 2018 on these issues. He’s discussed price fixing. We had a long call recently with him using very colorful language around this market similarities to OPEC. We’ve had a lot of fun here talking about this. We’re also joined by John Tamny. He’s President of Parkview Institute, Editor of RealClearMarkets, a Senior Fellow at the Market Institute and Senior Economic Advisor to the mutual fund firm Applied Finance Group. Thanks so much for joining us today.

JOHN TAMNY AND JACK RYAN:  Thanks for having us.

TEDDY DOWNEY:  So, they are both authors of a new book entitled Bringing Adam Smith Into the American Home, which challenges the conventional wisdom surrounding homeownership and offers a compelling argument for reevaluating realtor commissions. And I’d love to start off with John. Can you tell us about why you wrote this book and just give us high-level, some of the conclusions that you want to want to share today?

JOHN TAMNY:  Well, it’s a book that I’ve always wanted to write because there’s this myth out there that housing should be the goal. It’s the be all, end all. When, in fact, it’s the opposite. And nothing against the housing and the central market good. We all need to live somewhere. But in a country like the United States, where you’re free to move seamlessly throughout it to the best opportunity, what an odd choice to buy the one asset, if you can call it that, that immobilizes you, that makes it difficult to get up and go to where opportunities are greatest.

We are founded—when Alexis de Tocqueville walked through the United States, toured it in the 19th century, said Americans are restless amid abundance. And that’s what we are. In Italy, it’s nothing to live in the same town that you grew up in, that your parents grew up in and your grandpas. Americans are constantly moving all over. Yet, suddenly housing has become this thing that politicians subsidize. Both sides. It’s not a partisan notion. And they subsidize it in a way that immobilizes us. And we, Jack and I, both worry that this worship of housing –

JACK RYAN:  Owning a home.

JACK TAMNY:  Of owning a home is robbing the United States and the people of what make them the most innovative, productive people on earth. It’s holding them down when they should be living.

TEDDY DOWNEY:  We talk a lot about policy. What do you think would be a good, positive vision for perhaps homeownership policy? Or what are some of the levers that you would pull? Or what do you think could be improved?

JACK RYAN:  Well, I think, one, is this notion by the National Association of Realtors. They keep pushing this idea that you must own a home. It’s like the 11th commandment. And it is good to own a home if you buy at the right price. But just like owning a car or choices in operating a car, you can own it, you can lease it, or you can rent it. And the same with homeownership today—or living, I should say—in a residence. You can own it. You can lease. Or when we started REX—we moved REX in Austin—I said I’m just going to Airbnb around for a couple of years and move around Austin, Texas and check places out.

And so, why aren’t we looking at this asset like any other thing you would buy? It’s a buy versus lease versus rent decision. And look at it objectively. But the National Association of Realtors keeps saying, well, you must own a home. By the way, REX is in the brokerage business. I found when I was at Goldman Sachs that people thought, “Hey, you’re advising me against doing a transaction.? You’re the honest broker. I want to work with you”. So, I’m speaking against my own game, so to speak. But we should not be telling everybody, no matter what their age is, or what their profession is, or what their wealth is, that they should own a home. That doesn’t make sense. But I think it’s kind of like the American Bakers Association saying for maximum health, everyone should eat two donuts a day. I’m not sure that’s true, but I understand why they’re saying it. Same with the NAR. It’s like, I don’t think this idea you should own a home is some commandment when it’s dumb.

TEDDY DOWNEY:  Yeah, it’s also, it’s got a lot of other factors going on. It’s kind of tied up in the American Dream. It’s like, oh, I want to own my own home. It’s sort of part of the mythology of the American Dream. But then you look at—to your point about the price—the cost of owning a home like doubled in a couple of years because of interest rate changes.

JACK RYAN:  Yes. Would you buy a stock if it doubled in the last three years? You might say, well, let me look at this very carefully before I put all my liquid net worth in this, right? But you’re kind of told that if you have money, you should buy a home. But that’s not the way you should look at this asset class. You should look at it like any other asset class. We’re not saying that it makes absolute sense that you should never own a home. We’re just saying look at it like any other asset class and see whether—like your advice to a 30-year-old about how they should invest is different than a 65-year-old. And the same with owning a home. What is your profession? What’s your family like? What’s your net worth? And by the way, is the stock market low or high? What’s the alternative investment you have relative to equity in the house? That’s what we’re advocating. But it sounds crazy because everybody says, well, you should own a home. There’s no normative to owning a home is what we’re trying to make the case for.

TEDDY DOWNEY:  And I’m also curious what you think about is this a functioning market really? Because it seems like a highly broken market. Because as the interest rates go up, the price should come down accordingly. I mean, the cost of owning a home seems totally disconnected from typical supply and demand framework. And so, I’d love to get your thoughts on what about this market makes sense, doesn’t make sense, is broken?

JOHN TAMNY:  Well, we argue in the book that interest rates are somewhat overrated in the discussion. If you look back to the 1970s, interest rates were skyrocketing, but housing was the top asset class. If you look at the 2000s, interest rates were going down, but it was the top asset class. So why a similar outcome in two different rate environments?

And one of the arguments we make is that when there is uncertainty about the currency—Americans own dollars, Americans earn dollars—they tend to buy wealth that already exists. Housing. Think gold. Think rare arts. Think stamps. Something that has an established market value. When you’re not as worried about the currency, you might buy stocks and bonds, which is a speculation. That’s an investment in the creation of wealth. Because you’re thinking there’s less of a risk related to the currency losing value.

So, I think a big driver that no one wants to talk about is the dollar. But there’s also some emotional aspects to it. We don’t deny the excitement, the emotion of seeing the house that you’re dying to have and seeing this is where we can get started. This is the path to other dreams. We’re just saying think about it in terms of your other dreams, your career dreams. Think about it in terms of costs beyond money. When you own a house, you are managing something that you don’t really know much about. If someone comes to you and says, change the water heater. You have to buy a new HVAC. Your wiring is all wrong. You’ve got to fix this. Can you answer honestly, oh, yeah. You’re right. You’re wrong. No, you just throw dumb money at it and you’re throwing mindshare, plus your precious wealth, at something that you don’t really know anything about.

TEDDY DOWNEY:  Yeah, that can be very frustrating about owning a home, as someone who owns a home. The information asymmetry about maintaining it and getting it repaired, for sure.

JOHN TAMNY:  But think about that in terms of—the great Ken Fisher, the billionaire investor, always says the great thing about owning the stock market is he says the stock market does all your worrying for you. Because it’s this massive information machine, day after day, pricing in all known information. All your worries are handled by someone else.

Who’s doing your worrying for you when you own a home? You are. And talk about an information asymmetry. Something about which you know nothing. Yet, suddenly you’re spending all this time and then throwing dumb money—because it is dumb. If you could see me when a plumber comes to the house. or if you could see me when the people who install our air conditioners come to the house, who am I to say, oh, no, we’re going to skip that repair? I don’t have an answer for that.

JACK RYAN:  Or in pricing, you can answer when they say that? Teddy, you might, because you have relatives in the business. But in many situations, like what you said about Adam Smith is like you should outsource those things you’re not an expert at. So, why at any moment, Teddy, when you’re thinking about the electricity in your house, or the plumbing, rather than antitrust and what’s going on in the legislative markets and the economy, it’s probably a waste of your time. This is not a good deployment of your resources.

So, we’re saying, look, when you go to buy a home, do the math. Just like you do with stocks. Is it a good time with the S&P or not? Make sure that you not only have the price of the home, but the property taxes, the maintenance. Stocks actually pay dividends each year. Costs go out the door on the home. And then think about the mindshare and say, is this worth it? We’re just trying to take out this golden idol that many people tell us to worship, that you have to own a home. So that they look at it more objectively than they have in the past.

TEDDY DOWNEY:  I think part of the reason why it’s hard to also think about renting is that market does not seem very favorable in many respects as well. Like, you’ve got—especially at the lower end—you’ve got slumlords. You’ve got private equity owning mobile homes. You get a lot of stories about not great landlords, private equity going around buying up tons of rental units. So, you have this sort of bad facts there also. Do you guys think about improving how the rental market works either?

JOHN TAMNY:  Well, I’m going to plagiarize Jack and then he’s going to come in on this. Name me one industry or sector that’s ever been harmed by the inflow of capital. I think it’d be difficult to find that. At which point, thank goodness private equity’s coming into housing. What’s the goal of private equity? Stephen Schwarzman, the founder of Blackstone, said, I got to get into an industry where I was going to be rewarded if we improve companies. He said, my only rule at Blackstone is don’t lose money. And so, you better improve every company that you buy. So private equity wants to get into housing. Please do this. Because it’s not just that they’ll presumably want to improve a house, but they might take it over for me. They’ll buy in an area and improve it because they eventually want an exit. And they’ll give me a chance to live in something that they’re actively improving while taking care of all the maintenance for it.

At which point, my extra money can go into liquid assets that don’t require me to expend any money. When you buy the S&P, your fees are near zero. Whereas, housing you have to—so private equity wants to improve it for me? And they might make it possible for me—I can’t necessarily live in, I don’t know, let’s think around here. Let’s just say McLean, Virginia. But if private equity is buying up houses and renting them, maybe I have a chance to live in a desirable place that I otherwise couldn’t. In much the same way with leasing a car, I can lease a car that I couldn’t otherwise purchase. And so, please, let’s see it happen.

JACK RYAN:  Yeah, I’ve been through this kind of let’s not have capital influence a sector of the economy. It’s my third time I’ve seen it. I saw it once when institutions started buying stock in the 70s. Like, oh my gosh, individual investors are going to be overshadowed by institutions. This is bad. We should have institutions stop buying stocks. And, of course, things have worked out well there. And then there was the raid environment in the 80s and 90s, when they were saying, “Oh no, people are levering up buying these companies”. And what happened? Well, they improved the companies and it worked out well. So, this idea that private equity shouldn’t buy assets. Wrong, I think history shows they made it better.

So, what we’re suggesting is just do the rent versus buy analysis objectively. It’s hard to execute on that. Maybe in McLean Virginia, I don’t know McLean, Virginia. Maybe it’s hard to execute because there’s not really an opportunity to rent versus own the place. But if private equity were to come in, now it really is a choice I can make. And I can outsource the management of the home to somebody else.

Now, on the slumlord side, yeah, I think most people would want to improve the asset. Even if they bought a really bad asset, I don’t know if you’d want to degrade it. But there are horrible stories at the low end. But we don’t see that happening with rental car companies. We don’t see rental car companies coming in saying, I’ve got an idea. Let me try to pick off the lowest income and see if I can abuse them. I don’t think, Hertz and all those companies, long-term lease companies do that. I think it’s been good for most Americans. What do you think, Teddy?

TEDDY DOWNEY:  I think we’re probably going to want to move on just because we’ve investigated a lot of these companies that buy up particularly mobile homes. Absentee landlords is really different from—and by the way, there’s plenty of shady stuff going on in subprime car sales maybe. But that’s also not really where you’re going to be renting. But yeah, I think there are a lot of issues with absentee landlords. I think real estate, having a landlord, you really want someone who is nearby, really cares, is paying attention to the renter’s interests and not—I think what’s a good example where you have absentee ownership and things go badly. It’s happened before in the housing industry already. We had a financial collapse around it.

JOHN TAMNY:  But was that absentee ownership? I don’t think it was. And I would just say was it better? Landlords before the entrance of Wall Street money, was this a glorious thing for renters in such a way? Was it perfection before that? I think you can always find examples of bad management. That’s the point. That’s what a market is. Markets are correcting that all the time. The markets make mistakes and they correct them. And so, I think it’d be hard to say that just because private equity is doing it, that that’s going to degrade the quality of ownership and the quality of management of an asset. I just think it’s hard to find evidence of that. And how we know this is that if you’re constantly losing money on your investments, you’re not going to be in business much longer.

TEDDY DOWNEY:  I think if you do enough reading of the journalism about what it’s like to rent these homes that are owned by these companies, I think there’s plenty of evidence that it’s not good. But again, I think it’s interesting. I completely agree there’s a calculation to be done here. People should be thinking more about what’s broken about these markets and how they can be fixed.

Let’s move onto what’s going on with the realtors? Because I think that’s top of mind for a lot of people. Since the last time we talked, there’s been a massive settlement. We’d love for you to put that into perspective for us. This is like one aspect of a bigger picture. We’d love to hear from you what you think this does resolve, does not resolve, and kind of take the conversation from there.

JACK RYAN:  Okay. So last time we spoke with you and your listeners, we had spoken about the fact that NAR, as I called it, was one of the worst cartels in the history of the U.S. But I brought data that says the cartel about $120 billion a year. The rent, in the financial sense, is 4 percent because the UK charge is 1.5 percent, for instance, in Sweden, Hong Kong, Singapore, et cetera. Five and a half in the U.S. So, five and a half minus one and a half is four percent. Two and a half, $3 trillion of transactions per year. So, $100 to $120 billion. OPEC is about $75 billion, fifty cents on a 150 billion gallons of gas. Sometimes you think, well, that sounds colorful. It sounds like I’m overstating things. But no, it’s $120 billion going from middle class Americans to realtors versus $75 billion from middle class Americans to OPEC. So, its one of the biggest cartels in the history of the U.S.

So, there’s four legal avenues to correct this. One was a settlement that was on behalf of sellers of homes. We’ll talk about the settlement in a second. There’s a second class of suits that are working its way through the system – that’s from the buyers of homes about these excess fees. There’s a third one, which is the U.S. They just got clearance about two months ago to reopen their investigation of NAR and this whole industry from the D.C. Circuit Court. I think you saw that. So that’s the U.S. versus the cartel, the people of America versus the cartel. And then there’s us, the competitor who is going public about a billion dollars, moving our fees from two percent to zero, just like TD Ameritrade did, where on the eve of our IPO, Zillow joins the cartel. And because there’s a lot of rules in this cartel to prevent competition—one of which is the Segregation Rule—they pushed us off Zillow, and Trulia, and all those websites, into a tab that no one could see and labeled us as “other” – not agents. There’s a tab for agents. And even though we passed all the laws of every state as agents and as brokers, they pushed us into a tab called “Other”, which implies that you’re not an agent. There’s another tab called agents. And, of course, our visibility goes down by 90 percent. And, all of a sudden, our IPO goes out the door in the midst of our putting it together.

So, let’s go back to the first one: the settlement on behalf of the settlers. I don’t understand the settlement at all. Because from an operating point of view, it’s very porous. It’s not really going to change anything. And I don’t understand the amount either. So, there’s three things that happened on the settlement. Well, let’s take a step back. Within Sitzer, the sellers in the State of Missouri won a jury verdict for $1.7 billion of damages under antitrust trust laws, tripled, for  just one state, so $5.1 billion in damages. And the settlement was for $400 plus million, number one. That’s hard to get your arms around. And then number two, the remedy going forward was three-fold. One, you can now offer zero dollars as opposed to one dollar to the buy side fee. So, they reduced the figure you can offer by one dollar. One dollar. If offering a dollar was possible, which it was before, is offering zero going to change the steering or affect the buy side? No.

The second thing is you can no longer advertise what you’re paying to the buy side commission through the MLS. The only place you can’t advertise it is through the MLS. You can put it on your website. You can call up the broker and say, how much is the fee? You can do everything else, but you can’t advertise it on the MLS website. Do you think that’s going to stop anybody from finding out what the buy side fee is being offered, or it will not continue?


TEDDY DOWNEY:  Could you offer it on Zillow too? Could you put it on Zillow?


JACK RYAN:  I don’t think you’re allowed to put it on Zillow. But, in fact, within two weeks after the settlement, I got calls saying, hey, “I’ve got a business idea. We’re going to scrape all the realtor sites and just put up $25 a year for a subscription. We’ll put up the fee on every single home in the U.S. It’s the easiest work- around in the world. Or in the era of cell phones, I will just call the selling agent, say, hey, what’s the fee, right? So that’s not going to change anything.

And the third thing, which was already a suggested rule by NAR, is now mandatory, is you’ve got to sign a contract with the buyer and clearly disclose the fee that you’re being paid. It’s got to be clear to the buyer what fee they’re paying. None of that’s going to change anything to do with this 5.5 percent fee. In fact, the head of NAR said we have ways to work around this and their senior leadership is already giving direction on how to do this. The same with the heads of different realtor firms.

So that’s not going to change anything near term. So, I wish there was better news. Especially because a lot of your listeners want volatility. Those who are investors want to see –“what should I go long on and what should I go short on”? Should I do anything in the next nine months?

On this, I wouldn’t probably because I don’t think it’s going to change all that much. But if you’re sitting, I think, in the seat of a regulator, you look at this and say, this doesn’t solve this biggest cartel problem, probably in the history of the U.S.  It sounds like an overstatement. Was the Standard Oil case in1911 case bigger? I don’t think so. Even if you look at inflation and adjust the numbers and try and think of what their cartel there could be, I don’t think so.

TEDDY DOWNEY:  We’ve heard some anecdotes about the realtors kind of brazenly saying how they’re going to get around this. Have you heard similar?

JACK RYAN:  Yes, I’ll send them to you if you want them. One, people who are part of the NAR have said you better still be offering the buy side commission because everybody’s going to be looking for it. If you don’t offer it, guess what? They’ll take their customer to some other home. By the way, the whole idea is crazy. Are you allowed in the legal profession to say, hey, the plaintiff is going to get their fee from the defendant’s lawyer? The plaintiff’s lawyer is going to get their fee from the defendant’s lawyer? No, you’d be disbarred doing that. The same with investment banking the way it used to be. Oh, Goldman Sachs from the sell side is going to pay Morgan Stanley two percent that convinces the buyer to buy?. No, it’s a conflict of interest, right? Why is this (in the real estate industry) even permitted?

For this industry to get fixed, among other things, there’s got to be a complete breakage or decoupling between sell side people – the sell side and the buy side brokers- or these super-fees will continue as they’re going right now. So, there’s the buy side, that suit’s coming up. That case may remedy that. They also may not settle for $400 million. And then there’s —

TEDDY DOWNEY:  Are the people settling, the sell side settling? The seller are settling. Is NAR trying to lump the buyers into that and trying to be exempt from that? Or is that obvious that that won’t happen? We know that there’s going to be a separate whole litigation path for buyers.

JACK RYAN:  I think there will be. Now, of course, NAR’s going to say, well, we already settled this matter already. But the plaintiffs are going to say that was on the seller side. It was only Missouri, by the way. Now they’ve lumped everybody into that settlement. Which, Teddy, I just don’t understand this at all from an American point of view, as a former investment banker. They got a $1.7 times three judgment, $5 billion, for one state out of 50. And by the way, it’s not in the top ten of states for the most real estate traded in that state, like California, Texas, Florida, New York. And so, that was $5 billion for one state. So just imagine 50 states. Like it’s tobacco- litigation type numbers. And I’m sure that the plaintiffs’ lawyers for the buyers are thinking as well, who knows how much NAR can pay?

But think about this for a second. There’s 1.5 million realtors in the U.S. They all pay $1,000 in dues, about, each year to NAR and to the local MLS and for a lot of these other things. It’s all like itemized. It’s $1.5 billion in dues per year. There’s money. You can take a red pen and say, okay, send me a million dollars and the federal lobbying goes away this year and all this stuff. So, they do have ability to pay these plaintiffs. So, I don’t understand why the plaintiffs’ lawyers settled for $400 million. Plus, the additional realtors that got to come in after that. That’s just one state. And $1.5 billion a piece is a lot of dues every year. Of course, they’ve got to cut back. And, of course, they’ve got to make expense reductions. Of course, they may send out a special assessment to some of their members who caused this all in the first place. But I just can’t get my head around the $400 million number for the entire country. One state that’s not in the top ten was alone a $5 billion verdict.

TEDDY DOWNEY:  And so, we’ve got questions around whether or not this seller settlement will get done. But we’ve got these three other paths. You’ve got the buyer litigation and also you’ve got DOJ.

JACK RYAN:  And us.

TEDDY DOWNEY:  And competitors. Let’s talk DOJ for a second. Because if it’s true that this actually won’t have any impact on bringing broker fees down, ostensibly DOJ’s not going to be very happy about that. The goal from their perspective has got to be we actually want lower fees. I mean, this whole junk fee, high fee, campaign by the White House, pushed ahead by DOJ and FTC, it seems like this sets up for a whole other leg of, all right. DOJ is going to either pursue an investigation, pursue litigation, or pursue a settlement that actually would ultimately materially change those incentives. Is that the right way to think about this? Or am I crazy to be thinking about it that way?

JACK RYAN:  I don’t have any special insight into the DOJ. Of course, they’re a very professional group of lawyers, really professional. Of course, they’re not going to tell me what their plans are and things like that. But they spent over a year trying to reopen their case from the district court here in D.C. and got approval two or three months ago. So, I don’t think they would have done that if they had not intended to take this a lot further than they had.

And then when you think about the DOJ in particular—and I just outlined why this is a bigger cartel than most in the history of the U.S.—I would think they would say this is our mandate. We’ve got to go after this. If not this, what? I mean, they went after chicken prices, which was like $100 million. I can’t remember what the exact number was. They went after tickets for live events, Taylor Swift concerts and things like that. This is orders of magnitude bigger. But I don’t have any insight. But I would guess they would have to. Because it’s not only just the price. It’s not only just these fees.

You talked about the price of the housing and rents. The average margin for a home builder is about seven or eight percent. We talked about this last time. If you took out this three percent, kind of what I call junk fee, on the buy side, all of a sudden, the return, your ROI, goes up by 40 percent and your margin by – I don’t know how many homes get built when the margin for a home builder goes from 7 or 8 percent to 12 percent or something, but it’s a lot.

And then also, if you say this fee is embedded in the price of a home, it goes on top of it, there’s 4 or 5 percent fee on top of it. And we can’t get into the incidence of a tax. This is a tax. It has all that elasticity of demand, all the stuff you can miss on this call about who pays the 5 percent, I get it. But just for simplicity, this 5 percent gets taken off, if REX is successful, taking the fees to zero. And then there’s also a lot more supply of homes, because the margins to build homes go way up. They always go way up, way up. You were saying the market’s broken, that’s (builders’ margins) broken. Then what happens to the price of homes (as supply goes up)? They’d probably go down by 5 or 10 percent.

And by the way, it’s also true of rents. Why is it true of rents? Because someone had to buy that four story townhome here in D.C. or apartment or whatever and pay that 5 percent fee, right? So now the price of the brownstone or the house goes down by 5 percent. The competitive market drives the rents down by 5 percent. So, to me then who—just like your spouse—who benefits from transaction fees going down? Carpenters, plumbers, electricians, architects. Because the volume of homes traded goes up by 2 or 3-fold.

So, this all is a derivative (of the price-fix)  to the DOJ, should they get involved. This is not just the $120 billion of excess profits taken from the middle class Americans every year. It’s over one and a half trillion over the next ten years with normal inflation. But then there are all the knock-on effects. Supply of housing, cost of housing, plumbers jobs, carpenters jobs, architects jobs, taxes. There’s usually a transfer tax here in Maryland to sell a home, right? Transaction costs go down, the number of transactions go up.

The other thing I could just say – and this is a  point of view that John might have insight into—40 percent of CPI, about 40 percent of CPI, is your imputed rent (if you own a home)  or the rental costs, 40 percent of your CPI. So, if I’m right that the price of housing comes down by 5 or 10 percent over time,  I’m not saying that it comes down every year, but over ten years 10 percent is deflationary to the tune of .4 percent a year, right? That’s awesome for all Americans. So, GDP growth goes up when you take out these high fees. Inflation goes down. Taxes go up. Win, win, win.

So, I’m just saying as an outsider: if they weren’t going to focus on this, what are you doing over there? What is your mandate over at the DOJ? So, I’d be very passionate if they weren’t. I have no insight into what they’re doing.

TEDDY DOWNEY:  Yeah. Maybe we could take a quick step back. I want to get into your litigation as well and the competitor side. I couldn’t agree more on like the scale and the size of this issue and just how big of an impact it could have. I do want to talk about whether or not it makes sense that this is paid on a percentage of the house. I mean, to me, I always come—and we’ve talked about this. I’m actually sympathetic to workers and professionals being able to negotiate reasonably for their wages and get paid fairly. I mean, I think architecture is a great example. They’re just completely on the wrong side from a size perspective, and they get completely taken advantage of every single time they’re negotiating a rate.

However, I think there’s a couple of things. One is there are so many things that make NAR sort of this Goliath that’s kind of disconnected from a worker, from a professional. The MLS, we’ve discussed, that seems crazy that they organize all these MLS’s.

JACK RYAN:  650, yeah.

TEDDY DOWNEY:  Control all the terms on them. But then also, just intellectually, it makes no sense that this is a percentage of a transaction payment. What’s your take on whether or not that makes sense as a way to compensate brokers? And if not that, what would the alternative be? That does preserve a profession, but isn’t so kind of disconnected from when you think you’re getting.

JOHN TAMNY:  Jack had a partner at Goldman Sachs who would frequently speak to our Equity Associates Class, Roy Zuckerberg. And so, I got their full-time in 1998, at a time when commissions per trade, per equity share, were going way down. And Roy said, this isn’t going to hurt Goldman. Do you think that you’d ever sell 500,000 shares through E-Trade? No, you’d bring it to us. You’d bring the big volume, the seriously important trades. Just because our traders know the market, they know how to sell 500,000 shares without moving the market. How would housing be any different? We do not think for a second—we’re very clear in the book—we don’t think a deregulation of commissions or getting rid of this odd calcified commission structure is going to hurt realtors. In fact, it’s going to help them. Because if you’ve got a $10 million house, you’re not going to put it on the e‑trade of housing. You’d have a realtor come in and stage it and do videos of it.

Getting rid of commissions for travel agents—they used to be ticket takers calling up United and buying tickets for people. Did that end travel agents? Now they’re travel counselors. They’re putting together portfolios for their customers throughout their lives, making better money, doing much more advanced planning of travel. You’re not going to get rid of the realtor on this. What you’re going to get rid of is wasting the realtor’s time on minor sales. Just a quick sale of this condo right here for $250,000, $500,000. Yeah, those would go online. But the big houses, the real moneymakers, of course, you’re going to have a realtor. And you’re going to hire a realtor to show you the market in the way that you want it.

So, we don’t think this is going to end things for realtors. Jack’s in the business. He wants to make money at this. He’s just saying that you guys are stuck in the past. And any industry that’s stuck in the past, as Adam Smith makes clear, a stationary state sets itself up for obsolescence. And so, Jack, I hate to speak for you, is trying to take this sector to the next level so that it can actually prosper.

JACK RYAN: Your point’s a really good one too. Because why is it a 5 percent fee that’s a $300,000 home or a $30 million home? It doesn’t make any sense. That makes no sense, right? It seems like it should be tethered to the—your wife’s an architect—tethered to the amount of effort she puts into it and the level of design, et cetera. someone wants. But it shouldn’t be just—it’s a $30 million house. You pay for $1.5 million of work. It makes no sense.

And also, how skilled is this person you’re working with, to John’s point? That’s not how law firms work. It’s not the same fee if it’s a first‑year associate or a thirty‑year partner, right? The fee’s very dependent upon the excellence of the person and the project you’re working on, et cetera. So why is it a  5.5 percent no matter what? It just makes no sense. That just proves the price fix.

To the point that John was making, I remember when I was actually at Goldman—that’s how old I am—when it was twelve cents to trade a share. The fees were coming down. But a big day for us on the New York Stock Exchange in those days of twelve cents a share was 100 million shares traded. Wow, 100 million shares! Today it’s like 2 billion shares trade on the New York Stock Exchange. The fees are almost zero, right? So, there’s actually more work than there was before. Not doing busy work, doing actually worthwhile things to do. So, I think probably we have not lost many people on Wall Street. I think Wall Street’s bigger than it ever was before.

By the way, how do you make money in this business at zero? – like TD Ameritrade or Robinhood, the same way they do, the same way Goldman does. The brokerage business is lead generation through those other services you can offer. What are those? Mortgages, escrow—I hate to say this word, title. Let’s just move that to the side for a second. That industry is very kind of broken also.

TEDDY DOWNEY:  We’ll come back to this.

JACK RYAN:  Okay. But also much like one of  our points in the book is, hey, with REX we were using the data we collected when we were selling someone’s home to manage the home for the buyer, by our having them take pictures of everything, or our using AI to identify everything, every appliance, or piece of wood, everything. And then putting sensors in the home so you could tell that the humidity in the attic was three steps away from normal. And that way, Teddy, you don’t have to realize there’s a leak when you’re watching a football game. You can see that yellow, discolored thing in your ceiling, that twirling circle. We realized it two months prior when the humidity was too high on the roof. We stopped it before it was a big problem. And now when we take that away from you, you who’s great at antitrust stuff, probably not great at plumbing. We take that away from you and outsource it to someone who’s really good at that.

Anyway, I think there’d be a lot more jobs for everybody, including everything and everyone attached to the home ownership, home cycle when the fees are almost zero to trade them. Because just like Goldman or Morgan Stanley did very well since this fee compression, the lower fees will create a lot more activity.

TEDDY DOWNEY:  Got it. And so, do you see the fee—because aren’t some of the referrals for services, aren’t there legal restrictions on that as well, like RESPA laws and things like that? So how will the new landscape work? I don’t want to spend too much time on this, but I am curious about it.

JACK RYAN:  I’ll give you a quick answer. I think, due to RESPA the industry moves to a salaried model. As long as they’re on a salary, they’re not getting commissions selling people into bad mortgages, bad escrow, bad title firms. That’s what RESPA was designed in part to do is stop the person, who the buyer is most relying on, to send them to a bad mortgage broker and then getting a one percent kickback from the mortgage company? There are other reasons too. That’s another conversation.

But I think what’s going to happen is they’re going to move to what our business model was, which is everyone’s on salary. You get rewarded at year end, based on customer satisfaction, not agent satisfaction. So, the whole property industry right now, Coldwell Banker and all the rest, they built the business around how do I get more agents to join me? I’ll get 10 or 20 percent of what they (the agents) earn. What happens to the customers is interesting to them, but not all that relevant to their getting more agents, getting more commissions to brokers, right?

So right now, the way the industry is designed, outside of REX, was “my customers are my agent”s. And at REX, they (agents) were salaried. No, at REX your customer is the buyer or the seller of your home, how you used to think about a client. That’s your customer. If they give you a great review on Google and give us great reviews, you’ll do very well. If you don’t, there’s a problem, just like every other business in the world.

And RESPA, by the way, doesn’t have a problem if we offer mortgage, escrow and title to help purchase the home for you, that’s just part of our services and our people aren’t getting compensated extra for that. They’re (regulators) are fine with it. What they’re trying to stop is all the skullduggery that would come from putting some escrow company in there that’s overcharging them. But I, the customer,  don’t know any better because I do this once every ten years.

TEDDY DOWNEY:  And I want to get back to the fourth prong, which is competitor litigation. And maybe like other litigation. Because I think there was that DOJ, that MLS related lawsuit, where they wrote an amicus brief saying it wasn’t going far enough.

JACK RYAN:  Nosalek. I say it for your listeners.

TEDDY DOWNEY:  So, let’s talk about this fourth prong or other litigation that we should watch to figure out how long this is going to take for this transition. Because I think everyone is kind of in agreement. And even the realtors, except for the ones who are like I’m going to get around this no matter what. There is some existential realization that this is not—especially if Biden wins—this is not a sustainable plan. If Trump wins, maybe they can put it off another four years or so, hope that he shuts down that investigation again. But there’s sort of this broader, especially with the litigation, there is some existential realization that this game—this is not how people are going to buy homes forever.

And so, this fourth path here, competitor litigation. I know we’ve talked about the Zillow claim, the Zillow lawsuit, that you have, which I find to be just as interesting and important in many ways as the NAR stuff. Because Zillow acts as a gatekeeper on behalf of Zillow and pretty much all of the sites now. Because they all are members of NAR. They all have the same rules. Act as gatekeepers on behalf of any NAR. And so, this fourth path, I would love for you to talk about that. And what we should be paying attention to from there. And then I’m going to follow-up with some timing questions.

JACK RYAN:  Okay. So, the timing, we went to the District Court in Washington , where Zillow mandates that you sue them. And, of course, you can challenge that, but it wasn’t worth the time. So, we sued them there. And we didn’t get to trial because a senior judge said that he didn’t see an agreement. And our view is you don’t need a written agreement or anything that’s written or emailed, et cetera. I’m overstating things just for the purpose of clarity and quickness. That’s not how cartels work. And in fact, if you had to have more of an explicit agreement, guess what? You just wrote a map for every trade group in the world that wants to set prices. So, this can’t be the reason.

Anyway, so we’re appealing to the circuit court. And the timing on that is we file our brief at the end of this month. So, for those of you who are looking at long or short or regulators or other people, there will be a brief saying we think that they got it wrong. And as you know, there was another case in that same district, same circuit, where someone was trying to put homes up, but not on the MLS. And the circuit court said, no. You’re not forced to put them on the MLS and overturned the district court decision that said “nothing to see here”.

So anyway, I’m hopeful and optimistic. You’re always fighting an uphill battle when you go into an appellate court. So that’s where our case stands. We never got to trial. But I would hope that we do get to trial. Because one of the rules they have is the Segregation Rule we’ve talked about already. And that is just the Enforcer saying “if you don’t join the cartel, you get put into a spot that no one will see”. So, there’s no competition.

The other rules that, just three or four of them, this goes back to “the trade group should have no rules”. No trade group. I don’t think any of the others do have rules that can set the terms of competition. There’s one which says that if any one person joins the realtors in your brokerage firm, everyone else must join them also. This would be like saying that if one person joined the UAW in a plant, everyone else is forced to  join because of that  one vote, puts you all in. Why is that important? It’s to force collection of dues. How do they get $1.5 billion in dues collectively? It’s the forced round-up of dues.

Number two. Another rule is that you must compete fairly. You must compete fairly. What does that have to do other than about price? What are you competing on other than price with competition. And by the way, if you appeal that, where do you go to? It’s just the local -the local National Association of Realtors. That’s who you can appeal to. What’s the overlap between the local MLS and the local realtors? It’s the same group again basically. So that doesn’t make any sense.

The third thing is the forced round-up of data. This is by far the most important thing for a lot of your listeners. In a data-based economy, the MLS’s and the NARs write into the seller agreements, the buyer agreements. And they say that you must turn over all the data on your home to the local MLS and then the local MLS copyrights it and calls it theirs. So, they make everybody—and no one who’s not a lawyer probably thinks about this as a seller of a home. And furthermore, the contract that Realtors use is in legal terms. Which means that, even if one person opts out, it’s not going to make a difference. Because 5.99999 people are not going to decide to opt out, right? So, everyone just signs it.

So, copyright law was designed to protect creative endeavors. But there’s no creative endeavor from the NAR. They just send all the data over to them. Then they rubber stamp it with saying “we now own the data”. And they won’t share it with anybody who’s not part of the NAR. So how do you price a home? How do you think about how fast homes move? How do you use AI and all the other data sets that Citadel and Goldman Sachs and Morgan Stanley use—and we’re doing it at REX—to speed up the transactions of homes, the way John was describing the $300,000, $400,000 home. They (homes)  should trade like IBM stock. That condo is exactly the same as the condo in that same apartment building. There’s no mystery. The trade is really kind of like IBM stock, right?

So, the forced  round up of dues—or the forced round-up of data and no one else can access it. Imagine if Goldman Sachs, Morgan Stanley and Citadel all ganged up and said, you cannot get any of the stock trades or any of the volumes or prices unless you joined the Goldman Sachs, Morgan Stanley, Citadel trade group. And by the way, our general fee is 5 percent. Just so you know. Of course, you’re going to do that, right? We don’t give the data to you unless you join the cartel. But that’s what they do.

So, I think if I were a regulator, I’d say we’ve got to get rid of all the rules that limit competition, number one. Number two seems a little bit more out there, Teddy, but I think you might be open to this idea. We’ve now been through three or four heads of the NAR over the last two years, three years. And each one of them, like the current fellow, who just said, hey, here’s the way to, you know, this is not going to stop us from charging the buy side. Here’s the way to get around it. It’s almost like the Teamsters in the 60s, 70s, 80s and 90s where they kept replacing the head of the Teamsters because the old guy got tossed out for some reason or another. The new guy was the same as the old guy. And eventually, the federal government put a supervisor over the Teamsters because the organization was inherently corrupt. It didn’t make any difference who was the head. The DNA of the organization was fixed. And I think at some point, the government’s got to say, hey, this cannot only apply to blue collar organnizations like the Teamsters, the truck drivers and people. It’s also got to apply to white collar organizations. This has proven itself over and over and over again. It doesn’t make any difference who’s in charge, they keep creating new rules.

And by the way, in that last point, which is why they need  federal oversight, is if it takes the DOJ or FTC seven or eight years to undo the rule, it’s a no-lose game. Let’s create new rules. You’ve got eight more years before the DOJ can take this one on and get rid of it. Then let’s do another one. We’ll do another one. We’ll do another one. And we can never catch up.

So, I think (1) no rules that control competition. It’s got to be the point of view of the regulators who might be listening to this or  DOJ. No rules about limiting competition. You don’t let the National Association of Car Dealers do that.

And then, second is we don’t trust that you’re not going to pass new rules. So, put one other rule in place: (Just like I think about seven or eight years ago now,  I can’t remember when they came up with the rule) : federal oversight. But at some point . . . I am  more of a free market guy like John not someone who says we need more, more, more rules. But this organization has proven itself to me, and I  think to everyone who  is looking at it objectively, that its DNA is very broken.

TEDDY DOWNEY:  And if you’re trying to get a sense of when we will see real change, because I think people will look at this settlement. There’s been a lot of—the seller settlement, there is a lot of difference of opinion on how that will play out and how quickly that will actually trickle down, or if it will work at all. I think we’re in agreement that it won’t do anything.

JACK RYAN:  Right.

TEDDY DOWNEY:  So, keep an eye on everything. But in terms of something that could drive the timing, accelerate this transition to a new way of paying for broker fees, my opinion is that DOJ action is the one that could really accelerate that and sort of hammer that home. If it’s investigation, litigation, settlement discussions, what have you, that’s really where you’re going to see comprehensive change. Is that the right way to think about it is kind of like this is really the main way that this changes is really DOJ negotiation or maybe states getting involved? But really someone coming in and negotiating or litigating comprehensively here.

Because we already saw the seller settlement, and it’s just so lacking, to your point, in both money and as a penalty and as a prospective policy change. So that’s kind of how I’m thinking about it. Keep an eye on everything. But really the thing that could change things quickly is the DOJ. Is that the right way to think about it? Or how are you thinking about it?

JACK RYAN:  Well, I think, one, you have to have competition. Otherwise, the people in industry are going to keep it the same way, the pricing,  unless there’s competition saying “I’ll do this for a lot less and better service”. And by the way, at REX, we were doing that. It was a much lower fee. And because we controlled the person because they were W-2s, not 1099s, like our competition who could not control the delivery of service as a matter of law. We could. They work for us. And then you put the customer first. That’s how we’re going to evaluate you at year end. So, we control the delivery of service. None of our competitors did.

So, one, for there to be real competition that change things, you need to get rid of the Segregation Rule and some of these other rules. But to your point, Teddy, on the Sitzer case, they really were taking on the buyer/broker commission rule. And then they had this remedy, but it was like one of like the four or five rules I highlighted in this short conversation about the levers NAR pulled to keep competition out. We’re taking on the segregation rule that Zillow started enforcing when they said, “oh, REX is going public. And there’s going to be a lot of fast followers, which we encouraged. But there are going to be a lot of fast followers that mimic the make zero percent fee”. Not good. That’s how I took it. They didn’t tell me that. I think it’s pretty—to me, it’s clear what happened there.

But then there’s these other rules, like the forced collection of data, which they won’t share with other people. And there’s other rules too I can go through. We don’t have standing to complain on some of those. They didn’t hurt us. What are you complaining about, REX? Say the buyer broker guys at Sitzer. That’s your issue. And so, to get comprehensive reform, it’s got to be the DOJ saying there’s all these rules that affect competition. Get rid of all of them.

So, to your very point, I think there’s a short-term remedy if we win on our lawsuit. Because we will be free to be the Robinhood, TD Ameritrade, Schwab, of this industry again. And we will get a lot of fast followers. And that’s good because that works faster. So that has to happen. But that’s not stopping the NAR from doing something else two years later or a year later. And they seem to be totally courageous—if that’s the word you want to use.—or brazen about “let’s create a new rule”. So, unless the DOJ gets involved, I don’t think that there’s complete clarity as to how this will end up.

TEDDY DOWNEY:  One last question and then I’ll let you guys go. We’ve talked about Zillow’s business model potentially being disrupted. I’m curious to get your thoughts on Zillow. As the broker fee model changes, how does that affect Zillow and other companies in this space? I know makes their money off advertising. Zillow makes their money differently. I think different services—I don’t want to call it kickbacks, but the referrals, broker referrals. What are your kind of top things that you think will change in this market if we’re right and ultimately this broker fee model does change? What are the things you want to leave our audience with?

JACK RYAN:  I know you have investors in this audience and they want to go long, short. And John and I both come from that background. So, I’m going to make some suggestions. Then I’m going to turn it over to you John. Because you were in the stock investing business. I was in the investment bank area.

JOHN TAMNY:  But this is more directed. This is about Zillow. So, you would know.

JACK RYAN:  So, if you look down the list of publicly traded companies, where do you go long, where do you go short and when you do it? It depends on what your timeframe is. Unless you’re a really long-term investor, I’d wait to see how our lawsuit goes and whether the DOJ does something. Let’s assume those both go as they should based upon the economic results of the current structure.

And so, I would say if you look at the public companies, Redfin, Compass, RE/MAX, Anywhere, which is Coldwell Banker, those stock prices are pretty low already. Because one of the decline in stocks there and they are now in the hundreds of millions of arm caps. It’s hard to short those stocks because there’s also  not a lot of volume and they’re already kind of $500, $200, $300, $900 million in market cap. So, it depends how aggressive you want to be on “what does the future look like? They’d have to make the transition from an agent‑focused business to a consumer-focused business. And it’s not that they can’t do it. But it’s really hard to go from a high fee business to a low-cost producer. But I’m not saying that they can’t do if they want to.

People like EXP, which create platforms for agents, I think that’s a good business to be in. EXPI is their ticker. They create the kind of cloud platform for agents to do their business on their own without being attached to some large firm. So that’s probably a good one to be in. I think the stock prices come down as the volumes of homes traded come down. I think it’s a great business to be in. If ceteris paribus , ceteris paribus. Do you know what ceteris paribus is?

JOHN TAMNY:  No, I don’t Laughing

JACK RYAN:  It’s a very fancy Latin phrase. If you weren’t a sociology major at Columbia, you won’t know what it is from what I’ve seen in the newspapers recently. Okay. So, anyway, this is all ceteris paribus, everything else being equal. The ones that I think will take off are the ones that have direct correlation to volumes really increasing. Because John and my thesis in the book is that when fees go from 5.5 percent to one percent or zero percent, transactions go way, way up. Just like happened in the stock brokerage business, volumes up to a 20, 30‑fold. So, the escrow companies, FNF is the ticker, Fidelity National, those firms, ITIC, the small title company. Now, put aside the issue on the title issues that you just raised a few minutes ago.

TEDDY DOWNEY:  Yeah, that was before the call. I mentioned that the President has called for title reform to basically cut out title insurance.

Jack Ryan:  Okay. So, one of the big title escrow companies whose volumes suddenly double or triple because this all of a sudden happens, it’s Fidelity National. It’s First American Financial. I think it’s FAF and FNF. You guys know the tickers.  I think those are the ones. The ones that are directly correlated to volume increases, probably do the best. And then the traditional brokers model probably have a hard time.

And then the ones that are kind of on agent advertising. How valuable is the advertising when the agent’s not getting $50,000, but $10,000? The value they’ll pay for the ad, it’s going to go way down. How much will you pay for an ad when your customer’s worth $10,000, not $50,000? I don’t know. Seventy percent less, 60 percent less, 80 percent less, somewhere in there. I don’t know what the exact algorithm is for that business. So that business would probably have to change in some way to be a viable business.

TEDDY DOWNEY:  Got it. And Zillow specifically, you think hurt, right?

JACK RYAN:  Well, unless they’re doing the same thing which you just described, which is getting into other businesses or doing things that add to core value, but I think just selling advertising is going to be hard. That’s happening. I’m just making this up. I don’t have any stock in it. Half of their business is advertising revenues for buyers. By the way, Zillow or Costar or somebody like that already has a seller. So, they aren’t advertising that much. They are advertising some of it to people who want to sell homes. Just kind of looking to do something. But it’s really the buyer fees that drive their business the most. If those fees go way down because of the things we’re talking about, then the value of those ads go way down.

TEDDY DOWNEY:  Yeah.  John, any thoughts on how the market evolves here?

JOHN TAMNY:  I think what you’re going to see is, first of all, it’s an inevitability. I would actually say that the fact the DOJ is finally paying attention to this is the surest sign that companies like REX are about to push a new dawn into real estate in the first place. Prices can’t stay high forever. Because high prices attract competition. And as Jack’s, one of the employees at REX pointed out in the Wall Street Journal op-ed several years ago, he said something like 96 percent of home searches begin online. Well, think about that. What does that tell you about where this is going? People just aren’t going to be willing to pay these 5 percent commissions for basic home searches anymore. And to be clear, that is a good thing for the real estate industry. That’s a good thing for realtors. They offer real value.

JACK RYAN:  They do.

JOHN TAMNY:  They offer enormous value. But what’s not—every industry that remains the same is a sitting duck for competition. And so, you can basically let market forces push realtors into much better economics that are free of a commission structure. Or you can have the industry stay stuck in the past fighting for the same commissions, fighting for the same crumbs in the past, and watch them be rolled over by progress. So, my sense is that it’s going to the opposite. Realtors offer real value. Jack proves it with REX. Others prove it. And we’re going to see something really exciting.

And this is the idea of our book, is that Adam Smith would tell you that if you’re in the stationary state, the market’s going to roll over you. If you’re in the advancing state, that is the path toward prosperity and all that. And we think it’s going to happen here.

TEDDY DOWNEY:  I actually think one of the most interesting things that we’ve written about recently was the decision by the FTC to allow Zillow to merge with Trulia. Because, before they merged, they had in their 10Ks, “We aggressively compete to be the independent platform, independent of NAR.” They both aggressively competed over that as a benefit. Because they said, look, we’re going to have more comprehensive data. It’s not going to be ads like real time. It’s not going to be as good as in the sense of they are going to be hooked into the MLS. But we’re going to have an independent data source act independently of them.

And then after the merger, you lost that competition. And so, it was just that easy for Zillow to just switch and just join NAR. And all of these ramifications since then, excluding competition and preventing competition, you can kind of trace it a little bit back to that moment. Or at least that was one of the moments that kind of allowed for the current situation. Because otherwise, they wouldn’t have as good of an ability to inoculate themselves potentially from competition.

JACK RYAN:  You make a really good point. And this is why anyone on this call should not listen to me as an antitrust expert. When they proposed that merger in 2015, I think it was, I was like, no way that’s getting approved, number one. And two, preventing the online showing of homes in the industry, it’s not going to happen. Okay. Move on. Let’s move on. We’ll (REX) put all of our homes up for everyone to see it, to John’s point. Everyone will start to search online, just like stock brokerage or travel agents or whatever. We’ll get in front of that. I saw this happen at Goldman. We’re going to mimic that. I know how to do this. It’s Schwab writ large all over again. We’re going to do that, get ahead of it. Be there. And then when they let them merge, Holy Toledo, what the heck?

And then I thought, well, Zillow keeps saying to the world “we are independent. We’ll put the customer first. We’re not going to join those other guys. We are on your side, customer”. And so, when they joined the NAR on the advent of our IPO, I was like they did exactly what they said they weren’t going to do for the prior ten years. Anyway, it was horrible.

TEDDY DOWNEY:  Yeah, and I think the two things we did—I’ll send you the piece. We published it recently. I think two of the most interesting aspects of that was (1) getting bought by News Corp was seen as like a disruptive good thing. How that’s relevant to an independent field makes no sense to me. And the other was just market definition. And I find it so funny that, I think it’s only in sort of an establishment, antitrust lawyer could look at that market and be like we’re going to have a real problem with market definition. I mean, literally you just go through their 10-K, and all they did was talk about each other as their competitors. How hard could it be to define the market?

JACK RYAN:  Yeah. Well, 2015, as you know, it was a shock to me at that time too. So that’s why they should have listened—they should have known what was going to happen to the industry from that point of view and the derivative impacts on companies around it. But when and if the DOJ, or we, will be ultimately successful, I think we will because the facts say we should be, but I don’t know. And what you’re saying is I was shocked that someone is able to define the market as newspapers, magazines, digital, the store on the street that was the local Coldwell Banker that advertised homes. They made the market so much bigger, as you know, from an antitrust point of view. And I was shocked that—and we could tell where newspapers were going. And when those two guys merged, I was shocked.

TEDDY DOWNEY:  Yeah, yeah, yeah.

JACK RYAN:  I would love to see your piece. Yeah, I had the same point of view as you. I was like, I can’t believe they allowed these two companies to merge.

TEDDY DOWNEY:  Yeah, it was interesting just to go back and read all those 10-Ks, about how closely they compete. And it’s a very different FTC and DOJ now. They’re not, you know, they’ll look at the indicia of close competitions. Well, that tells us what the market is. As opposed to sort of opining sort of about what they think the market is or how they might be vulnerable in court to some economist saying, well, you could buy a billboard ad type of thing.

JACK RYAN:  Well this aside: housing is, if they can undo that damage, you know 20 percent of the U.S. GDP is either housing or derived from housing, like the carpenters and plumbers, architects or jobs around the person’s home. There’s no question on that. If this gets freed up, it’s part of the economy, I think it’s a permanent increase in GDP growth for as far as the eye can see. Now, is it .1 percent, .2 percent, .3 percent? I  don’t know the exact number, but it’s a huge number.

TEDDY DOWNEY:  The homebuilders’ point—and I think this is a good place to wrap up. We’re way over time. But the homebuilders’ point really resonates with me because that’s the one where you really directly go from—your costs go down immediately, right? Like this is like cost of your sale—cost of your transaction just goes down so much. It does make it – that moves the needle. You’re talking about enough money, that absolutely moves the needle.

JOHN TAMNY:  The local guys at 7 or 8 percent add on to that 5 percent. AND you look at Horton or Pulte or Lennar, these companies are around 15 percent. Just the same, you add 3 percent on 15 percent of that size of a company, 18 percent is now their margin, ROI up about 20 percent. Oh, my gosh, lots more homes get built if they had 20 percent at that scale. It is really meaningful.

TEDDY DOWNEY:  Yeah. Because I think that gives you a much quicker translation into activity. Whereas, like even like a typical customer is just going to be a little bit more sensitive. Like all right. You know the price hasn’t, you know. Who knows what the price is going to be in your individual market? I mean, I definitely agree that volumes will go up and things like that. But the homebuilder, you really can see it. It’s almost instantly, really materially changing their economic reality.

JACK RY:  If you make a phone call to Lennar on all this stuff, they will say oftentimes that they don’t even see a buyer agent until the closing. Then suddenly, the buyer says, “oh, I had a buyer agent. You never saw them or knew about them, but can you pay them three percent?”. It’s like their fraternity brother or whatever that gets three percent of that $600,000 home, just kind of gave it to them. And the builders go crazy because this $18,000 on my margin on the day of the closing – – – for what? But they don’t want to tick off the realtor. So, they grudgingly have to say, okay. Here’s $18,000. Or else they get blacklisted in town. But this is the kind of stuff that goes on right now because of this cartel that forces these big firms—people like Lennar, that bend their knee to the local MLS – – – you can see how powerful they are.

TEDDY DOWNEY:  Yeah, yeah. No, it’s going to be.

JOHN TAMNY:  Think about those sales. Think about Pulte sales. It doesn’t insult Pulte one iota. They can put it all online and sell it, bam, bam, bam, bam. Because it’s an established ticket. This is what it is. This is the square footage. But if you have a $10 million house, you’re never going to put it online. You’re going to go through a realtor. This will not be bad for realtors. It will just vastly increase liquidity and vastly increase the number of houses out there available. There will still be a massive need for people who know how to market a house, how to put it online, know how to stage it and all that. That’s not going to change.

TEDDY DOWNEY:  Yeah, I’m super excited to keep track of this. It’s really interesting. A lot of money at stake. So, thank you so much for doing this. I really appreciate you guys coming in. All right. Thanks everyone for joining us. This ends the call.

JACK RYAN:  Take care.