NAR Settlement, House Prices, and Consumer Welfare

Motivated by the recent National Association of Realtors (NAR) settlement, we examine how reduced real estate agent commissions affect home prices, housing turnover, and consumer welfare. Using a calibrated dynamic structural search model, we show that by reducing future transaction costs, lower commissions raise the value of housing as a durable asset and tend to increase house prices. While reduced fees generally improve consumer welfare, most gains accrue to current homeowners, with limited benefits for prospective buyers. Higher prices may also crowd out financially constrained households, suggesting that lower agent fees are unlikely to significantly improve housing affordability and access. Our findings underscore the importance of accounting for market dynamics, consumer heterogeneity, and general equilibrium effects. They also shed light on the redistributive implications of technological innovations—such as those leveraging AI—that reduce transaction costs. Finally, our analysis suggests that static IO-style models may be ill-suited to studying transaction costs in durable goods markets, where dynamic considerations and repeated resale are central, as this can lead to misestimated magnitudes and even incorrect signs of key effects.