A large condo building recently went up across the street from my house, and though to my knowledge nobody has yet moved in, a person with a dog regularly emerges from the building, presumably to walk said dog. I have over time developed a working theory that the individual is a hard-working real estate agent—so hard working, in fact, that he has no time to run home to his pup. Poor guy!

This is all to say that it’s not easy to be a residential real estate agent these days. This week, we discuss the recent change to agent fees that has some agents scrambling—and why it might not actually lead to the lower home prices that some buyers are expecting. Plus: the importance of “connectors,” leadership tips from a pro, and more.

Lower agent fees, higher home prices?

You’ve probably heard by now about the recent NAR settlement that changes how real estate agents are paid. Namely, going forward, buyers will be responsible for ensuring their own agents get paid, while listing agents will no longer be able to publish offers of compensation in the Multiple Listing Service. These changes are intended to bring more transparency to the real-estate industry, ultimately allowing competitive forces to drive down commissions, which remain almost double that of other developed economies.

But if you are expecting lower commissions to lead to lower home prices—well, I’ve got some bad news for you. I recently spoke with Kellogg’s Gregor Matvos who, along with his colleagues, developed a model that predicts precisely the opposite. Here’s a quick excerpt from our conversation.

Kellogg Insight: The general argument for why the changes to the agent commissions are supposed to lower home prices is because these high commissions are baked into the prices we all pay. If it costs us a lot of money to buy and sell a house, that in turn is going to drive up the price of the house. Thus, if you lower those costs, it’s going to push prices down. So why is the above reasoning not correct?

Gregor Matvos: I think we should first talk about why it could be correct. Imagine if we were talking about selling shampoo. Anytime a store wants to sell you shampoo, somebody takes six percent of the price as a sales tax. If the sales tax goes down, what would happen to the price of shampoo? Well, a part of the discount is going to go to the seller, who will pocket some of the money, and a part of the discount is going to go to the buyer, who will pocket some of the money, and shampoo prices will go down. I think that’s the intuition we have for most goods. If we tax them less, prices should go down, and if we tax them more, prices should go up.

But unlike shampoo, houses can be resold. And this makes them a little more like stocks. When you go to your broker and you buy a stock, you know for sure that you will resell it. And anytime somebody takes a chunk out of that—say, the government, as a transaction tax—the stock loses value. So if the transaction tax goes down, the stock price goes up.

Now, houses are somewhere in between. They have some consumption value, but then most of us resell the house, so they have some resale value too. So when that resale value goes up, a buyer should be willing to pay more for it. In essence, buyers are getting a “better” house. The problem is, now we’re all willing to pay more for these better houses, and house prices go up.

You can read more from our conversation in Kellogg Insight.

Connections

Are you a connector? You know, that person with a thick rolodex who always knows the right contact to put someone in touch with—and is generous enough to play matchmaker? Well, if so, you’re more valuable than perhaps you know.

“We all develop a point at which the network that we’re in can’t satisfy our needs anymore,” Kellogg professor Brian Uzzi told the The Wall Street Journal:

When we become brokers, dipping in and out of various groups, we have access to all kinds of new information: little tips, fresh opportunities. Synthesizing multiple viewpoints, we’re better able to solve problems in innovative ways, Uzzi says. People love us for it.

Connectors are more likely to get promoted and win bigger bonuses, Uzzi says. In one study of M.B.A. students, those who acted as brokers between cliques were twice as likely to get the best job offers upon graduating, he adds.

Read more on the value of connectors (and how to be a good one) in The Wall Street Journal.

DEI done right

You’ve probably noticed that much of the overt interest in DEI that exploded in 2021 has faded, with even some of its biggest advocates souring on efforts that often feel performative. But to say that DEI is over—well, it’s more complicated than that.

“Many organizations remain committed to DEI, but their strategies are shifting,” says Maryam Kouchaki, an Academy of Management scholar who teaches at the Kellogg School of Management at Northwestern University. “We’re seeing more reframing of DEI efforts and a stronger emphasis on systematically linking DEI to a business case.”

The goal, she says, is to create sustainable, long-term DEI programs that are not performative but grounded in strategies that benefit both employees and the organization. Research suggests that diversity leads to better performance and decision-making as well as greater team satisfaction.

You can read more in Business Insider.

Jessica Love, editor in chief
Kellogg Insight