In real estate, it used to be necessary to hire a buyer’s agent to gain access to the listing information in the MLS. Generally, that’s no longer the case as anti-trust pressures have forced the real estate industry to open up access to listings. However, most people still sign up with a buyer’s agent to represent their interests and it is usual for the selling agent to split the commission paid by the seller with the buyer’s agent.

Under almost any other circumstance, this would be an illegal kickback. For example, if, as a corporate manager, I found out that my purchasing agent was taking payments from suppliers he would be out the door so fast it would make his head spin - to say nothing of facing legal action and possible prosecution. It is a conflict of interest, pure and simple.

The LA Times reports that sellers are now taking advantage of this conflict of interest by offering bonuses - extra commission - to the buyer’s agent: “O’Brien says listing agents are beginning to urge sellers to give 3% to the buyer’s agent, while offering to keep their own rate at 2.5%, as an incentive to get property shown more by agents who may have numerous properties to offer clients.”

There’s nothing wrong with hiring an expert to look after your interests and help you negotiate the best deal when buying property. Indeed, it is probably a good idea. But they should not be paid by the seller. Hire an attorney, not a real estate agent, and pay him or her an hourly rate. Or a fee that is structured on the benefits that you receive, not that the seller receives.

This practice of offering a bonus, which tantamount to a bribe or kickback. and may be undisclosed, to the agent who is supposedly representing the buyer’s interests illustrates the abusive nature of the real estate industry. The buyer’s agent should not be receiving anything from the seller, other than maybe a coffee or lunch at the most. If you hire a buyer’s agent, recognize that he or she is not working for you, but rather the seller who is paying them. And that sellers believe that you can be influenced by paying your agent more. The LA Times continues: “This commission split, as with other incentives, is perfectly legal, according to the California Assn. of Realtors. Whether Realtors choose to disclose such additional income to buyers is up to the individual agent, making all transactions a case of buyer beware.”

Gary Shilling (a well-known investment guru, not to be confused with Robert Shiller the economist) on The Coming Collapse in Housing: “In contrast to Bernanke’s forecast of a 1 percentage point drop in annual rate GDP growth from housing weakness, we see more like 5 or 6 percentage points. The 3% trend growth will turn into a recessionary decline of 2% to 3%. Especially hard hit by falling house prices and the recession will be the subprime borrowers that the government, through Fannie Mae and Freddie Mac, has been enticing into homeownership. The idea is that if low-income, young and minority people own houses, they’ll have stable families and neighborhoods. These programs, fueled by 3% or lower downpayments, have worked in increasing their homeownership. But many of those people have small or negative net worths outside their houses and little discretionary income. They’re basically living hand to mouth.

In the recession, these low-income folks will suffer widespread layoffs and will default on their mortgage payments. In addition, their house-buying will dry up. So those a rung up the ladder who would normally sell their starter houses to low-income people and move to higher-priced digs will be stymied as will successive links on the up the move-up chain, all the way to the McMansions of Reginald van Gleason III.”

Released this morning: Building permits fell 6.3% to 1.535mln in October, down 28% year-over-year, a 9-year low. Housing starts fell 14.6% to 1.486 mln, down 27.4% year-over-year, a 6-year low. September was revised lower. This data series is notoriously flakey, so caution is advised, but this is entirely consistent with the anecdotal data coming from the bubble market areas.

Needless to say, this is what has to happen for an eventual recovery; builders have to stop increasing the glut. But that’s a long way down from here.

Roubini comments at length in his blog; short summary - stick a fork in it.

After the close today, Dell announced that it wouldn’t be filing its quarterly results on time because of “complexity” attributed to the SEC’s investigation of its stock option practices. The steady stream of these announcements and the apparent indifference of shareholders just stuns me. The executives of these companies have apparently been stealing from the shareholders and no-one cares? What does it say about the level of business ethics that these folks practice? What else have they been doing that hasn’t yet been found out? That these companies stop reporting earnings seems to glamourize them and their shares get bid up. Amazing. Pathetic.

Of course, to further add to the burr under my saddle, Franklin Raines just got another $2.6 million paid to him by Fannie Mae based on an arbitrator’s decision. This guy should be giving back, not dipping in for more! Senatus haec intellegit. consul videt; hic tamen vivit.

I guess crime does pay. How sad. Because that rots the social and business fabric that we rely upon. If you cannot count on honest dealings, business becomes more difficult and more costly. Then we pay doubly. First of all we lose to the thieves, and then we lose trust.

The Fed has already admitted that they made a mistake by setting interest rates too low in 2002 and subsequently. As the WSJ notes:

“In an apparent and rare in-house critique, the president of the Federal Reserve Bank of Dallas said that because of faulty inflation data, the Fed kept interest rates too low for too long earlier this decade, fueling speculative housing activity.

A number of critics have said the Fed under former chairman Alan Greenspan kept monetary policy too easy from 2003 to 2004. But Richard Fisher’s remarks to the yesterday mark the first time some Fed watchers could recall a sitting Fed policy maker making such comments.

Mr. Fisher said from 2002 to early 2003, inflation, as measured by the price index of personal consumption expenditures (PCE) excluding food and energy, was running below 1%. That suggested that a serious shock to the economy could turn inflation to deflation, or generally falling prices. Deflation makes it much harder for the Fed to boost growth by engineering deeply negative real, that is inflation-adjusted, interest rates.

To reduce the risk of deflation, the Fed lowered its target for the Fed funds rate — charged on overnight loans between banks — to 1% in June 2003 and held it there until mid-2004. It has since raised it to 5.25%.

Mr. Fisher noted that subsequent revisions show PCE inflation was actually a half a percentage point higher than originally estimated. “In retrospect, the real Fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer than it should have been,” Mr. Fisher said.”

Now the Fed has busily been raising rates. Today, the minutes of the October Fed meeting were released. Some gems:

“Many participants drew some comfort from the most recent data, which suggested that the correction in the housing market was likely to be no more severe than they had previously expected and that the risk of an even larger contraction in this sector had ebbed….

To date, weakness in the housing market and the associated downshift in house price appreciation did not seem to be spilling over into consumer spending, which appeared to have grown at a steady pace in recent months….

Although substantial uncertainty continued to attend that outlook, most members judged that the downside risks to economic activity had diminished a little, and likewise, some members felt that the upside risks to inflation had declined, albeit only slightly. All members agreed that the risks to achieving the anticipated reduction in inflation remained of greatest concern.”

Clearly, they’re going to keep short rates high or possibly even raise them one more time. This will, IMO, prove to be exactly the wrong thing to do once again. They will, of course, blame the data. Not being willing to admit that you can’t drive well by looking in the rear view mirror. Which is not to suggest that they have much control anyway, except to make things worse. It appears that they will succeed in doing so.