If real estate brokers charge 6% to sell a house, and home ownership over a long period of time averages about 6% growth a year, is it possible real estate agents are the real reason/problem with out of control real estate prices?
Here is how I see it. Seller A is willing to take X amount for his house. Agent B marks it up 6% to cover his fees. Buyer C pays x + 6% for the property. Broker D uses x + 6% to comp a new listing and lists the next home at x + 6% + 6%, etc....
Essentially, if brokers use comps to value properties, and they mark up the "net to seller" by 6% and prices average a 6% growth a year, wouldn't that mean that real estate agents are artificially inflating housing prices beyond what wages can justify and afford?
Would cutting out real estate commissions bring housing prices back under control?
As the interest rate fell from 14% in 1981, to roughly 0% today, and mortgage rates fell from ~20% to ~4%, people could afford to pay more and more, comfortably or otherwise, for their homes, and because often people buy the biggest house they can afford as a proportion of their monthly income, the maximum people can pay will continue to rise as interest rates fall. This drives house prices upwards.
As house prices rise upwards, all homeowners will have increased equity-debt ratios, giving them additional collateral to further pledge their houses to increase the amount they can borrow to spend on more properties. It is a pro-cyclical effect on house prices.