The Hidden Forces Driving Home Prices Higher

Buying a home should be one of the most exciting milestones of your life. But in today’s housing market—where affordability is at an all-time low for many—the dream of homeownership is turning into a nightmare for countless families. Prices are soaring, bidding wars are fierce, and competition feels endless. Yet, beneath the surface, something even more troubling is at play: the entire system is designed to push you into spending more than you should. And the worst part? Most buyers don’t even know this. The truth is that the real estate industry’s structure—how commissions are paid, how loans are processed, and how services like appraisals and inspections are incentivized—is geared towards maximizing the price you pay for a home. Nearly every professional involved in your home buying journey benefits when you spend more, and unless you understand these dynamics, you could find yourself financially stretched beyond your limits in a market that already feels impossible to afford.

The System that Pushes You to Overspend

At the heart of the real estate transaction is a commission-driven model that permeates the entire industry. Real estate agents, for example, earn their income through a percentage-based commission on the final sale price of the home. This means that the more you pay, the more they make. Even if the agent has your best interests at heart, the system itself nudges them toward pushing higher bids, showing you homes outside of your original budget, or suggesting that you offer more in competitive markets.The same goes for mortgage providers, who profit from the size of the loans they originate. Lenders want to approve the biggest loan possible because they earn more in interest payments over time. So, while they may offer you pre-approval for an amount far higher than you expected, they are incentivized by the system to get you to borrow as much as possible.The commissions and fees associated with title agents, appraisers, and inspectors are similarly tied to the price of the transaction. Larger deals lead to higher fees for these professionals, subtly encouraging everyone involved to prioritize bigger sales. The entire structure of the home buying process—from agent commissions to mortgage lending—is built to reward higher spending, often to the detriment of the buyer.

The NAR Settlement: A Step in the Right Direction

Change is finally on the horizon. In March 2024, the National Association of Realtors (NAR) reached a settlement agreement that aims to increase transparency around real estate commissions. Historically, the commission paid to the buyer’s agent was handled behind the scenes, often by the seller, with little involvement or awareness from the buyer. This practice masked the true cost of agent services and contributed to higher sale prices without the buyer fully understanding how much they were paying.The NAR settlement is an important first step toward breaking this long-standing practice. Moving forward, buyers will have to negotiate the commission they pay to their agent, giving them more control and transparency over the process. For the first time, buyers will clearly see the cost of agent services and will have the ability to question whether they are getting the value they deserve.However, while this settlement is a victory for transparency, it doesn’t fully address the deeper issues within the industry. The commission structure that encourages higher prices is still intact, and buyers are still surrounded by a system designed to extract the most money possible from every transaction. The settlement is just one piece of the puzzle; there’s still a long way to go to protect buyers from the forces pushing them to spend more.

The Housing Crisis: It’s Never Been Harder to Afford a Home

All of this is happening at a time when housing affordability is reaching crisis levels. Wages haven’t kept up with the rising cost of housing, and in many cities, homes are simply out of reach for average families. Buyers are already grappling with the emotional and financial strain of finding a home they can afford, and the system only makes it harder by driving them toward higher spending.The real estate industry, as it’s currently structured, amplifies this problem. The very people buyers rely on for advice and expertise are part of a system that benefits from increasing home prices. Buyers may not realize that their agent’s commission, their mortgage lender’s approval process, and the fees associated with title and closing services all contribute to higher overall costs. In a market where every dollar matters, these hidden forces make it even harder for buyers to stay within budget.

Buyers Deserve Better: It’s Time to Rethink the System

The NAR settlement represents a step toward transparency, but it’s only the beginning. The real solution lies in rethinking the system entirely. Buyers deserve a process that doesn’t incentivize overspending at every turn. They deserve tools and services that empower them to make informed decisions without being pushed into bigger, more expensive transactions.Agent Mira, for example, was created to address these very problems. By offering AI-driven insights, transparent pricing models, and a commitment to the buyer’s financial well-being, Agent Mira helps buyers find the right home at the right price—without the pressure to overspend. Our platfomr puts control back in the hands of buyers, allowing them to navigate the housing market with confidence and clarity, free from the financial interests that dominate traditional real estate transactions.

Empowering Buyers in the Face of Unaffordability

In today’s market, every dollar matters. With so many players incentivized by a system that rewards bigger purchases, it’s critical for buyers to stay informed and vigilant. The housing affordability crisis isn’t going away anytime soon, but buyers deserve better. You deserve better. By understanding how the system works—and leveraging unbiased, transparent tools—you can protect yourself from overspending and find a home you love without the financial strain. Because at the end of the day, homeownership should be about achieving your dreams, not falling victim to a broken system.The time has come to demand more transparency, better tools, and a rethinking of how the real estate industry operates. With the right resources, buyers can take control of the process and make homeownership a reality, even in an increasingly unaffordable market.