There are more real estate agents than home sales in some markets — and simple economics tell us that something has to give, said Jack McCabe, a real estate consultant in Deerfield, Fla.
McCabe said that there are already examples of Realtor membership declines in the Fort Myers-Cape Coral, Fla., area, and in Palm Beach County, Fla., as well as real estate brokerage office closures and consolidations. The Realtor Association of Greater Fort Myers and The Beach reported that membership has declined about 7.8 percent year-over-year, to a current total of about 6,000 members.
“Those are fairly anecdotal of what’s going on in marketplaces all around the country — especially in housing-bubble markets,” McCabe said. Those markets that saw the “most dramatic increases in real estate salespeople and mortgage salespeople and so on are now seeing job losses in the thousands.”
While some markets have seen declining Realtor membership, the National Association of Realtors reported last month that its overall membership has grown about 0.42 percent since the end of July 2006, to a total of 1.36 million at the end of July 2007.
The number of real estate licensees — including Realtors and non-Realtors — has continued to rise in California and Florida despite the market slump, though the rate of growth in new licensees does appear to be slowing down.
In August 2007, the number of newly licensed real estate brokers and agents for that month was down about 36 percent in Florida compared to August 2006, the Florida Department of Business and Professional Regulation reported, while the total number of real estate licensees in that state rose about 0.8 percent during that period, from 309,795 in August 2006 to 312,128 in August 2007.
In California, the state’s Department of Real Estate reported that the number of real estate broker and salesperson licenses issued in July 2007 dropped about 35 percent compared to July 2006, while the total licensee population rose about 6 percent during that period.
McCabe said he expects the number of Realtors to drop as a result of “commission attrition” — less money to go around for the many professionals working in the industry. There were fewer transactions than agents last year in Palm Beach County, Fla., he said.
“To the true, long-term real estate professional — many are quietly cheering the exodus of the inexperienced and unprofessional agents who have damaged their reputations. I think they’re not altogether unhappy that we’re going to see a drop in the ranks. The true full-time professionals will survive and succeed while the others drop like flies.”
The Las Vegas Sun newspaper reported this month that Century 21 Aadvantage Gold, a Las Vegas-based real estate brokerage company, had been a high-roller in real estate, and was ranked the top Century 21 affiliate worldwide in sales from 2002-06. Times have changed. Jimmy Dague, the company’s owner, this month filed for Chapter 11 bankruptcy, according to the report.
And Florida’s St. Petersburg Times newspaper reported that some Realtors who got swept up in the real estate boom and bought investment properties are now facing financial distress because they haven’t been able to unload the properties for a profit.
The financial troubles of real estate professionals do not always catch a sympathetic ear. Responding to an Inman News blog post about the Century 21 Aadvantage Gold owner’s bankruptcy filing, a reader commented, “Did Jimmy (Dague) not see this coming? Did anyone not see this coming? Do these people not have a memory? Can’t we even remember (back) to the 2000 dot-com fiasco? From the penthouse to the outhouse.”
Another commenter noted that the real estate market will continue to be cyclical: “All of us real estate professionals will need to learn to adapt, and the strong will survive (again).”
McCabe said that those real estate professionals who left other occupations to join the real estate rush when the market was strong may hop back to their past professions. Waitresses-turned-Realtors may become waitresses again; “teachers will go back to being teachers; we’re going to see some previous service employees go back to their sector,” he said.
According to an analysis of Southeast Florida Regional Multiple Listing Service statistics by Real Data Strategies Inc., there were about 20,853 agents who participated in a real estate transaction — either representing a seller or a buyer — from July 1, 2006, through June 30, 2007. Those active real estate agents represent about 47.7 percent of the MLS membership — 22,867 agents did not participate in a transaction during that period, according to the data.
Active agents participated in an average 3.5 transaction sides during that period, and for the entire agent population that means 1.7 deals per agent. The top 25 percent of active agents accounted for 67.7 percent of all of the business, Real Data Strategies reported. This data can be skewed by those agents who work as part of a team and by those agents who are members of multiple MLSs and may be most active in only one MLS but maintain memberships in others.
The percentage of active real estate professionals in a given MLS is typically higher. For example, there are 64.4 percent active real estate professionals in the Phoenix-area Arizona Regional MLS, 71.9 percent active in the Sacramento-area Metrolist Regional MLS, 65.1 percent active agents in the Greater Washington, D.C.-area MRIS MLS and 67.5 percent active agents in the SANDICOR Regional MLS in the San Diego area, according to Real Data Strategies statistics.
For all of these markets, the top 25 percent of active agents are handling at least 65 percent of the business in terms of sales volume, and the top 5 percent of active agents are handling at least 27 percent of the business.
The California Association of Realtors in June announced that it expects home sales to fall to about 410,500 units this year compared with 477,000 sales last year. There are about 200,000 Realtors in the state, for an average of about two transactions per Realtor if that projection holds.
A report released last month by CleanOffer, a company that offers an MLS-search service to subscribing agents and their clients, found that 45 percent of licensed real estate agents who are members of the RE InfoLink MLS in the Greater San Francisco Bay Area did not close a transaction from July 1, 2006, to June 30, 2007.
“What we’ll continue to see over the next three years is a decrease in the total number of Realtors and people who make their living off of real estate sales,” McCabe said. “There is always a purging process that happens in business cycles.”
Real estate brokerage giant Realogy — which owns real estate brands Coldwell Banker, Century 21, ERA and Sotheby’s International Realty, last year announced a $50 million cost-cutting plan for its company-owned brokerages that included office closures and a “head-count reduction.” Realogy is also a major real estate franchisor.
NRT LLC, the Realogy subsidiary that manages company-owned brokerage operations, had about 64,000 sales associates at year-end 2005 and now has about 59,000 sales associates, according to company spokeswoman Melissa Campbell.
A company fact sheet states that NRT now has about 8,000 employees, compared with a count of 9,000 in 2006, though Campbell stated that that number “has not changed materially in either direction” during the past three to four years.
As for the reduction in the sales force, Campbell said, “Like the rest of the industry, we saw many newcomers to the industry join our employee and sales associate numbers through 2005. As the housing market has changed during the past two years, we have also seen some of those newcomers, as well as some bottom-quartile agents, leave the business, which we believe is a healthy thing for both our company and the industry in general.”