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After a bruising 2022, last month offered a bit of a surprise for the real estate industry: Membership in the National Association of Realtors (NAR) didn’t dip; in fact, 2022 saw Realtor numbers climb to a record high.
Membership in NAR has been climbing for some time now, so upticks in general aren’t out of the ordinary. But what is surprising is that the shift in the housing market — higher rates reduced demand for home purchases and reversed the market’s 2020 and 2021 trajectory — didn’t have an impact. Indeed, the conventional wisdom is that when the housing market slows down, the number of real estate agents falls as professionals who can’t make ends meet move on to other jobs.
The most obvious question, then, is this: Why didn’t that happen in 2022? Also: Just how long does it take for a downturn to impact the real estate agent labor force? What have past cycles of boom and bust looked like? And will the number of Realtors keep rising in 2023, or is this the year that the numbers will finally reverse their trajectory?
To better understand what’s going on, Inman combed through NAR’s membership numbers — which we’re using as a proxy for the broader agent community — going back several decades, then compared it to various other economic data. Inman also spoke to a handful of experts and industry veterans.
The takeaway from all of this is it appears very likely that the number of agents will fall in the near future. However, in the end, that may prove to be something of an opportunity for the agents who manage to weather the storm.
Past shifts put downward pressure on the number of Realtors
As previously reported, NAR membership stood at 1.58 million as of Dec. 31, 2022. That beat out 2021’s numbers — which were a record at the time — by more than 21,000.
The graph below shows NAR’s membership numbers going back more than a century.
As mentioned above, the record 2022 numbers surprised some observers because they came amid a significant market shift.
However, in a phone call with Inman, NAR Chief Economist Lawrence Yun explained that typically “membership does not drop during the year of transition” in a market shift. Instead, he explained that NAR membership numbers typically hold steady for about 12 months, then see declines over the ensuing two or so years.
One thing worth noting about the chart above is the huge spike in NAR membership in 1975. As it turns out, the huge spike was due to a change in NAR’s membership offerings, and for that reason, pre-1975 numbers are less useful for understanding the current Realtor membership landscape.
In that context, the first major post-1975 change in trajectory for Realtor numbers happened in the early 1980s. Here’s what that moment looks like, plotted alongside U.S. GDP at the time. Data on GDP comes from the St. Louis Fed.
The other major dip in NAR membership visible on the top graph began in 2008, which of course coincides with the Great Recession and the end of the early 2000s housing bubble.
Here’s what that moment looks like plotted against GDP.
(It’s worth noting that these graphs aren’t comparing the absolute number of Realtors to the specific figure that is GDP. The idea instead is to superimpose one graph onto the other to merely compare the trajectories of two different trends.)
These graphs support the conventional wisdom that economic hard times reduce the number of people working in real estate sales.
What’s interesting, though, is that the hit to Realtor numbers tends to outlast wobbles in GDP. After the Great Recession, for instance, NAR membership bottomed out in March of 2012 at 963,455. But at that point the GDP had fully recovered and in fact, had experienced more than three years of growth.
George Ratiu, senior economist and manager of economic research at Realtor.com, noted that employment in the broader economy had also recovered by 2012. But he characterized the lingering effects on the Realtor labor force as predictable.
“The real estate labor force tends to mirror activity in the housing market, but with a lag,” Ratiu explained in a phone call with Inman. And he added that this lag explains NAR’s record membership at a time when the market was shifting. “It takes a while for markets to adjust and for people to come to terms with it.”
The idea of lag came up in almost every conversation Inman had for this story, with experts routinely noting that it takes time for a market shift to start impacting the number of agents. And then when the impact begins, it can take years for NAR membership to start rising again — even if the broader economy is taking off.
The lag is in part due to the fact that it takes time for a market shift to work its way through the system at the local level. Agents tend to drop out when they’re no longer earning enough money to make ends meet, so personal savings or a reduced-but-still-ongoing number of transactions can also delay agent dropouts.
But Mike Miedler, president and CEO of Century 21, told Inman that part of what’s going on has to do simply with the fact that it takes time for a membership to run out.
“These folks are paying their dues, they’re paying their board,” Miedler told Inman in a phone call. “They generally pay that up front. So it’s going to last for all of 2022.”
The agent community’s response to a market shift is also influenced by an array of other factors, including broader unemployment, interest and mortgage rates and home prices. And it’s not all bad news on those fronts at present.
“The unemployment rate is really low,” Ratiu said, pointing out that such a factor could set this moment apart from past shifts, such as the Great Recession.
However, Jonathan Miller — president and CEO of appraisal and consulting firm Miller Samuel Inc. — said at the end of the day the number of agents is most closely tied to the number of transactions folks can close.
“I think what people don’t understand is it’s a transactional business,” Miller said. “It’s all about transactions. The more transactions, the more people can make a living in the profession.”
So, if there are fewer transactions, the number of practitioners falls.
In that context, the graph below shows NAR’s membership going back to 1981 plotted alongside existing home sales for the same period. The sales data comes from NAR in this case. (Unlike the GDP graphs above, the Y axis applies to both data sets here.)
The lag the experts mentioned above, which was apparent on the GDP graphs, is also clearly visible here. Most notably, the trough in NAR membership numbers started after home sales began tanking and didn’t recover until after housing transactions were well on their way up again.
It’s also notable that the NAR membership line is smoother than the line for existing home sales, suggesting real estate sales professionals are weathering minor shifts.
But probably the most interesting thing that jumps out from that graph is the dip in home sales in 2022, as well as the lack of a dip in NAR membership. Looking back at prior periods, the graph makes a compelling case that NAR membership will see a similar dip in the near future.
We’ll get to what might happen in the near future in just a second. But before that, a few more comparisons.
First, here’s NAR membership compared to the average rate for a fixed 30-year mortgage from 2005 to 2015, or the period that includes the Great Recession. Data on rates comes from the St. Louis Fed.
As with other data sets, these trend lines roughly follow each other at the start of the highlighted period.
Notably, during the Great Recession interest rates eventually fell as regulators worked to stimulate the economy. That’s essentially the opposite of what is happening now, with the Fed repeatedly raising interest rates — which influence mortgage rates — in an effort to stop inflation and cool an overheated economy.
Falling mortgage rates ultimately make housing more affordable and end up fueling more transactions which eventually happened during the Great Recession; the graph above shows rates were going down in 2012, while the graph of existing home sales shows that deals were increasing during that period. It took some time after that, but NAR membership eventually started to tick up until eventually mortgage rates and membership numbers were moving in opposite directions — which is ultimately what we might have expected.
Finally, here’s NAR membership alongside the U.S. unemployment rate over the last 22 years.
This graph also highlights an inverse relationship; as unemployment falls, the economy grows and more people buy houses, fueling a demand for more real estate professionals to serve them.
The future is hard to predict
The point of the graphs above is to highlight the fact that a variety of broader economic trends intersect with how many people are interested in working as real estate agents. The list of factors could go on, but the gist here is that it’s possible to anticipate whether the number of Realtors is likely to go up or down by looking at everything from home sales to mortgage rates to various measures of the broader economy, such as unemployment.
But what this also means is that if some of these predictors behave in unusual ways, the number of Realtors could also fluctuate in unusual ways. That at least was the point Ratiu made, saying thanks to high employment numbers and the Fed’s goal of a “soft landing” past periods may not entirely foreshadow what will happen now.
“If the economy does hit a recession and we do see broader layoffs and interest rates do stay elevated, that could accelerate the number of agents choosing to leave the profession,” Ratiu said. “But if we have this soft landing, and in conjunction with that housing stabilizes, we could have a more stable pace of transactions and that might motivate agents to stay in the industry.”
His point wasn’t to identify exactly what is going to happen, but rather to highlight the differences between the current housing landscape and prior ones — a situation that makes it hard to know just how many agents might leave or join the real estate profession in the coming months and years.
Most see declines in the agent community — but that’s not necessarily a bad thing
Still, the experts who spoke with Inman for this story generally agreed that NAR membership — and by extension the broader real estate agent ranks — is likely to shrink.
“It’s just inevitable that the membership will begin to slip downwards,” Yun pointed out, though he too noted the large number of variables that could influence what specifically happens. “A decline will occur with a lag time, but let’s say home sales begin to pick up next year and home prices start to inch higher. Then I think we’re looking at a short term membership drop.”
Alternatively, if a less positive scenario plays out — say, a recession begins or other economic stressors become more pronounced — agent ranks could fall further. Looking at what is already happening with transactions and inventory, that was more along the lines of what Miller envisioned.
“Inventory was obliterated,” Miller said of the recent past. “With the drop off in activity, I expect there’s going to be a relatively sharp fall off in NAR membership.”
That sounds somewhat apocalyptic, with many people washing out of their chosen profession. And it may indeed be bad for many people on an individual level.
But it can also mean the agents who stick around get bigger pieces of the pie as the competition shrinks.
“In 2005, arguably the best year in real estate in many many decades, the average sides per agent was 5.5,” Miedler said. “In 2010, when you fast forward to one of the worst years, the per person productivity moved up to 8.5.”
In other words, with far fewer agents after the onset of the Great Recession, those who persevered had a chance to do more deals. If large numbers of agents do leave the industry this time around, something similar could play out in 2023 and 2024.
The conventional wisdom holds that the agents who thrive in these types of scenarios are those with more experience and a bigger book of business. And indeed, the experts who spoke to Inman generally agreed that such a demographic is best positioned to stick with real estate amid harder times. Some also indicated that part-time agents and hobbyists might leave the industry as their deals dry up and it no longer makes financial sense to pay to stay active.
But Miller argued that new markets also sometimes rearrange the industry’s pecking order. Ergo, newer agents who have a firmer handle on the new landscape also sometimes come out ahead.
Put another way, the situation isn’t hopeless.
“The stereotype of having a book of business and a proven track record only goes so far,” Miller argued. “Every market seems to create new top producers. So for people who were successful in a previous up market, the conditions have changed, the buyers, the technology, any number of factors. And some people just naturally thrive in that.”