There will be fewer agents, which is a good thing. There are 20,000+ realtors in San Diego County, and last month there were 2,113 sales of attached and detached homes. Hat tip to Greg for sending in this article!
When real estate broker April Strickland looks at her local housing market in Gainesville, Fla., she sees a mismatch. Industry data shows that only a few hundred homes are sold each month, she said, yet there are more than 1,500 local Realtors.
Strickland has seen the ups and downs of the housing market since 1995, when she started managing her parents’ rental properties as a teenager. But she says the business environment of the past two years is the most challenging she can remember — slower even than the years following the 2008 financial crisis.
“Quite frankly, Realtors are running out of money,” Strickland said.
An industry that swelled with newcomers in 2020 and 2021 has recently experienced a harsh slowdown — leaving the field no choice but to downsize, experts say. One widely cited analysis predicts that as many as 80 percent of the country’s real estate agents could find a new line of work.
“Many industry leaders think there are way too many agents and would like to reduce the number so the professionals can service more clients, thus allowing a reduction in commission levels in order to maintain current incomes,” said Steve Brobeck, a senior fellow at the Consumer Federation of America.
By some measures, the exodus has already begun.
The Bureau of Labor Statistics recorded 440,000 full-time real estate agents and brokers in 2023, about 72,000 fewer than the year before.
Realtors will soon face new rules that could result in sweeping changes to how they do business and how they get paid.
Under the new rules starting in August, real estate databases no longer will include offers of compensation for buyers’ agents. That means those agents can no longer count on a cut of the seller’s windfall. Investment bank Keefe Bruyette & Woods has estimated that as much as 30 percent of the total U.S. commissions revenue might be lost as a result. They forecast that changes to the commission structure could cause 60 to 80 percent of U.S. Realtors to leave the profession.
CUNY Baruch College’s Sonia Gilbukh and Yale School of Management’s Paul Goldsmith-Pinkham estimated that about 56 percent of agents would exit the market if one side’s commission remained at 3 percent while the other became competitive, Gilbukh said in an email describing the study. A 2015 paper in the Rand Journal of Economics by Panle Jia Barwick and Parag Pathak predicted that a 50 percent reduction in commissions would result in 40 percent fewer agents.
Experts see a silver lining in a potential exodus of Realtors: Those who remain might be more experienced and competent. “This will be good for consumers because agents on average will be better at their job and will charge more competitive commissions,” Gilbukh said.
A “Realtor glut” has persisted since the industry’s pandemic high point, said Brobeck, who also sees a departure of real estate agents as probably a good thing for home buyers.
Gilbukh, the CUNY researcher, believes that only the most experienced agents will be able to keep charging high commissions.
Agents that survive the upcoming transition are likely to be better connected within their industry, having deeper relationships with professionals such as contractors, electricians, plumbers and appraisers, and “overall better poised to advise their clients,” Gilbukh said.
The proposed NAR deal was met with fear throughout the industry when it was announced in March, Strickland said. But the panic has given way to a “wait-and-see” attitude, she said.
She characterized the NAR deal as a positive thing overall:
“It will eliminate people who quite frankly aren’t up to snuff, who can’t do the work, who don’t want to educate themselves and learn new ways or working. … This will be a good pivot for our industry.”
Hopefully banks actually start foreclosing.
Letting people live for free in houses they aren’t paying for limits the supply of homes for sale.
Unfortunely doing nothing is much easier than doing something. Which means banks will likely let the deadbeats live in houses for free.
It seems like limiting the supply of homes only causes prices to increase! So, I don’t expect them to start cranking up the foreclosure machine anytime soon.