We’re continuing with Real Estate Sunday.

By way of Mike Panzner (New Laws of the Stock Market Jungle) we get this interesting observation: There seems to be a breakout bull market in Real Estate Agents:

click for larger graph

Realpop

The chart shows agents on a percentage basis (Labor Force and Total Pop) at all time highs:

As of March 2004, the individual membership of the National Association of Realtors@, a trade association for those involved in all aspects of the residential and commercial real estate industries, hit 1,118,201, a new record.

While that nominal gain in and of itself is not surprising, what is more interesting, perhaps, is the fact that the membership as a percentage of the total working-age and overall U.S. population has also hit new highs.

As of December 2004, NAR membership grew to more than 0.6% of the U.S. labor force, an increase of 37% over the past decade. Is that more evidence of a bubble in the real estate market?

I don’t believe this is evidence of a bubble. Rather, it is a normal function of capitalism. People are attracted to careers where they can make more money and in more pleasant conditions. As the number of participants increases, competition goes up, margins tighten, profits go lower. At a certain point, the field is that  much less attractive, reducing the number of new participants. The cycle ends.

Think about the high profile careers which went through that same life cycle over the past 20 years: Law in the 1980s (blame hit TV show L.A. Law), Stock Brokers in mid-1980s, then Investment Bankers in the 1990s, followed by Venture Capitalists, ands in the late ’90′s, Coders, Software Developers and Digital Graphic Designers.   

Once interest rates hit 40+ year lows, it was Mortgage Brokers turn. Now, I suspect Real Estate Agents are topping.

Competition brings along its own self correcting mechanism. That’s whats meant by creative destruction . . .

>

UPDATE: February 10, 2007 10:32am

Ths week’s WSJ: 

Amid Slump, Real-Estate Agents Hang Up Their Blazers

 "The long-awaited shakeout among real-estate agents is finally
happening — much to the relief of those who are sticking with the business and
prefer a bit less competition.

When David Lereah, chief economist of the National Association
of Realtors, addressed the group’s convention in New Orleans in November, he got
one of the biggest bursts of applause by predicting there would be fewer
Realtors around in a year. Mr. Lereah said in an interview that he expects
membership in the trade group to decrease by about 6% to 8% from the record of
nearly 1.4 million reached in 2006.

The culling of agent ranks is a reaction to the downturn in
housing that started around mid-2005. Sales of previously occupied homes last
year declined 8% to 5.7 million, even as the number of agents continued to
increase for the year as a whole.

Even before sales slowed, people in the industry said far too
many agents were chasing too few deals. If hordes of inexperienced agents are
scrapping for business, says Christopher Galler, a senior vice president of the
Minnesota Association of Realtors, that can only lead to "a race to the bottom
in fees."

More competition on commissions could strike many consumers as
a good idea. Mr. Galler argues the result would be poor service. He says more
productive agents, who complete 20 or more transactions per year, are better at
solving problems than those who do only a few deals annually."

Category: Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “A Bull Market in Real Estate Agents”

  1. Peter says:

    Frankly, I know many engineering people (software and hardware) and others who started a real estate career during the last 4 years. There was only one reason for that. Desperation. After having been laid off, they simply could not find a job in their own profession anymore. Especially the over 40 ones.
    By the way, some of them became car salesmen for the same reason.

    Peter

  2. Larry says:

    Keep in mind that many individual investors get their real estate license to save on the transaction commissions on their own deals. Investing, not sales, becomes their full-time pursuit.

  3. seamus says:

    Peter, I’ve noticed the same thing. But I’ve also noticed people changing careers — or talking about changing careers — into real estate.

    I disagree that people are doing this because real estate is such a great career. It’s a direct function of the bull market in real estate. It’s only not evidence of a bubble if it’s evidence of an “extended asset class.”

  4. Bill says:

    Wonder how many lawyers have enterd the real estate game . Get them all togther , easier target .
    Not either of my favorite (career )people to deal with , obviously . Neat post

  5. Bubble Employment

    For RE agents, California alone has added 113,307 licensed RE agents since July 2000. The total RE agents in California (427,389) represents 1.9% of the total working population of California

  6. Jon H says:

    seamus writes: “I disagree that people are doing this because real estate is such a great career. It’s a direct function of the bull market in real estate”

    It’s also a function of how comparatively cheap & easy it is, compared to other career paths.

    Real estate firms advertise for new people all the time, offering training courses, etc. I assume the training is either free, or cheap. So it’s much more attractive than choosing another career path which involves a lot of expensive education and training.

    Real estate agencies want lots of agents because they don’t pay the agents. The agents only get paid commission. No benefits. So it doesn’t cost the agency anything to have a few dozen agents. I suppose having a lot of agents might bring in business, if only from increasing the odds that a person selling or buying happens to know someone at the agency.

    The problem with a superabundance of agents is that the pie gets divided up into smaller slices. Some agents will continue to do well, many agents will put in time and effort and money and not make any money at all. In the middle, the average agent will make less over the course of the year, due to having a part in fewer transactions.

    Another thing to consider is that real estate is probably considered a good side job, to bring in extra income. Low barrier to entry, and low commitment of time once you’re in, with the potential for good income if you’re well-connected. Part-timers probably account for a fair amount of the increase.

  7. mh497 says:

    This marks the top of the real estate bubble:

    From CNBC: A House panel today considers legislation that would add a real estate investment trust (REIT) option to the retirement savings plan for federal employees.

  8. Bigmuzz says:

    What caused the big spike upward in 1975?

  9. dc says:

    its all market forces obviously! higher earnings attract more people. i switched from investment banking to real estate and am making way more money there. we’re seeing a swap out of housewife real estate agents into full-time professionals. thats me. housewives beware!

  10. Another important point is that real estate trade groups are seeing success protecting their 6% commission at the local level. This type of job protection surely leads to an increase in interest in the job. See post: http://www.howtovaluemyhome.com/content/view/32/1/

  11. Your comments in Bull Market in Real Estate Agents is accurate. First there were “Soccer Moms” now we have “Realtor Moms.” The National Association of Realtors boasts more than two million members. A large portion of which came into the field in the last 4-5 years. I’m a 30+ year veteran real estate broker & Realtor who recently authored a book called:

    “I Know Where You Live! An Intelligent, Easy to Read Conversation Regarding Residential Real Estate for Everyone”. [ISBN 1-4137-6726-5, it's on Amazon, B&N.com, Forbes.comBookClub, etc]

    This is the first book everyone should read regarding residential real estate. It is a simple introduction to buying, selling and/or making residential brokerage your career. My intent was to ignite the reader’s interest in the subject & then explore further before they start their sales career.

  12. Bill Waltrip says:

    As a Dallas, TX REALTOR and former corporate sales consultant myself, I can tell you that real estate agents are increasing in number due in part to unemployment in corporate America. There is an influx of younger men (and women) displacing the previous stereotype of a dominant older women REALTOR population.

    It may be useful to some to know that comparatively, it IS NOT necessarily cheaper to enter residential real estate. There are license and training costs, dues and memberships, desk fees, office and supplies (overhead) and a long list of other mandatory expenses. My team employs the latest in communications technology and reporting functionality in guarantee our competitive lead; these out of pocket costs are considerable.

    Moreover, there are no benefits and salaries of any kind (IRS “independent contractor” rules) and the supposed “bull market” and natural increase in over all price-points is essentially a wash considering the increasing professional costs (some mentioned above) and while combined with the increasing competitive landscape.

    A word for the wise should include facts regarding the true success rate of new residential real estate agents. In many larger markets (i.e. Dallas, TX), I witness about a 75-90% fallout rate. Only about 15% on average really “make it” in the industry to the degree that they are financially comfortable and headed in the direction of true retirement potential…one day.

    Also, new agents should have 12-18 months of complete living expenses in cash (liquid) savings “prior” to entering the business. Unless there are unusual (positive) circumstances in place, I would suggest this as a rule, for obvious reasons.

    I am highly passionate about residential real estate and I believe our Park Cities (Dallas, TX) are clients receive the best service in Dallas. New agents just need to realize that this takes a unbelievable amount of preparation, time and financial commitment to make happen. If done correctly, a good REALTOR can bring untold joy to the lives of their clients and to themselves.

    Bill Waltrip
    The Kraft & Waltrip Team
    Coldwell Banker Residential Brokerage
    Dallas, TX

  13. evan says:

    Should graph per capital agents & amount of real estate sold per agent. With the boom market (value and volume (units) there should be a few more agents. A gas state attendent quized me recently when he saw I did real estate, he was taking his exam for a license soon. (I actually work non performing commercial loans) A few years ago he would be learning tech stock trading, following another herd.

  14. Mabelle says:

    The great housing bubble has now come to a point of deflation. The five years of price gains saved America from the collapse of the stock market. It has placed billion’s to consumers and cause ignition of a building boom. This case bolstered the U.S. economy.The latest figures show that home sales, both new and existing, has risen in March. Local housing experts say that they are not forecasting the collapse of the nationwide housing. Monthly sales went down 11% to 25% in Miami, Boston, San Diego and Virginia.

    Frantic market went calm with the hovering beyond of most potential buyers. People who listed their hones are not taking their houses off the market. At present, home values’ ratio to incomes in the bubble zone is around 40%. In scenarios like these, housing prices drop 10% to 15% in the bubble zone. They then remain flat only after three to four years while incomes catch up.

    By M. Sese
    Miami Real Estate

  15. Mabelle says:

    Entering the Dead Zone

    The great housing bubble has now come to a point of deflation. The five years of price gains saved America from the collapse of the stock market. It has placed billion’s to consumers and cause ignition of a building boom. This case bolstered the U.S. economy.The latest figures show that home sales, both new and existing, has risen in March. Local housing experts say that they are not forecasting the collapse of the nationwide housing. Monthly sales went down 11% to 25% in Miami, Boston, San Diego and Virginia.

    Frantic market went calm with the hovering beyond of most potential buyers. People who listed their hones are not taking their houses off the market. At present, home values’ ratio to incomes in the bubble zone is around 40%. In scenarios like these, housing prices drop 10% to 15% in the bubble zone. They then remain flat only after three to four years while incomes catch up.

    By Mabelle Sese
    Miami Real Estate Florida

  16. A Bull Market in Real Estate Agents – Not anymore

    Miami Real Estate

  17. Donna Whipple says:

    My husband and I are from New York and we want to buy a home in chambersburg or Shippensburg, Pa. We want two bedrooms, one bathroom, kichen, living, dinning room. And 1.5 acres of land, not in town
    We want something in the $ 60,000 price range.

  18. Donna Whipple says:

    Another reason that real estate agent licenses have increased is that in some states, in order to be a mortgage broker, you must have a real estate agent license (and nothing else). So many of the numbers were mortgage brokers jumping in on the action.
    realtor email database

  19. When will the real estate bubble burst?

  20. mike says:

    Real estate listings san francisco bay area , homes for sale las vegas, mortgage interest rates, loan payment calculator and refinance. Comprehensive real estate and property listings. Includes information on buying, selling or renting a home, mortgage rates, home loans and refinance information. Plus free instant home valuation.

  21. bologna – people are still chopping down forests to pave parking lots- real estate will always continue to grow, the lame upstart agent who probably doesnt fit the job probably accounts for 80% of the failure agents not earning a decent salary in the field. I have architectural design education, union carpentry, and I think having direct knowledge about construction and the housing markets will give me a valuable insight as to what makes a home desirable and to which customers looking to sale/buy a new or older home, or even a home they look to invest in to rehab. To down play a market because it is flooded with “newbs” is completely premature and irresponsible in my opinion. My thoughts are let the “newbs” play in the sandbox, and if they can make it let them. I don’t think anyone will stick around if they aren’t making any money, and in this respect that makes it a self cleaning oven. I dont visit this site and probably never will, so make of my response as you undoubtedly will.

  22. eliza sam says:

    i like what “none ya biznes” had to say…

  23. Karen says:

    The successfull Realtors of today were the newbies of yesterday.

  24. I think after being a realtor of Top Production for 26 years that real estate is no longer about just making commissions from buyers and sellers!! I think a real business plan for realtors must include a third source of income that insures wealth and a happy retirement plan!! Single level residuals paid on sponsoring other agents into the business has by itself created six and seven figure incomes for many realtors in two to five years of applied effort!! Brian W. Nichols/Dallas,Texas

  25. Someone in Massachusetts says:

    Would I do well going into a real estate sales career now (Oct 2007)? I’ve got a very good amount of liquid assets to help me get by for a year without making money. Any advice, comments, suggestions to me, as I consider this new career?

    I don’t have any “connections” to help me get listings, but I am a social butterfly.
    Will that help me? Or should I just forget about real estate as a career altogether?

  26. Consider staying in the business and help the remaining agents find residual income through Exit Realty!! Every day we are recruiting people in because the old system of two income streams is cracking!! For the first time in real estate a true business plan is made available to agents so they can get off the merry go round of just having their own production commission income. Now other peoples production earns an agent of Exit more money over time through single level residuals, and they are regaining financial health. The Insurance Industry pays single level residuals,the music industry pays single level residuals,Walmart to their top executives pays single level residuals,and now the fastest growing real estate company ever in the history of real estate pays residuals!!!Help yourself,and help your friends with three income streams in your real estate business.

  27. Francesca Lamothe says:

    I am studying for my real estate license in Los Angeles. Do you have any advice? is it a good time to start a career in real estate? thanks

  28. Francesca Lamothe says:

    do you need real estate photography?
    email franlamothe@yahoo.com

  29. MRS MARIAM ABACHA says:

    16th January, 2008.

    Dear ,

    I am Mrs. Mariam Abacha widow of the late Nigerian Head of State, Gen. Sani Abacha who died on the 8th of June 1998 while in active service to our country. I am presently in distress and under solitary custody while my eldest son Mohammed is currently undergoing trial in Lagos and Abuja though he has just been recently granted bail. The present administration has intensified their probe into my family investments and estates and my late husband’s bank accounts both locally and internationally have been frozen.

    Refer to these websites for more on my family’s present predicament:

    http://news.bbc.co.uk/1/hi/world/africa/211324.stm
    http://www.time.com/time/europe/magazine/2000/27/swiss.html

    To save the family from total bankruptcy I have the sum of Twenty Eight Million United States Dollars (=US$28,000,000.00=) being accumulated pay-back contract deal between my late husband and a Russian firm that executed our country’s Multi-Billion Dollar Steel Plant project in 1996. The money was deposited in a private Finance Company in (Holland) The Netherlands after the death of my husband. This is the reason I am contacting you with the hope that you will be of great assistance to my family to invest this money into viable business projects outside Nigeria.

    I am soliciting for your help and trustworthy assistance to transfer the money into your account for investment partnership with you as may be agreed after the final negotiation. I have also decided to compensate you with (20%) equity share of the total sum after you must have received the money into your custody. Do not hesitate to send me mail immediately you receive this letter and confirm your willingness to assist my family in this project. Please forward your private telephone and fax numbers (mobile preferable) to enable us commence formal discussion on this transaction.

    May Allah Bless you.

    My Best Regards,

    Mrs. Mariam Abacha

  30. MRS MARIAM ABACHA says:

    16th January, 2008.

    Dear ,

    I am Mrs. Mariam Abacha widow of the late Nigerian Head of State, Gen. Sani Abacha who died on the 8th of June 1998 while in active service to our country. I am presently in distress and under solitary custody while my eldest son Mohammed is currently undergoing trial in Lagos and Abuja though he has just been recently granted bail. The present administration has intensified their probe into my family investments and estates and my late husband’s bank accounts both locally and internationally have been frozen.

    Refer to these websites for more on my family’s present predicament:

    http://news.bbc.co.uk/1/hi/world/africa/211324.stm
    http://www.time.com/time/europe/magazine/2000/27/swiss.html

    To save the family from total bankruptcy I have the sum of Twenty Eight Million United States Dollars (=US$28,000,000.00=) being accumulated pay-back contract deal between my late husband and a Russian firm that executed our country’s Multi-Billion Dollar Steel Plant project in 1996. The money was deposited in a private Finance Company in (Holland) The Netherlands after the death of my husband. This is the reason I am contacting you with the hope that you will be of great assistance to my family to invest this money into viable business projects outside Nigeria.

    I am soliciting for your help and trustworthy assistance to transfer the money into your account for investment partnership with you as may be agreed after the final negotiation. I have also decided to compensate you with (20%) equity share of the total sum after you must have received the money into your custody. Do not hesitate to send me mail immediately you receive this letter and confirm your willingness to assist my family in this project. Please forward your private telephone and fax numbers (mobile preferable) to enable us commence formal discussion on this transaction.

    May Allah Bless you.

    My Best Regards,

    Mrs. Mariam Abacha

  31. william joe says:

    Interesting fact: This has been due to the sub prime crisis in the United States, increasing volatility in the share and financial markets and investors such as fund managers requiring higher returns. Nice Site by the way.

  32. Peter says:

    Real Estate agents have to find harder these days. It’s not as easy as it used to be. To all of the real estate agents, keep up the good work and good luck.

    Peter