“Frankly, Realtors are running out of money,” Strickland said.
The industry, which boomed with new entrants in 2020 and 2021, has recently experienced a severe slowdown, forcing some to scale back, experts say. One widely cited analysis said: This is because 80% of the country’s real estate agents have the potential to find new jobs.
“Many industry leaders believe there are too many agents and would like to see fewer agents, allowing professionals to serve more clients, which would then allow them to lower commission levels to maintain current revenues,” said Steve Brobeck, a senior fellow at the Consumer Federation of America.
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In some ways, the exodus has already begun.
The Bureau of Labor Statistics predicts there will be 440,000 full-time real estate agents and brokers in 2023. This is a decrease of 72,000 people from the previous year.
As of mid-April, there were approximately 1.5 million real estate agents registered with the National Association of Realtors. That’s down more than 100,000 from 2022, according to Nick Gerli of real estate data firm Reventure Consulting.
The real estate trade group, which recently stopped releasing membership figures, declined to comment on the matter, but earlier this year, Gerli cited a monthly report the trade group issued that said NAR expects real estate agent membership to decline over the next 24 months.
As interest rates remain relatively high, transactions are so few that many real estate agents are only able to sell a few homes a year. A Consumer Federation of America survey of nearly 2,000 real estate agents found that 49% of agents sell only a few homes a year. few More than one home will be sold in 2023. And real estate agents will soon be facing new regulations that could result in sweeping changes to how they do business and get paid.
Under new rules that come into effect in August, property databases will no longer include buyers’ commission offers to agents, meaning agents can no longer expect to receive a cut of the seller’s profits. Investment bank Keefe, Bruett & Woods estimates that this could result in a loss of up to 30% of total U.S. fee revenue.
The rule is the result of a court settlement between NAR and a group of home sellers who argue the commission structure violates antitrust laws. A federal judge tentatively approved the settlement and is expected to consider making it permanent in November. And the pressure on the industry could continue. — The court’s ruling in April gave the Justice Department the authority to reopen an earlier antitrust investigation into NAR and its fee rules.
Economists who study the real estate industry have long believed that the “unbundling” of buyer and seller fees would drive a significant number of real estate agents out of the industry, but estimates vary as to how many.
Keefe, Bruyette & Woods predicts: Due to changes in the fee structure, From 60 80 percent of the U.S. Real estate agents are leaving the industry.
Sonia Gilback of CUNY Baruch College and Paul Goldsmith Pinkham of the Yale School of Management In an email explaining the study, Gilbeu said that if one agency’s commission remained at 3% and the other became competitive, about 56% of agents would exit the market.A 2015 paper by Panre Jia Berwick and Parag Pathak in the Rand Journal of Economics predicted that a 50% commission cut would lead to a 40% drop in the number of agents.
Experts see a silver lining in the potential exodus of real estate agents: Those who stay may be more experienced and competent. “That’s a good thing for consumers because agents will, on average, be better at what they do and will be able to charge more competitive fees,” Gilback said.
Brobeck said the real estate industry has been experiencing an “oversupply of real estate agents” since the peak of the pandemic, and he sees the exodus of agents as probably a good thing for homebuyers.
According to a separate Bureau of Labor Statistics measure that includes part-time workers, 1.8 million people worked in real estate as of April, up slightly from last year. But many of those workers run relatively small businesses and hold other full-time jobs, making home selling “definitely a part-time industry” at the moment, Brobeck said in a recent report.
Brobeck said agents would come under more pressure to justify their fees as buyers would be more likely to ask for lower fees under the rules that come into force in August. He also said it should create more room for discount brokers who serve first-time property buyers.
“This would lead to a more diverse and competitive residential real estate market,” Brobeck said.
Gilback, the CUNY researcher, believes only the most experienced agents will be able to continue charging high fees.
Agents who survive the upcoming transition will likely be better connected in the industry, have deeper relationships with contractors, electricians, plumbers, appraisers and other professionals and will be “better equipped overall to advise clients,” Gilback said.
Contracts under the proposed new rules should bring greater clarity to the buyer-agent relationship, analysts said, which could reduce cases of “ghosting,” in which a potential homebuyer talks to an agent while searching for a home and then signs a contract with another agent or puts their search on hold.
“Before, real estate agents weren’t required to explain what they did and there was less accountability,” Strickland says.
was suggested NAR transactions are Industry Announcements in March, “But panic has been replaced by a wait-and-see attitude,” Strickland said.
She called the NAR deal a positive overall.
“It will eliminate people who, frankly, are not competent, who are not up to the task, who are not willing to educate themselves and learn new ways of working. … This will be a positive change for our industry.”
Lauren Kaori Gurley contributed to this report.
