We’re headed into the spring buying season with too few homes on the market to satisfy demand. That’s sure to create competition among buyers. But what about agents? There’s been an increase in the number of brokers and agents over the last several years who are facing stiff competition to land those deals, and to make a living — especially those new to the business.
A membership roster for the National Association of Realtors shows there were more than 1.3 million members last year. That’s the highest number of Realtors since a membership peak in 2006, before the housing crisis. It then dipped to less than a million in 2012, and has climbed back up since then. The latest numbers are still lower than the peak, but with the recent increase in membership, and a tighter housing supply than we had in 2006, it’s got to be tough to survive as a real estate agent.
Tight Housing Supply
According to Redfin’s data on inventory, there were 607,836 homes for sale across the nation in February. That compared to 686,137 homes for sale a year ago February. That’s a drop of about 78,000 homes or about 11.5%. (1)
You can see where the markets are more challenging by looking at how many months of supply there is for each market. A six-month supply is generally considered the norm for a healthy market.
On Redfin’s data page, it shows the red-hot market of Seattle with less than a one-month supply! And the median number of days on the market for Seattle homes is just 8 days. Boy, you have to be quick to catch those deals! To survive in this market, buyers need to have all their ducks in a row, and agents need to be able to swim upstream in record time with those ducks.
Portland is another hot market. According to the Regional Multiple Listing Service, inventory dipped under a two-month supply in January. The local Business Journal reports that it’s down from 3.4 months in January of 2015.
Chief Economist for Realtor.com told the Journal, “When inventory is tight, it makes for a challenging market to buy in, and it can leave people bewildered unless they have good support going through the process.”
Offering that support for a dwindling amount of business are more than 8,800 licensed agents in the Portland area. That’s up from 6,400 in 2014. The Journal points out that for every listing in Portland, there are 2.5 Realtors. Even if you factor in the need for agents for the buy and sell sides of the deal and agents who are not that active, you will still have some agents who sell more homes and others who come up empty-handed. (2)
Agents Face Headwinds
With such strong headwinds, you might wonder how agents are making it work, and whether it’s worth the effort. The newly initiated agent is often told it could take months to land that first sale. And with more competition from other agents, and online services like Redfin and Zillow, that timeline could grow longer with more work and lower pay to get to the finish line.
The industry standard for pay has been a 6% split for the buyer and seller agents. Redfin is challenging that by paying their agents a salary and charging less for a listing — between 1 and 1.5 percent. The company may still have to pay a 3% fee to the buyer’s agent, but the total fee is less than what it’s been in the past. Agents working for other companies may need to reduce their fees to complete, although Redfin represents a small portion of the seller’s market. The Business Journal says that Redfin listings only represent about 0.7% of the market.
Typical Pay for Real Estate Agents
According to the US. Bureau of Labor Statistics, the median annual pay for real estate brokers in 2016 was $56,790, and for sales agents, $44,090. Top performers can earn a six-figure income but it’s definitely not a get-rich-quick type of job. (3)
So, the race is on as agents deploy new strategies. That could include expanding their sales territory, making more use of social media and internet advertising, and making sure you understand real estate regulations so you can tweak a deal without breaking any rules.
Agents also need to be prepared to write more offers, wade through more paperwork, and keep up-to-date on trends and technology. The strong housing market and high home prices might be luring more people into this career field, but it’s not a job for the faint of heart. You have to be prepared for a challenge and that will require creativity, resiliency, and perseverance. It’s also good to have a back-up plan, or maybe a spouse you can fall back on for those first months of basically no paycheck.
(1) Redfin Article
Disclaimer: The information provided on this page is for educational purposes only. Real Wealth Network makes no warranty or representation as to the accuracy, completeness or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Real Wealth Network be liable to you or anyone else for damage stemming from the use or misuse of this information.