It will come as no surprise that the number of realtors has declined fairly dramatically during the economic and housing downturn, but the exodus from our industry is a long way from over to return us to a more realistic number of agents practicing real estate in the US. Just for fun I decided to graph the annual population data from the US census versus the membership of the National Association of Realtors (NAR). (Not every agent is a member of NAR, but it is a pretty good proxy for the overall market.) The chart below shows how many US residents there are for each realtor.
The chart shows the dramatic increase in realtors during the inflation of the housing bubble. In 2000, there was 1 realtor for every 368 residents in the US. By the peak of the bubble, there was 1 realtor for every 220 residents. Between 2000 and 2006, the US population grew by 6% while the ranks of realtors grew by a whopping 77%! This is particularly striking when contrasted with the 90’s, where the number of realtors shrunk 6% while the overall population grew by 9%.
The lure of easy money for little work was powerful during the housing bubble, driving hordes of folks to get their real estate license. Compared to historical data, we still have way too many realtors chasing way too few deals. You may conclude that too many agents flooding the market would lead to more competition and lower fees for their services, but the inverse is true. With too many agents comes a powerful incentive for the industry to keep fees artificially high because the low-producing agents need to make a basic living. An overabundance of agents also leads to the sub-standard service levels that seem to plague our industry.
What is also striking is that the efficiencies brought about by the internet seem to have had little effect on the total number of agents practicing our profession. The ability to search for homes online has dramatically changed the role of the real estate agent and reduced the number of hours that they need to spend per transaction, meaning we actually need fewer agents to service the population. (If you don’t believe me, I will take away your internet connection and send you large binders of paper-based listings to find your next home!)
I think we have at least 3-5 more years of declines ahead of us in the number of active real estate agents in the US, perhaps more if the internet drives more efficiencies into the process of buying a home. I think it will benefit our industry tremendously to have fewer, better-qualified agents able to close more deals. Raising the barriers of entry to our profession and increasing the efficiency of each individual agent will lead to better service levels and lower fees.