Should you stay the course or embark on a different career path?
The pressing question that lingers on the minds of numerous real estate agents is whether they should stay the course or embark on a different path. As the year draws to a close and the annual dues and fees loom, many are contemplating their exit strategy. Recent data underscores a significant exodus, with tens of thousands of real estate professionals bidding farewell to the industry. This trend assumes a heightened significance due to realtors' innate ability to discern market nuances, often being the first to sense a market cooldown or impending challenges. The departure of realtors raises red flags for the industry at large.
In the past six months alone, an astounding figure of over 60,000 real estate agents has opted to leave the profession, as meticulously documented by the National Association of Realtors.
It is paramount to note that the real estate arena witnessed an all-time zenith in workforce numbers last October, boasting a formidable 1.6 million agents. By April, however, this figure had dwindled to approximately 1.537 million.
Much akin to the housing boom, the onset of the pandemic heralded a boom in real estate professionals, fueled by remarkable price surges and record-breaking sales.
Traditionally, whenever property prices ascend, agents inundate the market, viewing it as an opportunity to reap substantial profits from the housing surge.
However, the current landscape paints a starkly different picture from just a year ago. Sales of single-family homes plummeted by a substantial 42%, plummeting from a peak of 6.66 million in January 2021 to a mere 3.85 million in April.
In January 2021, realtors enjoyed an annualized commission high of $84,355, only to witness a decline to $56,632 in April 2023.
From April 2022 to April 2023, median property prices experienced a noteworthy drop of 4.1%, marking the most substantial decline in dollar terms and percentages since January 2012. Given the reduced earning potential for realtors, it is plausible that the early stages of mass departures are underway.
Despite the agent count remaining in proximity to historical highs, the broader real estate market demonstrates resilience, even in the face of declining sales and property values in certain regions.
The National Association of Realtors diligently compiles data on its membership, forecasting a reduction to 1.5 million members in 2023, equating to a 3% decline. Adjusted for inflation, commissions per member are projected to decline by 5.7%.
The NAR's data highlights strong correlations between average commissions per member and the ebb and flow of agents entering and exiting the profession. Historically, declining income levels have corresponded with a decrease in membership.
Several economists have crafted models projecting more severe downturns within the real estate domain. In a hypothetical scenario where annual existing home sales dip to 3.9 million and home prices experience a 5% decline, NAR membership could potentially witness a substantial 15% contraction.
The prevailing consensus among analysts and industry experts suggests an ongoing attrition in the agent pool, although not necessarily culminating in a collapse. Productivity tends to skew toward high achievers, meaning the adverse impacts are more likely to manifest at the lower rungs of brokerage production.
It is conceivable that a larger cohort of agents may seek secondary employment, potentially leading to an upsurge in the formation and expansion of teams, as lower-performing agents pivot toward team-based roles.
Many real estate professionals and analysts believe that while the rate of attrition may fluctuate in the coming months, a process of realignment similar to that witnessed from 2007 to 2009 is in store. This could entail a concentration of business among fewer individuals and shifts in the composition of agent pools.
At Homevets Realty LLC, we are here to help you persevere and stay in the game of real estate until you reach your full potential as a real estate agent.