As Housing Market Cools, Far Fewer Become Agents

The New York Times article As Housing Market Cools, Far Fewer Become Agents covered the topic quite well. The numbers of licensed agents are falling with the number of transactions. In fact the article seemed to focus on markets that saw heavy speculative activity and the run-up in the number of agents was especially pronounced there.

In many ways, the decline in the number of agents is probably good for good agents as well as the consumer. The market has undergone significant changes in the past 2 years, including rising inventory, falling transaction counts and falling prices in many markets.

Agents that are able to adapt to the new market may actually thrive and be able to service their customers in a more professional way. The ability to grab the low hanging fruit of the last five years has resulted in a lot more competition among agents and probably the image of most real estate agents making money hand over fist in the past five years was really isolated to the top 5-10%.

One of the significant effects of the housing boom was the rapid response in employment of real estate agents as well as the surge in membership in NAR in recent years. The barrier to entry and exit is low and makes the profession vulnerable to competition, namely to gains in innovation, as agents move from information gatekeeper to information interpreter. It is incumbent upon real estate brokerage firms to adapt to the growing openness of information available to consumers. Some firms will get it and some will not.

Jonathan Miller created the above chart to show correlation between housing prices using OFHEO and NAR membership just for fun. While housing prices are more volatile, the trend is similar over the past 20+ years. Please keep in mind that investors of all types, including flippers, got licensed to save transactional costs not to become salespeople.

The number of people signing up to take the California real estate license exams fell by 35% during the first seven months of this year compared to the same period in 2006, the state Department of Real Estate reported. Just under 70,000 exams were administered through July this year vs. the record of almost 108,000 exams through July 2006, according to the DRE’s Web site.

Still, the number of tests administered each month this year has been above the 7,700 monthly average for the past decade. The number with real estate licenses continues to grow, reaching a record of nearly 538,600 licensees in July, figures released this past week show.

“We’ve had a decrease in the increase in the licensee population,” DRE spokesman Tom Pool said dryly. “But it’s still going up.”

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