The housing recovery has renewed interest in buying and selling real estate, but limited inventory and online sales are taking a bite out of Realtors’ pocketbooks.
Realtor headcounts have long followed the ups and downs of the market. National Association of Realtors Economic Issues Media Manager Adam DeSanctis said the boom in home sales leading up to 2006 led to an influx of people looking to broker transactions. Many of them sold real estate as a second job.
Not surprisingly, participation in the organization swelled to a historic peak of 1.4 million that year, just after existing-home sales hit an annual high of 7.3 million.
But all good things must end. The collapse of the housing bubble and ensuing economic crisis caused home sales to steadily decline to annual lows of below 4 million in 2011. Membership subsequently plummeted, and the number of Realtors hit a trough of fewer than 1 million the following year.
Since then the market has steadily recovered. Home sales rose 6 percent in April from a year before to a seasonally adjusted annual rate of nearly 5.5 million. The NAR says membership has risen nearly 17 percent from 2012 to 1.2 million.
“Now that the housing market has mostly recovered and sales are near a 10-year high, it’s not a surprise that the number of people joining NAR has increased,” DeSanctis said.
Locally, membership in the Charlotte Regional Realtor Association has grown 40 percent since 2012 to 8,622, the highest it’s been since 2008.
But the increasing popularity of becoming a Realtor can have pitfalls in a market plagued by low inventory.
“More Realtors are competing for fewer listings,” DeSanctis said. He said that caused an 18 percent drop in the non-inflation-adjusted median income over the last several years, he said, to $39,200 in 2015 from $47,700 in 2012.
The CRRA does not keep data on income levels among its Realtors.
Zubin Shroff, a Charlotte Realtor with Helen Adams Realty, said he’s seen the increase in licensees since the economy has stabilized. He said competition and low inventory are his biggest concerns.
“There are tons of buyers,” he said, who are looking to purchase a home before interest rates rise. “But sellers are locked into low interest rates and are sitting on their properties.”
Short supply also can be chalked up to an increase in the region’s population; the bulk buying of homes by institutional investors who are holding them to rent; a circular pattern of not selling because a desirable home is difficult to find among fewer available homes; and low wage growth that makes it difficult to move up.
The result has been historic lows in local inventory, with the Charlotte area offering a mere 3-months’ supply of for-sale homes in May. That was a drop from 4.4 months a year earlier, the CRRA said. A six-month supply is considered a balanced market, where neither buyer nor seller has the upper hand.
Nationally, there was a 4.7-month supply of homes for sale in April, according to the NAR’s latest available figures. That was down from 5.3 months a year ago.
DeSanctis said the situation should improve as builders expand their focus from metropolitan rental apartments to new-home production. He said those looking to move often trade up to a newly built home, which frees up their existing property for purchase.
Along with more Realtors vying for fewer properties, the NAR said an increase in less-experienced Realtors within the ranks has caused earnings to decline. According to the organization’s 2016 Member Profile, 20 percent of members had one year or less of experience last year, rising from 11 percent the year before.
RealtyTrac Vice President Daren Blomquist echoed the NAR’s findings, describing some of the new Realtors as “bandwagoners” who “do a few deals.”
“Bandwagon folks think the home market is hot and do a few deals a year,” he said, saying that their turnover is much less than “a professional Realtor doing several a month.”
DeSanctis added that new Realtors also haven’t had time to build a client base, causing them to have fewer sales. And the properties they sell tend to be lower priced. Both result in reduced commissions, he said, weighing down the median income of NAR membership.
Blomquist gave another reason for why he thinks earnings have dropped: the internet.
He cites the growth of online companies such Ten-X, which is expanding its Auction.com platform for investors seeking distressed properties to include move-in ready homes for traditional buyers.
“There’s been a push toward technology where the Realtor doesn’t have to be part of the process,” he said.
And, he said, the institutional investors who bought up foreclosed properties in bulk during the recession appear to have passed the torch to “mom and pop” investors eager to buy in neighborhoods primed for gentrification.
“These are investors, buying one or two properties, who go to the homeowner of a property that hasn’t even been listed,” he said.
Realtors, he said, also must compete with the likes of national chains such as “We Buy Ugly Houses,” which advertise offers of cash for homes in deteriorating condition.
Nancy Braun, owner and broker in charge of Showcase Realty in Charlotte, cited concerns similar to those of the NAR and Blomquist.
She added that Realtor commissions are also affected by a lagging luxury real estate market and additional costs associated with handling transactions.
She said in an email that a “very complex and litigious environment” makes it necessary to have an in-house staff devoted to handling the gathering of information on such things as septic permits, HOA concerns, and structural, pest, and radon issues.
Expenses have also gone up as marketing techniques have expanded to include videos, drones, and staging.
“Consumers have higher expectations,” she said. “For example, sellers today want their home blasted on hundreds of portals, reaching national and international buyers.”
And, she said, “many other parties expect a piece of the pie,” including referral companies and online companies sourcing leads.