A Blog by Jonathan Low

 

Mar 22, 2021

As Pandemic Spurs US Real Estate, Brokers Outnumber Homes For Sale

The pandemic will not last forever. And neither will a hot real estate market. JL 

Nicole Friedman reports in the Wall Street Journal:

At the end of January, there were 1.04 million homes for sale. Also in January, the National Association of Realtors had 1.45 million members. This phenomenon reflects both the tight supply of homes on the market and how surging prices are persuading tens of thousands Americans to try their hands at selling real estate. The pandemic eliminated millions of jobs, especially in service industries such as restaurants and hospitality. The booming housing market suggests there is money to be made selling homes. And in most states, it doesn’t take more than taking a course and passing an exam to get a real-estate license.

The red-hot housing market has achieved a number of milestones this past year. Perhaps the most telling is this: There are more real-estate agents than homes for sale in the U.S.

This phenomenon reflects both the extremely tight supply of homes on the market and how surging prices are persuading tens of thousands more Americans to try their hands at selling real estate.

Michael Mitchell in Boston is one of them. He signed up for a real-estate course in June after being furloughed from a managerial position at a regional restaurant chain. He greeted the new profession enthusiastically, thinking his skills and focus on customer experience developed during 30 years in the restaurant business would be transferable to real estate.

He got his license in October, but has yet to land any deals, as Covid-19-related restrictions are limiting in-person interactions with clients.

‘I’ve learned some aspects of the business, but it’s hard to connect with people ... you’ve never met,’ said Michael Mitchell, who got his real-estate license in October.

PHOTO: MICHAEL MITCHELL

“I’ve learned some aspects of the business, but it’s hard to connect with people…that you’ve never met,” Mr. Mitchell said.

The National Association of Realtors’ membership count has exceeded the number of homes on the market only once before, in December 2019, when the number of agents dipped slightly but the inventory of homes for sale declined by more. It happened again last October and has held ever since.

At the end of January, there were 1.04 million homes for sale. That is down 26% from a year earlier and the lowest on record going back to 1982, according to the National Association of Realtors. Also in January, the NAR had 1.45 million members, up 4.8% from a year earlier.

It is easy to understand why so many people would sign up for the real-estate profession: The pandemic eliminated millions of jobs, especially in service industries such as restaurants and hospitality. The booming housing market suggests there is a lot of money to be made selling homes. And in most states, it doesn’t take much more than taking a course and passing an exam to get a residential real-estate license.

“There are very low barriers to entry, in terms of the ease of getting a real-estate license. But the barriers to success are very high.”

— Nick Bailey, Re/Max Holdings chief customer officer

State licensing exams can include questions on property laws and market analysis. Pass rates vary by state. In Texas, nearly two-thirds of test takers pass on the first try, according to the Texas Real Estate Commission.

“There are very low barriers to entry, in terms of the ease of getting a real-estate license,” said Nick Bailey, chief customer officer at Re/Max Holdings Inc., a real-estate brokerage franchiser. “But the barriers to success are very high.”

Home sellers generally favor agents with years of experience and proven sales records. That means newer agents tend to represent home buyers, many of whom are struggling to get an offer accepted with so few properties for sale.


Consequently, most agents make little or even no money in the beginning, since they typically rely on commissions and don’t get paid unless a sale is completed. Realtors with two years of experience or less earned a median gross income of $8,900 from their real-estate work in 2019.

But that figure rises with more years on the job: The median gross income for all NAR agents in 2019 was $49,700, up from $41,800 in 2018, the association said.

The business is pretty fluid. NAR, which represents the majority of active U.S. residential real-estate agents and brokers, said about 15% of its membership turns over every year. Agents usually work as independent contractors, and many work part time.

The number of agents also tends to roughly correlate with the performance of the housing market. The ranks of NAR rose to 1.37 million in October 2006—shortly after the market’s peak—then bottomed out around 960,000 in March 2012, following the housing crash. NAR membership has risen every year since.

Lauren Hurwitz, seen here with her husband and son, closed her first real-estate sale in February and has three more in contract.

PHOTO: MICHELE GOULD

Real-estate brokerage Redfin Corp. , which hires agents as employees, said it underestimated demand after the pandemic struck. Redfin furloughed 41% of its agents in April as home sales slumped. The firm said it is now hiring 162 people a week in its brokerage business, up from 92 a week at the same time last year.

“It is by far the most hiring we’ve ever done,” Redfin Chief Executive Glenn Kelman said.

Some new agents have enjoyed early success. Lauren Hurwitz of New Rochelle, N.Y., got her real-estate license in August after being laid off from a media-relations job. She closed her first sale in February and has three more in contract. Her first client was a close friend whom she helped buy a home. She has gained others through social media and word-of-mouth.

“I am seeing insane demand and very little inventory,” she said. “I know there’s a lot of competition out there.”

Diana Dorel Gutierrez was warned by her new real-estate colleagues that now is an awful time to be an agent for home buyers.

PHOTO: ALYSSA PEEK

Diana Dorel Gutierrez took her real-estate exam last March, just before the testing center closed because of the pandemic. When she joined a brokerage in the Phoenix area, co-workers warned it wouldn’t be easy.

“They said, ‘You don’t have any idea what you’re in for. This is the worst time to be an agent [for buyers] and the best time if you’re the listing agent,’” Ms. Dorel Gutierrez said.

But Ms. Dorel Gutierrez, who also works as a spiritual and relationship coach, has closed five deals so far. She has found clients through social media, referrals and leads from Zillow Group Inc. Her colleagues call her and the other agents that joined the brokerage last spring the “pandemic babies.”

“If you can do it in this industry at this time,” she said, “you can do anything.”

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