With Fewer Houses On The Market, Brokers And Lenders Compete For Crumbs
By this time last year, about 1,200 homes had sold in Austin, Texas. This year, it's not quite 1,000. Yet, like most of the country, roughly the same number of brokers are out there competing for a piece of the shrinking pie.
"A lot of agents and a lot of people got into the industry over the last couple of years because things were booming and things were moving," said Andrew Vallejo, a top Redfin agent based in Austin. "I think that some are potentially considering other options or leaving the industry, because they got into it when things were so busy and a lot of that has now changed."
Key Takeaways Home sales dropped 17.5% nationally so far this year, while the number of real estate brokers remained about the same.
A majority of all real estate licenses are inactive or part-time, with commission, according to the National Association of Realtors.
Mortgage lender employment dropped by about 80,000 as deals slowed and originations dropped by half in 2022 from 2021.
Nationwide, 508,931 homes have sold so far this year, down 17.5% year-over-year. At the same time in 2022, more than 600,000 homes had been sold, according to Redfin. Yet the number of brokers has barely changed. National Association of Realtors' membership in June was at 1,559,807, down from 1,563,502 in May of last year. The figure was still 12.7% higher than membership data from 2020, when the organization had 1,383,420 members.
The housing market's drastic swings since the pandemic may be one factor. Markets like Austin were so hot that real estate broker was an increasingly attractive and lucrative career opportunity over the last few years. As sales fell off a cliff, competition among brokers heated up and more brokers turned to part-time work, hoping to stay involved and wait out the slowdown. But part-time brokers are at an even bigger disadvantage, said Vallejo.
"For someone who doesn't participate in the market as much, it's also just become a lot more challenging because our market has been so dynamic, and it has been changing so rapidly, on a month-to-month basis," he said.
Full-Time Brokers Feel The Heat
NAR Chief Economist Lawrence Yun pointed to the often entrepreneurial nature of realtors, and said many pursue real estate on the side of another full-time career.
“For some realtors they may have a part-time income, working someplace else to temporarily give them a little time period until the market recovers,” Yun said.
That competition is putting a squeeze on full-time agents, according to a new report from the Consumer Federation of America.
“A majority of all real estate licensees are inactive or part-time with commission-related income that, by itself, is not sufficient to support them financially,” the report says. “Yet, because so many agents look for opportunities to sell properties, most full-time agents are unable to secure enough clients to provide commission-related income that is at or above the national median household income of around $70,000.”
Yun said NAR typically sees membership declines anywhere from 18 to 24 months after an industry decline begins. He expects no different this time around.
“I think people will essentially exit the industry. We have seen that condition in the past housing cycles,” he added. “I think this time will be no different in terms of the lag time and how the membership responds to the housing market conditions.”
Mortgage Lenders Cutting Jobs Amid Deal Slowdown
Mortgage lenders, facing a similar drop in demand, have pushed to decrease staffing, though many have the cash reserves to operate at a loss, at least for now, according to the Mortgage Bankers Association.
Historically, Walsh said, the market doesn’t typically see the abrupt fluctuations in conditions that it has through 2022 and into 2023.
“If you look at the 2003 refi boom, into 2004 and 2005, we saw a volume dropping but it was more gradual,” Marina Walsh, MBA’s vice president of industry analysis, said. “This is almost a roller coaster change in the volume.”
Originations, too, have dropped significantly. Total originations dropped by half to $2.2 trillion in 2022 compared to the year before and are expected to clock an even lower $1.8 trillion this year.
Even though companies are cutting costs, Walsh said the companies built up large cash reserves over the past few "good years" of the housing market, that many are still operating at a loss. However, that may not last for too long.
“We're in the middle of this spring home buying season right now. But needless to say, when you get into those winter months, into the fourth quarter, decisions have to be made, because it's difficult to keep operating at a loss,” Walsh said.
Source: Investopedia
