Real estate downturn hits real estate agents
The legions of people who jumped into work as real estate brokers during the recent boom are seeing leaner times.
NEW YORK (CNNMoney.com) -- There wasn't just a boom in real estate over the past decade - there was also a big boom in real estate agents.
Floods of people across the country applied for real estate licenses, attracted by record sales volumes and seemingly non-stop price gains.
During the boom's peak from 2002 to 2004, the National Association of Realtors (NAR) saw memberships soar 26 percent. Today, over 1.2 million Americans call themselves Realtors.
But the exuberance couldn't last forever: the NAR forecasts existing home sales to fall 7.6 percent in 2006. Agents, who work on commission, are already beginning to feel the bite.
"We've seen a big softening in Florida - there are fewer sales to be spread around more sales people," Richard Fryer, President of IFREC Real Estate Schools, a Florida school that offers a variety of real estate courses including a class to get your license. "Obviously there are some people who are not generating a lot of income in this market."
Real estate is a notoriously difficult industry for newcomers. The NAR reported in 2005 that those who have been in the business for two years or less had an average income of only $12,850 a year. Long-time brokers - those with at least 26 years of experience - had an average of $92,600.
"You've got a lot of people who got into the business in the last two to three years who never really had to do the hardest work of an agent, people who were basically picking low-hanging fruit," said Fryer. "Now they're suffering the most."
Some realtors are beginning to look to other professions for an income to sustain them during the tightening. "Many agents in my local community are really crying the blues," said Geri DeWitt Ruby, a REMAX agent in upstate New York. "They're very pessimistic, and they're even talking about finding other employment."
Said Gayle Henderson, a REMAX agent in Phoenix: "Our realtor population had swelled to over 70,000 in a population of 3.6 million. Now people are talking about getting another job or leaving the business altogether."
License losing allure
The cornerstone of the whole boom was the real estate license, seen by many as the easy ticket to wealth. Apparently a whole lot fewer people see it that way now.
"I'm absolutely encountering fewer new agents in the field," said Neil Brooks, a Century 21 agent in Phoenix.
Ruby says she's seen enrollment in her real estate classes in Dutchess County, N.Y., shrink from 40 students to 10.
At IFREC, one of the biggest schools in one of the formerly hottest markets in the country, the number of students enrolling in the pre-license program has fallen 47 percent so far this year - to 3,155 from 5,985 last year.
And the nation's leading group for real estate agents expects its first period of no membership growth in years. "We're not expecting our membership to grow," said Walter Molony, spokesman for the NAR. "But this isn't a huge sales correction so we're probably not going to see a big impact on membership."
Not everyone hurting
It is the long-time agent that's proved most immune to the sales contraction, and that's due both to the strong Rolodexes they've put together, and the expertise that only time can build.
"In the frenzied market we just came out of, where everything sells so quickly, there were plenty of brokers that were just acting as order takers," said Pamela Liebman, CEO of Corcoran in New York City. "Now they really need to work hard to sell these properties, and only the people with pricing and negotiating skills are succeeding."
"People actually seek out more experienced agents in a tight market," said Henderson the REMAX agent in Phoenix. "They offer the best counsel and can get the home ready and make sure it gets priced right."
She said that she was seeing success by getting all her sellers' listings appraised, and entertaining only 3 to 4 potential offers for a home in order to find the most qualified buyer.
And so it is that the end of irrational exuberance doesn't trouble most long-time brokers.
"You can't just expect to stick a sign in someone's front yard and have the house sell," said Brooks. "You need to have a really thorough understanding of your customers and your market."
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