When real estate broker April Strickland looks at her local housing market in Gainesville, Florida, she sees a mismatch: There are more than 1,500 local real estate agents, even though only a few hundred homes sell each month, according to industry data.
Strickland has seen the ups and downs of the housing market since she started managing her parents' rental properties as a teenager in 1995. But she says the business environment over the past two years has been the toughest she can remember, even slower than the years following the 2008 financial crisis.
“Frankly, Realtors are running out of money,” Strickland said.
The real estate industry, which boomed with new entrants in 2020 and 2021, has recently experienced a severe slowdown, forcing some to scale back, experts say. One widely cited analysis predicted that up to 80% of the country's real estate agents could find new lines of work.
“Many industry leaders believe there are too many agents and would like to see fewer agents, allowing professionals to serve more clients, which would then allow them to lower commission levels to maintain current revenues,” said Steve Brobeck, a senior fellow at the Consumer Federation of America.
Get caught up in
Stories to keep you up to date
In some ways, the exodus has already begun.
The Bureau of Labor Statistics recorded 440,000 full-time real estate agents and brokers in 2023, about 72,000 fewer than the previous year.
As of mid-April, the National Association of Realtors had about 1.5 million real estate agents registered with the agency, down more than 100,000 from 2022, according to Nick Gerli of real estate data firm Reventure Consulting.
The real estate trade group, which recently stopped releasing membership figures, declined to comment on the matter, but earlier this year, Gerli cited a monthly report the trade group issued that said NAR expects real estate agent membership to decline over the next 24 months.
As interest rates remain relatively high, transactions have become so few that many real estate agents are now selling just a few homes a year. A Consumer Federation of America survey of nearly 2,000 agents found that 49% will sell fewer than two homes in 2023. And agents will soon be faced with new rules that could bring about sweeping changes to the way they do business and get compensated.
Under new rules that take effect in August, real estate databases will no longer include buyers' commission offers to agents, meaning agents can no longer expect a cut of sellers' profits. Investment bank Keefe, Bruett & Woods estimates that as a result, 30% of all U.S. agent commission revenues could be lost.
The rule is the result of a court settlement between NAR and a group of home sellers who argued that the commission structure violated antitrust laws. A federal judge tentatively approved the settlement and will consider making it permanent in November. Pressure on the industry is likely to continue. The court's decision in April allowed the Department of Justice to reopen an earlier antitrust investigation into NAR and its commission rules.
Economists who study the real estate industry have long believed that the “unbundling” of buyer and seller fees would drive a significant number of real estate agents out of the industry, but estimates vary as to how many.
Keefe Bruyette & Woods predicts that changes to commission structures could cause 60 to 80 percent of U.S. real estate agents to leave the industry.
Sonia Girbuck of Baruch College of the City University of New York and Paul Goldsmith-Pinkham of the Yale School of Management estimated that about 56% of agents would exit the market if one's commission remained at 3% and the other's became more competitive, Girbuck said in an email explaining the research.A 2015 paper by Panre Jia Berwick and Parag Pathak in the Rand Journal of Economics predicted that a 50% commission cut would lead to a 40% drop in the number of agents.
Experts see a silver lining in the potential exodus of real estate agents: Those who stay may be more experienced and competent. “That's a good thing for consumers because agents will, on average, be better at what they do and will be able to charge more competitive fees,” Gilback said.
Brobeck said the real estate industry has been experiencing an “oversupply of real estate agents” since the peak of the pandemic, and he sees the exodus of agents as probably a good thing for homebuyers.
According to a separate Bureau of Labor Statistics measure that includes part-time workers, 1.8 million people worked in real estate as of April, up slightly from last year. But many of those workers run relatively small businesses and hold other full-time jobs, making home selling “definitely a part-time industry” at the moment, Brobeck said in a recent report.
Brobeck said agents would come under more pressure to justify their fees as buyers would be more likely to ask for lower fees under the rules that come into force in August. He also said that there should be more room for discount brokers who serve first-time property buyers.
“This would lead to a more diverse and competitive residential real estate market,” Brobeck said.
Gilback, the CUNY researcher, believes only the most experienced agents will be able to continue charging high fees.
Agents who survive the upcoming transition will likely be better connected in the industry, have deeper relationships with contractors, electricians, plumbers, appraisers and other professionals and will be “better equipped overall to advise clients,” Gilback said.
Contracts under the proposed new rules should bring greater clarity to the buyer-agent relationship, analysts said, which could reduce cases of “ghosting,” in which a potential homebuyer talks to an agent while searching for a home and then signs a contract with another agent or puts their search on hold.
“Before, real estate agents didn't have to explain what they did and there was less accountability,” Strickland said.
Strickland said there was some anxiety across the industry when the proposed NAR deal was announced in March, but panic has since been replaced by a “wait and see” attitude.
She called the NAR deal a positive thing overall.
“It will eliminate people who, frankly, are not competent, who are not up to the task, who are not willing to educate themselves and learn new ways of working. … This will be a positive change for our industry.”
Lauren Kaori Gurley contributed to this report.