‘Weekend Warriors’ Face ‘Shake-Out
The real estate business is shrinking with the housing bubble. “More than half of California’s real estate agents quit within their first five years, according to a recent study. CAR found that many left because of a lack of support from their brokers, but others left because of an inability to make a decent living.’ The association’s membership is at a record level at more than 161,000 members. A quarter of that total, 42,000, came on board in 2004.”
“‘I think you could be seeing something of a shake-out in the next 18 to 24 months,’ said Desiree Otero, president of the California Desert Association of Realtors. Greg Berkemer, the group’s executive vice president, noted that what’s happening in the valley is typical of what has occurred throughout California and elsewhere when real estate became the hot profession because of skyrocketing prices.”
“He pointed to a recent industry report estimating that one in every 300 Americans, and one of every 75 Californians, is now a licensed real estate agent or broker.” “The current number of valley agents and brokers, including full-time and part-time personnel, is five times the 1,000 agents that were here in 1996. ‘Around here, if you think there are two or three agents living on your block, you’re probably right,’ Berkemer said.”
“Unsold inventory levels have jumped sharply. In late January, there were nearly 6,400 unsold valley properties on the MLS, more than double the level of January 2005 and more than quadruple the 1,400 properties available in April 2004. And homes on average are taking around 60 days to sell, more than twice the time seen in early 2004.”
And in Florida. “Amid all the talk of a bubble in home prices, another bubble has been inflating, this one in the number of people flocking to work in the real estate industry. Palm Beach County now has nearly as many real estate agents as annual home sales.”
“Five years ago, the Realtors Association of Palm Beach County had 4,867 members. Today, it has 10,419 members. Consider that Realtors handled only 13,679 sales in the county last year, and that leaves barely one sale per Realtor per year.”
“The increase has been even more striking at the state association, which today boasts 155,000 members, up from 65,000 six years ago. Statewide, Realtors handled 248,565 home sales last year.”
“With the typical real estate commission at about 5 percent, a $400,000 sale generates a $20,000 payoff. But if both buyer and seller have agents, the agents divide the $20,000. And agents’ brokers typically get a cut of their commissions, and agents usually pay for ads, yard signs and car expenses.”
“A cooling market only boosts marketing expenses for agents who had been cashing in on quick sales. ‘You’d stick a sign in the yard and two or three days later you’d have competing offers,’ Brad Westover said of the boom during the past few years. But, he said, those days are over. ‘These weekend warrior real estate agents are going to go away,’ said Westover in Jupiter.”
What’s not captured in these numbers is the number of “agents” who don’t expect to make a living selling real estate. They have other sources of income, often from a spouse, and they are just looking for a place to park. It’s easier for them to say “I’m in real estate” and handout their business card rather than saying “I’m unemployed and taking it easy.”
Also the number of people who become agents for a single transaction. Eg selling their own house.
i’ve noticed a corresponding decrease at Costco of finger food servers in many aisles over these last few years. Perhaps some of these Agents leaving real estate will return to real jobs at Costco and Sam’s Club.
LMFAO!
I believe it’s already happening in Bellingham, WA. I never knew there are enough finger foods for a meal at Costco till recently. In the past 3 months, every time I go there, there are at least 10 of those servers.
Great varieties and many of them organic, BTW.
Those food servers at Costco are making $18 and hour with some of the best benifits around. Costco is probably the best ran company in the Unites States. Employees there love their jobs, and as such are far less likely to file bogus workers comp claims. Also very little turnover keeps their training costs down.
As Krugman said “As I like to say, these days Americans make a living by selling each other houses, paid for with money borrowed from China.”
The US spends way too much time and money buying, selling, renovating and financing bubblicious real estate.
David
Bubble Meter Blog
Unfortunately, I was reading through the Realty Times. com website and ts all rosy over there. Are these people drinking kool-aid? Or do they live in a state of deinal?
Yep. They are RealtorsTM. They will be pumping and spinning to the very bottom. All the while, popping Prozac like tic-tacs.
Crisp&Cole,
Actually, they ARE DOING BOTH… nipping the bottle, while in the state of denial
I keep reading about how great the job market is down here in Florida, and how low unemployment is. I’m wondering how quickly this will turn with the RE market going south.
And how long people will hold onto the “prestige” of being in RE? It’s much more “glamorous” to tell someone you’re a broker (albeit an unsuccessful one) than to tell them you’re unemployed or handing out food samples at Publix or Costco…
Our local paper has the annual ads from local realtors on who there top agents were, Circle of excellence, Presidents club, etc.. I think everyone of these top realtors will see there income cut in half in 2006. Our local inventory is up 200% in a few months and the speculators/investors have been replaced buy builder spec homes.
one of my favorite stories from the past year was about a realtor from Westchester County, NY who drove a $300,000 Bentley but lived in a rented apartment above someone’s garage.
he claimed that the Bentley was necessary for his business because he dealt with a lot of high-end clients who needed to see that he was on the same level of them and understood their needs. lmfao
I think he really is just a RE bear and doesn’t want to admit it.
Yeah, he’s probably smart. That Bentley will hold more value than the houses he’s been hawking… Plus it might even get him laid. More than can be said for a 1000sq ft crap box condo.
I wonder if there is anywhere to find historical price drops for the various price ranges during a bubble? All I can say is that some lower priced new home builders around east valley in az are still raising prices. I would think that as home values rise you will see increased price reduction down the road. For example homes priced between 500-700k will most likely fall more than homes priced from 200-250k. Does anyone have any kind of data out there on this from past bubbles? I would feel much safer in a lower priced home vs extravagant home during downturn.
OT, but I don’t understand how people can be suckered into ads like this:
“$150,000 mortgage as low as $494/month. See APR and terms below.**”
when the footnote clearly says this,
“**Assuming a $150,000 first priority loan with a 30-year term and an introductory interest rate of 3.950 percent (APR of 7.432 percent) for the first six months of this loan, with payments of interest only for the first five years, the borrower will make six payments of $493.75, fifty four payments of $906.25 for the remainder of the interest only period assuming an interest rate of 7.250 percent (APR of 7.432 percent), and three hundred payments of $1,084.21 assuming an interest rate of 7.250 percent (APR of 7.432 percent). The interest rate on the loan is fixed for an initial six month period and will adjust following this initial six month period and every six months thereafter. To qualify for this loan, the borrower must have a FICO score of 620 or greater, a maximum loan amount of $1,000,000.00 and loan-to-value requirements may apply. Because this loan has a variable interest rate, both the initial interest rate and the APR may increase after closing. Stated APRs include a 2.5% origination fee. Rates and terms are subject to change without notice. This program is available as of January 25, 2006 from a participating Service Provider. This loan is only available in the following states: AZ, CA, CO, CT, IL, IN, MA, MN, MO, NY, NJ, OR, PA, RI, VA, WA. If you are not in one of these states, we invite you to complete our form to be matched with lenders offering other programs in your state.”
and then cry foul when they have to foreclose.
At least the Costco or Walmart jobs pay some money, although not much. Better to have something, than dead broke. As for the Bentley dude, I hope he owns it free and clear, or isn’t sleeping in it when the repo man comes. Also, get laid in it before the repo man comes - better yet, be getting laid when it is towed away. That would make a great Candid Camera shot.
deflation will hit us all except gov workers- chew on that for a while
new topic
how much did RE prices drop in your area from 1989 to 1995 ?
we know the direction, how about the distance ?
flat, I’m in the LA area and I’ve heard different things from different people who have owned during those years. One neighbor of mine a few years back said his Hermosa Beach residence went down like 15% or so. I’ve heard some high-end places in Beverly Hills went down like 40%. Far-flung areas (i.e. AV, IE) at least 50% and it got so bad people walked away from their homes…took a long time for those areas to recover due to overbuilding.
The thing that is scary this time around is that prices have gone up so much they have much more to fall. You are probably better weathering the storm in a mid-priced residence in a good location IMO.
i can tell you exactly. i bot a culver city sfr in ‘90 for 349k, and had it assessed in ‘95 for 250k.
If you think about it, there is actually a bigger need for real estate agents at high inventory levels than at low inventory levels.
The fact that high inventory levels will actually drive agents out of business is another example of how speculative bubbles work opposite of common market behavior: First rising prices drove demand up instead of down, and now falling prices are driving demand down instead of up.
Lender’s battle plan
Brad Morrice wants New Century to become the Wal-Mart of lending.
http://tinyurl.com/7sggk
I thought it already was.
Don’t know if this has already been noted here.
guess I can’t figure out link function.
http://tinyurl.com/72of7
Considering that most of the flippers out there are also ‘realtors’, it should be a *really* interesting year for their net worth.
Ummm, hate to break it to you, but there are RIF’s at the Federal and State levels.
IMHO, I expect public servants to be hit the worst.
1/3 of jobs created since 2001 have been government jobs, and that’s with agencies that have already been running in the red. Once RE tanks and takes Wall Street with it, tax revenue will plummet along with the rosy estimates used for pension fund calculations. Can’t raise significant taxes in a recession/depression, so the layoffs will be murderous.
AN EXCERPT FROM THE ABOVE LINKED ARTICLE:
“After getting his real estate license in early 2005, he’s been learning the ropes for the past five months as an agent with Century 21 in Palm Springs.
“I once read a book where some people said they worked 100 hours a week to become successful in real estate,” said Hardy. “I fully expect to work 60 hours a week or more.”
GEE, I GOTS TO GET ME SOME OF THOSE ROSE COLORED GLASSES!!!
A NEWBIE Realtor that recently quite a good paying job to make it rich in real estate…
WOWIE- maybe we should all pitch in to his ALCOHOL FUND too, so that his dilusional 60 hour week to “become successful” in real estate in the year 2006 WILL PAN OUT;)
Burn, baby, burn…
These real estate wannabees will be eating Alpo pretty soon!