The Real Estate Encyclopedia
Does the Industry Have Too Many Agents?
Category - Real Estate Information Sources - Real Estate Articles

The past six years or so comprised one of the hottest real estate markets on record in which the industry enjoyed tremendous growth. During this period the country experienced a buying frenzy fed by low interest rates, a plate full of new mortgages, bullish customer confidence, low unemployment, strong economic growth and excellent price appreciation.

According to a sneak peek into the 2007 edition of the Swanepoel TRENDS Report, many economic factors were required to be in place to foster the prolonged real estate boom. The consumers' hunger seemed to have no end but it took more than just an appetite for "bigger and better" to fuel such a run in real estate. The media directed new programming at the housing market from home-repair to fix-and-flip to home-make-over shows. This surge in media coverage only compounded the frenzy. Many were looking for a "get-rich scheme" while others just didn't want to be left behind.

Real estate became the new "Internet Craze" where anything containing the words "home or real estate" seemed to be as hot as anything with a dotcom during the late 1990s. According to some, the frenzy will have a hangover affect for the next few years as many if not all of the following adjust and correct themselves:

  • Too many new agents and brokers
  • A reduction in number of transactions
  • A decrease in housing prices
  • Too many new mortgage brokers
  • A rise in the number of foreclosures
  • An increase in mortgage fraud

According to Stefan Swanepoel, author of the Report, adjustments on various levels would be a good thing for the industry but at this time they may be slow in coming, as the industry still has to deal with the morning-after affect. Consequently, some speculate that with the abundance of agents and their inability to be profitable in a strong market, let alone a down market, a large portion of these marginal agents may be tempted to commit fraud.

Statistically the average Realtor (NAR member) had fewer transaction sides in 2006 than in 2000. Normal supply and demand would result in halting the influx of new agents, but alas, commission income was supplemented by the sharp increase in house prices recently and this did not happen. Furthermore, the increase in NAR membership even outpaced the increase in new households.

Now, with house prices and the number of available listings declining, there are too many agents, many of whom are not even earning a living; they've simply been surviving on inflated prices. So, an overall reduction in the number of agents and Realtors is inevitable for 2007 and probably even 2008.

It's not that the industry hasn't experienced a shifting housing market or any of these challenges before. But for a great many agents who have never experienced anything other than the most recent feeding frenzy, they are going to be learning about these challenges first hand.

For the rest who have "been there before," it's a time to reflect on the last time through the cycle and learn from those lessons. Just remember that every down cycle or sideways movement is not the same and this time it's the combination of many factors, including the changing consumer and advancing technology that will probably cause additional restructuring in the real estate brokerage industry.

There is always a certain percentage of real estate professionals who want to play in a new market with yesterday's mindset and habits... their prospects for success are always limited. Then there are those that are willing to change and become proactive in the process. They are the ones that will end up on top. Which one are you?

This discussion is but the beginning of the first two pages of the new 2007 Swanepoel TRENDS Report and is followed by the Top 10 real estate trends that are anticipated to shape the life of all real estate professionals over the next few years. No other report covers as much detail as this 159-page eye-opening Report. If you plan on being in real estate the next few years this is the next investment you need to make into your future. Go to RE Trends and get your copy today.





References


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Real Estate Information Sources - Real Estate Articles
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