The rise and fall of real estate brokers and agents

There were 100,300 active real estate brokers in California during January 2015. This number has yet to find a bottom since declining from its January 2010 peak of 109,500 active brokers. Conversely, the number of active agents continued to increase from the 2014 trough of 171,100 active agents. There are now 185,300 active agents in California.

Historically, approximately 1.5 agents actively practice per active broker. This ratio grew during the greatly inflated agent population of the 2000s to as high as 2.7 agents per broker, and has since fallen closer to historic norms, currently at 1.8 active agents per active broker.

As home prices falter going into 2017, expect discouraged agents to slowly drop out of the active population in 2017 for about one year before rising again. The number of brokers will begin to stabilize through mid-2016, to slowly ascend back toward peak numbers experienced in 2009. Expect the next big wave of new licensees to arrive around 2018, as public confidence returns through added jobs and increased home sales volume.

Updated February 18, 2016. Original copy posted March 2010.

ActiveAgents
Chart update 02/18/16

Jan 2016
Dec 2015 Jan 2015
Active Agents
185,288
184,866
177,739
Active Brokers
100,271
100,369
102,000

The above chart tracks the number of active real estate brokers and agents licensed in California, based on data released monthly by the California’s Bureau of Real Estate (CalBRE). These numbers exclude licensed brokers who do not use their licenses, and licensed agents who are not employed by a broker.

Do you plan to renew your real estate salesperson or broker license again?

  • Yes. (90%, 459 Votes)
  • No. (10%, 51 Votes)

Total Voters: 510

first tuesday analysis

In a stable market, a natural equilibrium develops between active real estate agents and brokers. This ratio has historically found balance at the level seen in 2002; approximately 1.5 active agents for every active broker.

After a protracted period of inflated agent population, the ratio is returning to historic norms, with an average of 1.8 active agents for every active broker thus far in 2016.

As real estate entered its boom phase of the market cycle in the mid-2000s, new agents arrived en masse with the optimistic belief that extra money was to be had working real estate. In 2006, following the peak of the boom, there were a total of 2.7 active agents for every active broker. The high number of agents accompanied an inflated market, with unsustainable prices and little sense fundamentally.

Keep in mind that the active licensee totals above understate the real depth of the problem, as many licensees remained technically “inactive.” They presented themselves as licensees to speculate in property as principals or negotiate purchases for family members, all without being employed by a broker.

Agents speculate on the market

In October 2006, for instance, there were 261,700 active agents, but 376,600 Californians held agent licenses. Compare this to the more stable period of January 2000, when there were 122,300 active agents and 196,500 total agent licensees. Rather than just providing brokerage services to other individuals, the superfluous agents — active and inactive — bought and flipped properties. They speculated in the market while operating as insiders pulling (or saving) a fee when they, their family members and their friends decided to buy the property they located.

Even now, as we anticipate a return to core economic principles (supply for sale vs. demand by actual user-occupants rather than speculators) and real estate fundamentals (price-to-rent and mortgage-to-income ratios) in the residential and commercial markets, the chart above shows the licensee population is closer to the standard 1.5:1 agent-to-broker ratio. Expect that to remain constant until licensee numbers rise, expected in 2018.

Related articles:

California’s 60 largest brokers

Newly licensed sales agent and broker Population

Licensing in the economic recovery

Will this ratio last after the trough in licensee population?

Not likely. The boost in home prices experienced in the end of 2012 through 2014 caused increased optimism among the agent population. The perception of a healthy real estate market due to price increases has lured more individuals seeking career opportunities to become real estate agents. New sales agent and broker licensing jumped in 2013 and remained at their highest levels since the housing crisis fallout in 2008.

Insufficient lender regulation to protect public institutions and society from harm creates a mentality that will eventually lead to another destructive real estate boom. When this happens, possibly around 2019-2021, agents will begin to rapidly multiply once again, and standards will diminish.

It will be up to CalBRE to protect society from adverse licensee conduct. To do so, they will need to tighten up the agent licensing exam before 2017 to control a too-permissive passing rate. This move will limit new agents to the most qualified, dedicated and committed.

Whether the CalBRE will be politically able to do this in the face of opposition from big brokerage offices is doubtful. Large brokerage operations require a constant high number of agents-for-hire to blanket the market when momentum takes hold.

California demographics, and the extremely low present demand by occupying homebuyers, point to this return of “excitement” in the field of real estate around the time period of 2019-2021. Even then, the rate of buyer-occupant homeownership which has dropped from 61% in 2006 to 54% in 2015, will continue to suffer. Thus, fewer brokers and agents will be needed to service the purchase and sale of homes.

As mortgage rates begin their steady long-term rise expected to commence by mid-2016, downward pressure will be put on home prices. This will work well for brokers and agents representing investors interested in acquiring income property.

Related article:

Newly licensed sales agent and broker population

Agent and broker population, past and future

In early 2008, 7% (1 in 14) of all single family residences (SFRs) in California stood vacant, owned by:

  • speculators;
  • buyers of second homes (which were acquired in large part due to speculative fervor); or
  • lenders (in the case of real estate owned property (REOs)).

In 2013, home sales volume essentially matched the years 2009 through 2012. 2014 experienced home sales volume roughly 7% below 2013. However, home sales volume picked up in 2015 and ended the year level with 2013. For brokers and agents looking forward, sales volume is forecast to increase around 5% in 2016 due to the quickening jobs recovery. However, expect sales volume to fall back again in 2017, in reaction to rising mortgage rates.

With the current batch of licensee entrants embracing more sustainable, long-term real estate strategies, the “quick-buck” real estate agents are more reluctant to enter the profession than in earlier years.

No longer do we see the sort of high competition between agents that helped push up prices from 2003-2005. The return of lending fundamentals, pushing higher down payments will set a slower pace in the real estate market than has been experienced at any time during the last decade. If it weren’t for the cash-heavy speculator interference experienced in 2013, California property prices would have remained at their 2012 levels without the bounce.

Purchasing trends in 2014 reflected the intermittent influxes of excited purchasers who are experienced neither as investors nor homebuyers. These buyers who are speculators are most frequently nothing more than gamblers placing bets on houses without the patience or intent to do anything but wait for the market to increase the price so they can cash out on their “investment.”

Related articles:

First-time homebuyers and new housing

Home sales volume and price peaks

Industry behavior

Large single family residential (SFR) brokerage operations with branch offices have always depended on a constant flood of newly-licensed agents to fill their cubicles. This practice was enabled in the past by a high agent turnover rate, as freshly-minted agents burned through their family members and social contacts without developing a viable client base.

Brokers and office managers were able to mitigate the eventual loss of sales production from client-exhausted agents by aggressively soliciting new licensees to bring in as replacements.

These “list-and-run” type agents have disappeared from the ranks of new agents, as the total number of new agents has dropped dramatically. During the peak years of 2004-2007, 5,000 new agents were licensed monthly. Since October 2007, the number of new sales agents has remained steady with a slight general decline, from 1,100 monthly at that time to about 1,000 monthly through 2012. Then, licensing spiked in the first half of 2013 (due primarily to excitement caused by the price movement resulting from the speculator frenzy).

first tuesday predicts sales agent licensing will remain around the current level of 4,500-5,000 each quarter until 2018, when home sales volume is likely to reach a sustainable recovery.

Economic reality

When viewed in the context of disappearing short-term agents, rather than vanishing homebuyers (the rate of homeownership statewide is stuck at a low 54%), it appears that economic reality is forcing employing brokers to:

  • shutter their least productive branch offices;
  • release the weakest office managers and under-performing agents;
  • attempt to locate agents who generate business;
  • upgrade office locations and cut rent expense by taking advantage of office vacancies and ever lower rent;
  • develop new profit centers with office divisions for escrow, finance, homeowner/tenant insurance, property management, syndication and other brokerage services; and
  • require agents to “get back on the street” and gather property information and smoke out the deals to generate leads and sales.

Even more troubling for large brokerage operations is the bickering arising over brokers’ fee-splitting arrangements with their agents.

In the meantime, employing brokers take in fewer dollars and shoulder the costs of overhead, promotion, often servicing unmarketable listings at great cost. Gradually, the younger and more aggressive agents employed by large brokerage offices will look to become brokers or team up with brokers and other agents relocating into smaller operations. Others with a long-term client base will join “rent-a-desk” operations in order to reduce the fee percentage taken by the broker.

Survival and success

Agents jumping out on their own too often do not have the business acumen to set up and operate a broker office, even if it is their own one-man operation. They attempt to do so under the belief, right or wrong, that their current broker is getting too large a share of the fees.

Sellers who continue to demand unreasonable prices (the sticky price phenomenon), or who involve themselves in other conduct which keeps the property from selling within a 30- to 60-day marketing period, need to have their listings cancelled and returned. All this conduct suggests that fewer agents are needed by brokerage offices to effectively service the needs of the public.

Blasphemous talk? Not at all if an efficient brokerage operation is what it takes to get into the full recovery stage without going broke.

Brokers who advertise property that looks good from the curb, and who set listing prices appropriate to the property (prices which are likely to quickly generate offers at near the listed price) will get an offer within 30 days. Such conduct will provide for the survival and success of the rational seller, the broker and his agents. At times of speculative fervor, which are always short in duration, discussion of a stable office environment might seem like nonsense to those with a short-term outlook.

In a recovering market, time lost hurts everyone, a lesson inept policy makers – both state and federal – are beginning to learn from the totally ineffective and ongoing “extend-and-pretend” loan modification fiascos and 2009-2010 federal and state homebuyer subsidies.

Brokers who learn to cut overhead and eliminate operating inefficiencies while beefing up their staff of performing licensees prior to 2017 will be in the best position for the up-tick in the annual sales volume likely to begin by 2018. Employing brokers operating successfully in 2016 will be defined by their ability to plan ahead. They will have to be visionaries if they are to get in on the action when the federal government and Wall Street return to easy lending standards in a time of newly lucrative home sales.

Related article:

Rentals: the future of real estate in CA?

Looking ahead for smaller brokerages and others affected

In the near future, small brokerage offices with fewer than 16 agents will probably continue to recruit agents as they always have. Large brokerages typically use mail-blitzing campaigns and seminars to entice both seasoned MLS agents and newly licensed agents into their offices.

Conversely, smaller offices traditionally recruit from local word-of-mouth contacts. Brokers maintaining a single office with a staff of agents tend to have several different types of business clientele and need to focus on more than scope in the numbers game to drive the listing and marketing of SFR properties.

These smaller brokerage offices may well attract the more thoughtful entrants into real estate looking for the long-term advantages of being around others who work income property, land, and property management.

The boom during the mid-2000s saw five times as many individuals enrolled in licensing courses as compared to the late ‘90s. That licensing education revenue is all but gone for the schools, reduced to 15-20% of its peak 2007 four-year run.

If that is not bad enough for real estate educators, the license renewal rates among brokers and sales agents (especially those hit-and-run agents who arrived during the past six years) dropped to unprecedented levels by 2011. While renewal percentage rates jumped significantly going into 2013 on pricing bubble enthusiasm (despite the slipping sales volume), renewal percentages will not begin a sustainable rise until 2017.

The average rate of sales agent license renewals in 2015 was roughly 80%, up 7 percentage points above 2014. Renewal rates will likely remain about the same level through the end of 2016 as reports of lower price levels finally make their way into the media. Brokers are hovering near an 89% renewal level.

Related article:

New sales agent licenses on the uptick

Many let their licenses expire, then wait to see if the real estate market picks up during their two-year grace period for late renewal. Some of them cite price movement reports in 2013 as a reason to renew when they otherwise would not have done so. Most will be disappointed as the volume of sale has remained defiantly flat in spite of very volatile price movements. Several years remain before the next boom arrives – around 2019-2021.

The broker takes charge 

To operate a successful brokerage office, the broker needs to employ viable agents.

It is the quantity and quality of agents that produce the end result sought by brokers to be successful, i.e., broker fees. As in all service businesses, the linchpin for achieving success is the ability of management to orchestrate the efforts of qualified agents.

However, most brokers employing agents tend not to dedicate sufficient energy to the supervision of their agents. A level of seemingly deliberate neglect prevails in most single family residential brokerage offices, consistent with the proverbial “dumb agent rule.”

Thus, agents are left to learn the trade by observation or some third-party training, and to hone their skills by trial and error. This is an empirical result based more on the agents’ good instincts than on training, procedural policy and constant supervision by the broker — all required by law.

Brokers need to be more than distant observers limited to providing remote oversight for the agents. They or their administrative assistants and managers need to learn to supervise and police the business-related conduct of their agents.

Policing of business-related conduct

Supervisory conduct by brokers and managers includes:

  • setting the production goals to be attained (listings and sales);
  • an analysis of the agent’s income and expenses;
  • the setting of fees needed for the agent to become financially viable as a real estate agent;
  • establishing the personal routines and activities which will likely make the agent productive, i.e., overseeing the agent’s management of time spent working for the broker; and
  • the insistence that compliance reports be prepared and delivered periodically to management. [See RPI Form 520 – 523-1]

Further, the broker needs to be actively involved in the agent’s fulfillment of the duties the broker owes to clients with whom the agent has contact.

Thus, the agent knows from the beginning just what level of production is expected by the broker as a requirement for remaining with the office. Also, the broker will be demonstrating their expectation that the sales agent is to maintain a competitive attitude about producing listings and buyers that do deals. Further, an environment will have been created with a greater probability of producing purchase agreements and closings, which spells success for all involved.

Read more:

See “Human resources: (be)low-level management by brokers,” Chapter 2 of  first tuesday Realtipedia Volume 7: Real Estate Matters. Current first tuesday students may access Realtipedia from their Student Homepage.

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23 Comments

  1. AC said:

    This article is incorrect! There are currently fewer real estate agents that sell real estate due to the fact that loan officers who work for brokers through the BRE must become a real estate agent. Most loan officers I know have never sold real estate and have no desire to do so even though they are included in the chart in this article.

  2. Mark said:

    I would like to gratitude for sharing such a great and helpful information with us. A good agent will always be about what is going on in the market about properties or houses price rate. I think if you want to hire a real estate agent for selling or buying a house or other properties, then you should choose a licensed and experienced agent that helps in everything.

  3. Lisa Stanfill said:

    Great article. I always take my work seriously and keep up on the new laws. Education is knowledge and a key to staying in business. I can relate to a lot of the comments about it too. Ethics must be no.1 priority. I treat my clients the way I would want to be treated. I get a lot of referrals from my clients and some of my clients have done multiple transactions with me. As agents we see a lot of good and a lot of the bad in the business. It’s not hard to be a good agent and be ethical.

  4. Honest Abe said:

    Sorry to read the complaints about training and the number of agents, etc. Freedom is a *****. You are free to market yourself in the best possible manner, and to flourish or fail accordingly. It is the exact opposite of the govt. No one owes you any assistance at all, unless you are somehow in tune with them, and no one should be envious of your success. We have all seen newcomers enter the field and waltz right past our success, based upon their zeal and community reputation.

    Regarding the overly optimistic projections of various Real Estate groups: they would not be so harmful if only the overpaid, highly touted Teachers, dared educate the population about financial matters. Who the hell cares what John Quincy Adams had for lunch, if you can attend school for 12 years and barely know the how debt and interest rates work. ?

    The main thing to “improve” the quality of this “profession” is to eliminate the 0 day sale. It being allowed is one of the most hard to justify things in the business. Dual agency can be somewhat defended because of the agency disclosure forms, but 0 day is impossible to justify.

  5. mike in sd said:

    thank you liz for saying what needs to be said. the realtor associations sold out the agents years ago and have done very little if anything to further the value of the ‘realtor” brand at any time i can recall. their “economists” are cheerleaders and have never been willing to call the market correctly even when it was tanking.

    the assn of realtors accepts for membership anyone with a license, a check and a pulse…it is about as exclusive a club as a supermarket savings club. it is shameful that a newly minted realtor is on par, as far as the association is concerned, with an agent with 20 years in the trade and a nice book of business. i dropped my membership years ago…they are of no value to me.

  6. Liz said:

    If the sense is we need more licensees, I disagree. What we need are more educated and professional licensees. Its the Quality versus Quantity argument. On the other hand the Realtor Associations just want more… more members means more dues which means more money for staff salaries and benefits because I haven’t seen Realtor dues going down at any time during this downfall. Did anyone see the Brokers Insider article showing NAR’s Executive Officer Dale Stinton making $1,938,726 in 2010, that was after receiving a $500,000 raise over his 2009 salary! So while the housing crash decimated income for agents and brokers, the heads of Realtor Associations saw their paychecks keep rising through the downturn according to tax returns filed by the very same associations. We should be asking ourselves if the Realtor Association ideology is helpful or harmful to the working Realtor?

  7. Ira said:

    I believe that less agents and brokers may not necessarily be a bad thing. Leaves the true professionals on the job. Yes, I believe that the DRE should screen new agents better too. Ethics seem to be only words to some agents and not the practice of, which has brought this profession spiraling downward in recent years. Weeding out the bad apples is always a good thing!

  8. Glenda said:

    Real Estate cost money and the MLS is too much for the newbies like me and you do need good training and a mentor. Mentoring is hard to find.

  9. Real Estate Broker said:

    The NMLS has pretty much caused more hardship on potential borrowers than it’s done good. Been a broker and lender for many years, licensed in 1976. I have made hundreds of personal and “brokered loans”. However, I have Gone Galt now and make zero loans in California. Decided it was not worth the hoops getting in the way of my normal business practices. Using the Internet I can do business in states more friendly to borrowers and brokers. In addition, some of the loss in agents and brokers could have been caused by DRE regulations and not the economy. Wake up California, and AMERICA!

    In addition, loans can also be made in foreign countries with rock solid “rule of law” foreclosure process.

  10. Mary Hough said:

    I obtained my license in 2004 and my broker at the time handed me off to one of his other salespersons to train under. The broker and everyone else was too busy to train anyone, so needless to say, I became discouraged by the lack of professionalism. “Every man (woman)for himself,” so to speak, was the attitude I left with. I have kept up with my continuing education and my licensing, so I am looking into a establishing myself with a broker who is willing to invest his experitise and time into his employees.
    So, not all salespersons are greedy and just in it for the quick money. Often, what I’ve been told by other realtors, training and commitment should be mandatory, not something left to chance. There is great opportunity in real estate, but also, great responsibility. I hope I am more fortunate this time around.

    • Lisa Stanfill said:

      Mary i hear what you are saying. When I started I interview with 3 brokerages. I chose and still work at Keller Williams Realty. A classy place to hang my license. Try them. Let me know how it goes.

      • Bill Penn said:

        I was recruited by a KW Commercial broker to work in Northern NV and Northern CA/Lake Tahoe. Just at the start of my career but from what I’ve learned, Keller Williams and its system seems to be ‘the real deal.’

        Not licensed yet, but building a pipeline of potential deals.

        Will keep all posted.

  11. joseph said:

    Please I need to talk to real state broker
    As soon as possible I have 2 houses and I am lossing one of than
    So I need a broker to help me out
    My number is 9092829665

  12. Twain said:

    The DRE is becoming the Gestapo— Hell the whole country is becoming the Gestapo

  13. ananymous said:

    Very interesting article and comments. Let all licensed agents/brokers fight to keep the Department of Real Estate, seperate from the Department of Justice.

  14. Gary Boyer said:

    I would love to see the numbers pertaining to the “New” agents that have come out of the mortgage meltdown as compared to the true Professional Real Estate Agents that make a living in Real Estate. We have had an influx of new agents coming from the Mortgage Industry taking advantage of the contacts they had in mortgages to deal with REO’s and Short Sales. I’m guessing, but I believe that the number of agents who have left the business is even greater than this shows. Those opportunistic agents will only be here as long as their contacts provide them with business and then they will go to where the next quick buck is.

  15. Linda LaSalla said:

    wow, I am so glad you folks were able to stay in the business and struggled, while some of us, would have been homeless, or we had children to raise…I love real estate and I want to go back to it, but with all the set up fees, the fees for this and that…how in the world am I suppose to do that? In my first time through real estate was back in 1980 to 1986, we had 15% interest in Illinois…I had great mentors and wonderful caring and helpful brokers. When I first started, I didn’t know anyone…I was terrified…all of the Realtors that were there had been there forever…they didn’t treat me different because I was new…they helped me, therefore I helped them. I actually sold. I loved the business…I went back, or tried to in 2008 out here in California…I went for a big company…I should have gone with Century 21 but because it was close to home and a smaller office, wanted to get my feet wet, things were much different here and the times obviously changed…I received zero help from the other Realtors, some of them were married, and had been in the business for years and years….I got no help…I waited too long, I shouldn’t have even chosen that office…hindsight is 20/20–so don’t be so harsh on people that you don’t even know…I will go back, I will be more selective in the office I choose…so until you know the circumstances you have no right to judge….

  16. Realtor Bob Bishop said:

    If we want to improve the industry we need to raise the bar for who gets or renews a license. If we raise the standards we can professionalize our industry more and get the “speculators” out.

    But think about it? Who makes more money when we have more licensees? The real estate schools and the Department of Real Estate. They really don’t want to raise the standards. Then they would sell less courses and collect less fees.

    Doctors and nurses and other professions regulate the number of new workers by their standards. Raise the standards…lower the numbers.

  17. David Le said:

    I don’t know about agent but I have seen some brokers that always push the client to buy. They even justify by saying things like ‘if you don’t buy, the market price is going up soon’, or you ought to offer full price or otherwise the seller won’t look at your offers. Ethics in this profession is very hard to enforce and more uninformed or naive buyers are harmed than being helped.

  18. Demos Papadopoulos said:

    Nacy is right that it’s way too easy to get an agent license. It’s also too easy to renew. I just did that and it was no sweat. But even worse for our industry is fact anyone can go to the SAR store and buy a REALTOR pin and pretend he is one. Just astounds me how little consideration we give to our reputation, as an industry. When I asked the clerk how he could justify selling those pins to non-members his reply was that they had to pay $2 more for the pin. Now that’s protection!

  19. Nancy Mitchell said:

    I agree with Joseph Sarria – instead of the DRE making it close to impossible to figure out what a broker has to do to get a NMLS endorsement on her license in order to do loans. The DRE could start by making it more difficult to obtain a salesman’s license…Now for the NMLS endorsement one must have a background check, pre-licensing education, SAFE act, 20 hours of education, take their test, have a credit check and fingerprints, not to mention NUMEROUS fees and charges…The NMLS website has to be the most confusing I have been in contact with so far, and I’ve been licensed as a broker since 1984 and licensed since 1976. Make it more difficult for the “newbies” – make THEM have a sponsor, and fulfill all the other requirements that the government keeps throwing up in front of us. I was an appraiser for several years until they required licensing. Could not find a sponsor. Got a trainees license, but could go no farther. End of story. Everything is becoming more and more difficult – EXCEPT the ability to obtain a salesman’s license. They are still cranking them out to flippers, etc.

  20. Joseph Sarria said:

    The article hits it right on the money. The market is ful of agents when the business boom, and then they leave when things go bad. They are not true professionals, they are oportunistic and liable to do anything to close a deal. Therefore the high rate of fraud in the market. Flipping property, and working with crooked mortgage brokers and agents, who would forge any document to make the points. This is the people the DRE needs to get rid of, permanently. The image of the industry is in such disarray that a clean up is a most for it to recuperate its status.

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