In September 2011, 1,035 new real estate agents and 505 brokers received licenses from the California Department of Real Estate (DRE). Today, a total of 144,588 brokers and 295,060 agents hold licenses issued by the California DRE.  Since January of 2008, 1,000 to 1,300 new real estate sales agents have been licensed each month. [For historic data on the number of licenses issued quarterly, see the first tuesday Market Chart, Newly licensed sales and broker population.]

Not all of these licensees actively use their licenses as agents in real estate transactions. At the time of this writing, there are 107,284 active brokers and 190,833 active agents. Thus, roughly 64% of DRE licensed agents are employed by a broker. Inactive agents are not able to represent others in real estate transactions. [For the total active brokers and agents in California, see the first tuesday Market Chart, The rise and fall of real estate brokers and agents.]

In September 2011, 59% of agents and 73% of brokers elected to renew their licenses, in keeping with renewal rates since 2007. The remainder chose not to take the mandatory education and pay the required fees to keep their licenses valid.

first tuesday take: The current average rate of approximately 1,100 newly licensed agents each month will remain appropriate for the real estate market until this Lesser Depression ends and a full economic recovery takes hold — probably in 2017 for the real estate industry. This rate is far more restrained than was seen during the boom years, when approximately 5,000 new agents arrived on the scene each month over a three-year period ending in September 2007. The drop in new agent licensing numbers is caused by the same factors that have led to the overall drop in the licensee population, from 265,201 active real estate agents in 2007 to 190,314 at present: the housing market is simply not dynamic enough at present to support the former high numbers of active real estate sales agent licensees.

Indeed, to maintain the current level of newly-licensed real estate agents, the agent licensing exam passage rate has risen dramatically. In September, 1,555 people took the salesperson licensing exam to become real estate agents, and 62% passed that test. In contrast, the passage rate from 2004-2007 varied from 45-50%, as unprepared applicants took the test hoping to make quick money in an exploding market, a product of the Millennium Boom’s hit-and-run mentality.

As the real estate recovery progresses in upcoming years, the DRE needs to consider increasing the difficulty of the licensing exam to reduce the exam’s passage rate and prevent an oversupply of agents. Had such measures been taken in the years from 2004-2006, the distortions caused by the extravagant number of new entrants and the resulting current high rate of attrition among licensees would have been averted. Of course, this would have displeased the large multiple listing service (MLS) brokers, who flooded the streets with easily replaceable agents, but it would have fulfilled the DRE’s mandate to protect the homebuying public from distortional activity in the real estate market. [For the number of agents employed at California’s top brokers, see the first tuesday Market Chart, The 29 top brokers in CA by number employed.]