There were 90,200 active real estate brokers in California during December 2022. The number of active brokers continues to decrease and has yet to find a bottom since declining from the January 2010 peak of 109,500.

Conversely, the number of active agents has steadily climbed out of a 2014 low of 171,100. Active agent numbers have increased to 226,300 as of December 2022.

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. This ratio fell in the aftermath of the Millennium Boom but reversed direction beginning in 2014, and currently sits at an inflated 2.5 active agents per active broker.

firsttuesday forecasts a dramatic fall back in sales agent licensing in 2023-2025, the result of reduced sales activity. Watch for the next big wave of licensees to arrive — first with the return of speculators, then end user homebuyers to propel the housing market to its next expansion — around 2028.

Updated January 26, 2023. Original copy posted March 2010.

Chart update 01/26/23

Dec 2022Dec 2021Annual change
Active Agents
Active Brokers

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

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

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Total Voters: 510

Today’s inflated agent-to-broker ratio

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.

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.

After hitting the 2006 high, the ratio of active agents per broker began its downward trajectory towards historic norms bottoming at 1.6 in mid-2014. However, due to rising home prices, the ratio began to increase again, at an elevated average of 2.5 active agents for every active broker heading into 2023.

Keep in mind that the active licensee totals above understate the real depth of the problem, as many licensees remain technically “inactive.” They present 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 261,000 active agents, but 376,600 Californians held agent licenses. Compare this to the more stable period six years earlier 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 (inventory 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 well above the standard 1.5:1 agent-to-broker ratio. Expect the current ratio to drop gradually in 2023-2025, following the downward path of home sales volume and prices.

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California home sales volume

Licensing in the economic recovery

Will this ratio hold 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 continued to escalate, now 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 eventually leads into another destructive real estate boom. When this happens, possible in the years following 2027, agents will begin to rapidly multiply once again, and standards will diminish.

It is up to the DRE alone to protect society from adverse licensee conduct. To do so, they will need to become more aggressive, initially tightening up the agent licensing exam to control a too-permissive passing rate. This move will limit the licensing of new agents to the most qualified, dedicated and committed individuals.

Whether the DRE is politically independent to be able to do this in the face of opposition from big brokerage offices and trade groups is doubtful. Large brokerage operations require a constant high number of agents-for-hire to blanket the market when momentum takes hold. And large brokerage offices mandate new agents be members of a trade organization.

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California demographics, and the extremely low 2023-2025 demand by occupying homebuyers, point to a return of “2021 excitement” in the field of real estate in the coming recovery of 2026 and beyond. Even in 2021, the rate of buyer-occupant homeownership had dropped from 61% in 2006 to 55% in 2022, and will continue to suffer. For the next several years into 2026, fewer brokers and agents will be needed to service the purchase and sale of homes. This slowing will not be offset by an increasing need for more property management, leasing, and commercial mortgage operations.

Further, as mortgage interest rates continue their current half-cycle of a steady long-term rise, downward pressure is continuously placed on all property prices. Brokers and agents representing investors interested in acquiring income property will find a shift by investors from relying on earnings produced by resale profits to relying on annual earnings from rental income operations.

Capitalization rates investors set for pricing property they are willing to own are moving upward to adjust to the increases in the 10-year Treasury note rate increases and the profit margin for the risks in real estate ownership of illiquidity, material participation in property management decisions, and adverse changes in demographics affecting property values.

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 Agent and broker population, past and future

2021 saw home sales volume leap, the result of historically low interest rates, individual stimulus checks and a fierce sense of a fear-of-missing-out (FOMO). However, the pandemic fuel was quickly spent, and sales volume in early 2022 began a collapse which will continue through 2024.

The acceleration of sales agent numbers was rapid during 2021, carrying over into 2022, attracting an influx of “quick-buck” real estate agents. Expect to see these new-career agents drop out — if they haven’t already — as sales volume and prices continue to decline in 2023-2024. Easy money, all the time, does not exist in any industry due to perpetual business cycles.

For licensees to survive financially, they need to embrace more sustainable, long-term real estate strategies likely focusing on improved services for buyers and non-conventional sales assistance for sellers.

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Industry behavior

Large 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” agents disappear from the ranks of new agents when the total number of new agents drops dramatically, as in 2008-2014 before becoming the late 2010’s recovery. Previously, during the peak years of 2004-2007, new agents were licensed at the rate of 5,000 monthly.

However, the number of list-and-run agents crept higher in the pandemic years of 2020-2021, with brokers spending little time training and supervising new agents and more time mining them for prospects.

firsttuesday forecasts a dramatic fall back in sales agent licensing in 2023-2025, the result of reduced sales activity. Watch for the next wave of licensees to arrive, first with the return of speculators, then end user homebuyers to propel the housing market to its next expansion, likely around 2028.

Related article:

Real estate speculators during recessions and recoveries

 Economic reality

When viewed in the context of disappearing short-term agents, rather than vanishing homebuyers — the rate of homeownership statewide stuck at 55% heading into 2023 — what appears is an economic reality which forces 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 service divisions for escrow, finance, homeowner/tenant insurance, property management, syndication and other brokerage services; and
  • require agents to “get back on the street” to engage in the community, gather property information in greater detail, and smoke out  leads which generate 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 other brokers and agents relocating into smaller operations.  Others with a long-term client base will join “rent-a-desk” operations to reduce the fee percentage taken by the broker.

However, agents jumping out on their own too often do not have the business acumen to set up and operate a broker office, whether they employ agents or operate independently. They attempt to do so under the belief, right or wrong, that their current broker is getting too large a share of the fees.

Survival and success

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 — their employment of the brokerage office terminated. This seller belligerence surfaces in a recession suggesting that brokerage offices need fewer agents to effectively service the housing needs of the public until the recovery of willing buyers takes hold, likely in 2026.

Blasphemous talk?

Not at all when an efficient brokerage operation is what it takes to get into the full recovery stage without first going broke.

Brokers who market property which appears attractive from the curb and can set listing prices which will quickly generate offers will earn a living and prevail during an economic downturn. Such conduct, a requisite for success, is dependent on a rational seller, a savvy managing broker, and the talent of their agents.

At times of speculative fervor, which are always short in duration, discussion of a stable consistent office environment sounds like nonsense to those with a short-term outlook. However, real estate is not a business where you can “fake it until you make it.” Non-disclosure and misrepresentations will undo you every time.

In a market recovering from a downturn, time lost hurts everyone, a lesson inept policymakers — both state and federal — learned from the totally ineffective “extend-and-pretend” loan modification fiascos and 2009-2010 federal and state homebuyer price subsidies.

Brokers who learn to cut overhead and eliminate operating inefficiencies while beefing up their staff of performing licensees will be in the best position for the uptick in annual sales volume; probably to begin mid-2025, possibly not until mid-2026.

Employing brokers operating successfully today are defined by their ability to plan ahead. As visionaries they will be prepared to get in on the uptick in transactions when the Federal Reserve and Wall Street return to easy lending standards, a time of greater frequency for property sales, leasing, and mortgage originations.

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 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 branch offices.

Conversely, smaller one-location 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 the numbers game of market share to drive the listing and marketing of SFR properties.

These smaller brokerage offices are the most likely to 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.

Further, the license renewal rates among brokers and sales agents (especially for those hit-and-run agents) dropped to unprecedented lower levels by 2011. Watch for a similar dynamic to occur by 2025-2026.

The broker takes charge 

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

It is the quantity and quality of agents in a business model that produce the end result sought by employing brokers to be able 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 to act as permitted by law.

However, most brokers employing agents tend not to dedicate sufficient time and energy to the supervision of their agents. A level of seemingly deliberate neglect prevails in most SFR brokerage offices, consistent with the proverbial “dumb agent rule.” This has historical roots in the 1979 independent contractor misrepresentation of the status of what is an employee absolutely — licensed agents and broker-associates working for an employing broker as they must.

Thus, agents are most often 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 indoctrination, and constant supervision by the broker — all required by law and enforced by the DRE.

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

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Brokerage Reminder: Is your team playing by the rules?

 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]

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 sales listings and buyers ready, willing and able to deal.

Further, an environment needs to be created to nurture a greater probability of producing closings based on purchase agreements, leasing agreements and mortgage originations, which spell success for all involved.

Read more:

See RPI ebook Real Estate Matters: Chapter 2