New rules are expected to dramatically change how homes are bought and sold in America, which could lead to an industry shakeout.
When real estate broker April Strickland looks at her local housing market in Gainesville, Fla., she sees a mismatch. Industry data show that only a few hundred homes are sold each month, she said, yet there are more than 1,500 local Realtors.
“Quite frankly, Realtors are running out of money,” Strickland said.
An industry that swelled with newcomers in 2020 and 2021 has recently experienced a harsh slowdown — leaving the field no choice but to downsize, experts say. One widely cited analysis predicts as many as 80 percent of the country’s real estate agents could find a new line of work.
“Many industry leaders think there are way too many agents and would like to reduce the number so the professionals can service more clients, thus allowing a reduction in commission levels in order to maintain current incomes,” said Steve Brobeck, a senior fellow at the Consumer Federation of America.
By some measures, the exodus has already begun.
The Bureau of Labor Statistics recorded 440,000 full-time real estate agents and brokers in 2023, about 72,000 less than the year before.
As of mid-April, the National Association of Realtors had about 1.5 million agents registered. That’s down more than 100,000 from 2022, according to Nick Gerli of the real estate data firm Reventure Consulting.
The Realtor group, which recently stopped publishing its membership figures, declined to comment for this story. But earlier this year, Gerli, citing monthly reports that were published by the trade association, said NAR anticipates declines in Realtor membership for the next 24 months.
With interest rates remaining relatively high, deals have become so scarce that many Realtors now sell only a few homes a year. A survey of about 2,000 real estate agents conducted by the Consumer Federation of America found that 49 percent of them sold fewer than two homes in 2023. And Realtors will soon face new rules that could result in sweeping changes to how they do business and how they get paid.
Under the new rules starting in August, real estate databases no longer will include offers of compensation for buyers’ agents. That means those agents can no longer count on a cut of the seller’s windfall. Investment bank Keefe Bruyette & Woods has estimated that as much as 30 percent of the total U.S. commissions revenue might be lost as a result.
The rules are the result of a court settlement between the NAR and groups of home sellers who said the commissions structure violated antitrust laws. A federal court temporarily approved the settlement and will consider making the approval permanent in November. And the pressure on the industry could continue — an April court decision cleared the Justice Department to reopen an earlier antitrust probe into the NAR and its rules for commissions.
Economists who study the real estate sector have long believed that a “decoupling” of buyer and seller commissions will convince a significant number of Realtors to abandon the field, though estimates vary as to how many.
The forecast by Keefe Bruyette & Woods projected that changes to the commission structure could cause 60 to 80 percent of U.S. Realtors to leave the profession.
CUNY Baruch College’s Sonia Gilbukh and Yale School of Management’s Paul Goldsmith-Pinkham estimated that about 56 percent of agents would exit the market if one side’s commission remained at 3 percent while the other became competitive, Gilbukh said in an email describing the study. A 2015 paper in the Rand Journal of Economics by Panle Jia Barwick and Parag Pathak predicted that a 50 percent reduction in commissions would result in 40 percent fewer agents.
Experts see a silver lining in a potential exodus of Realtors: Those who remain might be more experienced and competent. “This will be good for consumers because agents on average will be better at their job and will charge more competitive commissions,” Gilbukh said.
A “Realtor glut” has persisted since the industry’s pandemic high point, said Brobeck, who also sees a departure of real estate agents as probably a good thing for home buyers.
Another Bureau of Labor Statistics measure that includes part-timers shows 1.8 million people working in the real estate sector as of April 2024, up slightly from last year. But with so many of them doing relatively little business and holding other full-time jobs, selling homes at this point is “clearly a part-time industry,” Brobeck wrote in a recent report .
Under the rules coming in August, agents will feel more pressure to justify their compensation, Brobeck said, because buyers will be more likely to press for a lower commission. That should also create space for discount brokers serving first-time buyers, he said.
“As this occurs, residential real estate markets will become more diverse and competitive,” Brobeck said.
ilbukh, the CUNY researcher, believes that only the most experienced agents will be able to keep charging high commissions.
Agents that survive the upcoming transition are likely to be better connected within their industry, having deeper relationships with professionals such as contractors, electricians, plumbers and appraisers, and “overall better poised to advise their clients,” Gilbukh said.
Contracts under the proposed new rules should bring more clarity to the relationship between buyers and their agents, several analysts said. That could cut down on “ghosting” incidents, in which prospective home buyers will talk to an agent while searching for a home, only to finalize the deal with a different agent, or put their housing search on hold.
“Previously there was no real sense of accountability, where Realtors didn’t really have to explain what they do,” Strickland said.
The proposed NAR deal was met with fear throughout the industry when it was announced in March, Strickland said. But the panic has given way to a “wait-and-see” attitude, she said.
She characterized the NAR deal as a positive thing overall:
“It will eliminate people who quite frankly aren’t up to snuff, who can’t do the work, who don’t want to educate themselves and learn new ways or working. … This will be a good pivot for our industry.”
