Trimming the fat.

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Came a question from Jessica:

Initially, for the average agents.

Tons of “get rich quick” folks always leave because they didn’t “get rich quick.” Beyond those, there are plenty who will weather the storm.

Once half the agents give up and get out of the market because they discover there isn’t free money to pick up off the ground, the number of transactions per remaining agent goes back up.

Good agents & teams with good operations/systems, pipelines, reputations, and relationships with their clients won’t really see a dip at all. They might get fewer referrals, but they will still have plenty.

It’s no secret that inventory levels/homes sold have plummeted since 2020:

Less inventory —> fewer homes sold —> fewer transactions —> less income.

During the first half of COVID, this was okay because houses were spiking, and demand was crazy, so Realtors were having their best year.

However, now prices have somewhat normalized, and the rates are very high, leading to low demand. In addition, no one wants to sell due to the lock-in effect, so inventory is also extremely low.

I have talked to many potential sellers who have been sitting out, waiting for the rates to drop before they upsize, downsize, move closer in, move further out, or whatever they have been planning.

But now the reality is setting in that they are not going to get 3% interest rates; they have stuck it out in the current situation longer than they had planned.

There have been multiple surveys that homeowners looking to move are currently thinking about trying the market, and more inventory would indeed help spur that. There are always conditions when people have to buy and/or sell.

The number of Realtors will decline, but it always goes back up when people think there is easy money to be made. It has little to do with transaction volume; when it stops being easy, the part-timers and dreamers will leave.

I've seen reports everywhere that hundreds of thousands, or even a million agents will quit the industry soon due to things getting harder in the industry.

The NY Times, for instance, said in March, "About one million real estate agents could leave the profession."

That number is shocking until you realize that 67% of agents closed zero deals in 2023 when none of these changes were in place. Having a million agents leave the profession would have little to no impact on actual business being done.

And that 1M is about 66% of the number of total agents reported by NAR.

Funny how those two numbers line up.

There will also be many thousand new agents. But yeah, a million licenses probably won't renew their licenses in the next year, and it won't make any difference to anyone because none of those agents are actually practicing real estate.

Buyer agency plays a key role in many agents’ income; many buyer agents are absolutely great at what they do and provide great value to their clients. I think many work extra hard to get their buyers' offers to go through and to the closing table.

Someone who is a good buyer's agent and knows everything about houses inside and out might not be so great at getting buyers to sign buyer agency contracts where a commission will go to them if the seller doesn't pay.

I also don't think many buyer agents will be good at negotiating commissions with the listing agent/seller. There will be fewer agents, but more at the top making more money (similar to commercial real estate).

Things are without a doubt going to get harder. It's already a tough industry where something like 90% of agents weren't making it in a much easier time. It's going to narrow down more than ever — so be sure to have your systems rocking at full speed.

There is always going to be a need for real estate agents. And there will be a light in the tunnel for agents who can withstand the upcoming impact. There will be fewer agents with larger pipelines getting a piece of the pie.

The industry will change but not go extinct.

Rooting for you,

Alexa

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