The housing market has experienced some recovery, and with that buying and selling real estate has also improved. However, limited inventory as well as online sales are making it difficult for real estate professionals and their pocketbooks.
Adam DeSanctis, Manager of the NAR Economic Issues explains that the increase in house sales working up to 2006 resulted in many people becoming active with broker transactions. The ups and downs of the market were closely mirrored by the number of realtors entering the market, making real estate a second job.
A historic peak of 1.4 million real estate participants occurred that year, with a year end high of 7.3 million home sales.
The trend swerved in 2011, when home sales decreased steadily and yearly sales fell below 4 million. As a result, there was a significant decrease of memberships and the following year saw less than one million for real estate professionals.
After the slow episode, the market slowly recovered. April saw home sales rise six percent from the year before to a rate closer to 5.5 million. Membership increased by almost 17% from 1.2 million in 2012.
Recovered housing market sales are at almost a 10-year high, so it’s no shock that NAR memberships are on the rise again. Since the fall of 2012, memberships for the Charlotte Regional Realtor Association have increased nearly 40% to 8,622; the number of real estate professionals has not reached this level since 2008.
Unfortunately, there is yet another challenge that real estate professionals face with increasing popularity; low inventory.
DeSanctis explained that competition is fierce with so few listings, and that the problem caused the median income to drop 18% from $47,700 in 2012 to $39,200 in 2015.
A Realtor at Helen Adams Realty, Zubin Shroff says CRRA do not have records of realtors’ incomes but that there were more licenses that came in after the economy stabilized. He emphasized his concerns about higher competition among real estate professionals, adding that sellers struggle with low interest rates and tend to sit on their properties.
The short supply of homes to sell can also be explained by a region’s population increase. There is a bulk of homes being bought by institutional investors who are renting them out; a cycle that sticks because of how hard it is to find desirable homes available on the market.
A historic low of housing inventory in the local area of Charlotte offers only a 3-month supply of homes for sale in the month of May. According to the CRRA, this is a decrease from 4.4 months earlier. A 6-month supply would be considered balanced, where neither party (buyer or seller) has the advantage. At the national level, a 4.7-month supply was available in April according to the NAR’s latest info, which was considered low compared to 5.3 months last year.
DeSanctis on a positive note explains that as builders expand to new-home production the market should improve. More of those looking to move usually do a trade for a newly-built home thus freeing their old property.
NAR further explained that with more real estate professionals coming in and less inventory to sell, there has been a significant decline of sales caused by inexperienced professionals. In their member profile this year about 20% of members had only a year or less of experience, in comparison to last year when only 11% had the same level. NAR is seconded by Daren Blomquist, President of RealtyTrac, who describes new realtors as “bandwagoners” who only “do a few deals”. In comparison to a professional realtor having monthly sales, these bandwagoners only do a few deals a year while the market is hot.
DeSanctis added that new realtors haven’t built a strong client base, which may be why they only sell few homes at lower prices. The result is lower commissions that pull down the median income of NAR’s membership income range.
Blomquist explained that the expansion of the internet may also be cause for lower earnings. The online company Ten-X is expanding its Auction.com platform to cater to traditional buyers as well as investors looking for distressed properties.
The push towards technology-driven home selling has removed the need for realtors. Blomquist also explains that institutional investors who bought foreclosed properties in bulk are eager to pass down their properties to smaller investors who want properties in neighborhoods ready for redevelopment.
He added that these investors compete to find properties that are not even on the market yet, and that seasoned real estate professionals also has to compete with companies like “We Buy Ugly Houses” who will buy homes in distress for cash.
Owner and Broker in Charge of Showcase Realty in Charlotte, NC area Nancy Braun stresses that a “very complex and litigious environment” is forcing staff to handle more information and issues concerning things like pests, radon, septic and HOA concerns. Braun also makes the point of the increased expenses for marketing as technology continues to improve.
Braun added that there are higher expectations from consumers, who expect their homes to be seen on a national level. Not only that, but both independent and large companies are looking for compensation for their small contributions to any sales, such as giving referrals and leads. “Many other parties expect a piece of the pie,” she explains.
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