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Copyright © 2011 by the first tuesday Journal Online - firsttuesdayjournal.com;
P.O. Box 20069, Riverside, CA 92516

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The rise and fall of real estate brokers and agents

By • Feb 7th, 2012 • Category: Charts

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This article reveals the historical population of DRE-licensed agents and brokers working in California, with explanation and forecasting about the future of real estate practice.

In December 2011, there were a total of 186,859 active real estate agents and 106,874 active brokers licensed by the California Department of Real Estate (DRE). This is the lowest number of active brokers present in the market since early-2008 and the lowest number of active agents since 2004. The trend in unrenewed license expirations will continue into 2016, until the decline in total licensees ends and new licensees begin to arrive in greater numbers. The declining number of active licensees indicates that much time remains until the occupation is once again seen by the public as a prudent career choice. [For further details and analysis of the most recent  licensee numbers, click here!]

Chart last updated 2/8/12

December 2011 November 2011 December 2010
Active Agents
186,859
188,279
201,778
Active Brokers
106,874
107,051
108,064

Information courtesy of the California Department of Real Estate (DRE)

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

first tuesday analysis

In a stable market, a natural equilibrium develops in the ratio between active real estate brokers and agents. This ratio has historically found balance at the level seen on the above chart in 2002; approximately one active broker for every 1.5 agents.

After a protracted period of inflated agent numbers, the ratio returned to historic norms in 2011, with one active broker for every 1.8 agents in the first quarter of 2011. The crossover point on the chart, when the number of agents expanded dramatically, indicates the beginning of a real estate momentum bubble.

As real estate entered its boom phase of the market cycle, new agents arrived en masse with the optimistic belief that extra money could be made in real estate. At the peak of the boom, in late 2006, there were a total of 2.6 active agents for every active broker.

Keep in mind that these active licensee totals understate the real depth of the problem, as many licensees remained technically “inactive,” presenting themselves as licensees to speculate in property as principals or purchase property for family members without being employed by a broker. In October 2006, for instance, there were 261,683 active agents, but a total of 376,561 Californians held agent licenses. Compare this to the more stable period of January 2000, when there were 122,260 active agents and 196,524 total agent licensees.

Rather than just selling properties, the superfluous agents—active and inactive—also bought and flipped them, speculating in the market while operating as insiders pulling (or saving) a fee when they, their family members and their friends decided to purchase property they located. Even in late 2010 and early 2011, as we anticipate a return to core economic principles (supply vs. demand) and real estate fundamentals (price-to-rent ratios) in the housing market, the above chart shows the licensee population has already nearly returned to the standard 1.5:1 agent-to-broker ratio. Expect that to remain constant through the trough in licensee numbers which will develop going into 2016

Read More first tuesday Analysis
(last updated May 2011)

 

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Copyright © 2011 by the first tuesday Journal Online - firsttuesdayjournal.com;
P.O. Box 20069, Riverside, CA 92516

Readers are encouraged to reproduce and/or distribute this article.

Copyright © 2011 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online — P.O. Box 20069, Riverside, CA 92516.

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is a licensed real estate agent and handles first tuesday's Market Charts.
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3 Responses »

  1. The article hits it right on the money. The market is ful of agents when the business boom, and then they leave when things go bad. They are not true professionals, they are oportunistic and liable to do anything to close a deal. Therefore the high rate of fraud in the market. Flipping property, and working with crooked mortgage brokers and agents, who would forge any document to make the points. This is the people the DRE needs to get rid of, permanently. The image of the industry is in such disarray that a clean up is a most for it to recuperate its status.

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  2. I agree with Joseph Sarria – instead of the DRE making it close to impossible to figure out what a broker has to do to get a NMLS endorsement on her license in order to do loans. The DRE could start by making it more difficult to obtain a salesman’s license…Now for the NMLS endorsement one must have a background check, pre-licensing education, SAFE act, 20 hours of education, take their test, have a credit check and fingerprints, not to mention NUMEROUS fees and charges…The NMLS website has to be the most confusing I have been in contact with so far, and I’ve been licensed as a broker since 1984 and licensed since 1976. Make it more difficult for the “newbies” – make THEM have a sponsor, and fulfill all the other requirements that the government keeps throwing up in front of us. I was an appraiser for several years until they required licensing. Could not find a sponsor. Got a trainees license, but could go no farther. End of story. Everything is becoming more and more difficult – EXCEPT the ability to obtain a salesman’s license. They are still cranking them out to flippers, etc.

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  3. Nacy is right that it’s way too easy to get an agent license. It’s also too easy to renew. I just did that and it was no sweat. But even worse for our industry is fact anyone can go to the SAR store and buy a REALTOR pin and pretend he is one. Just astounds me how little consideration we give to our reputation, as an industry. When I asked the clerk how he could justify selling those pins to non-members his reply was that they had to pay $2 more for the pin. Now that’s protection!

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