Millions of Agents Facing Job Losses
Tuesday, May 14, 2024
Millions of Agents Facing Job Losses
BOCA REAL ESTATE MARKET WATCHHi everybody, Joe Hillner with Your Home Sold Guaranteed Realty. Every week, I share market data to keep you informed with the local real estate market. Here is this week’s Boca Real Estate Market Watch.
Single Family Homes
This past week, we've seen:
- 67 new listings, ranging in price from $500K to $19.75M!
- 47 properties under contract.
- 41 properties pending.
- 55 homes sold, with prices ranging from $515K to $25,924,407. I kid you not! That must've been some negotiation, huh?!
Condos and Townhomes
For condos and townhomes, the activity has been:
- 96 new listings, priced from $105K to $4.4M.
- 38 properties under contract.
- 41 properties pending.
- 62 closed sales, ranging from $110K to $8.15M.
Industry Disruption: Decline in Real Estate Commissions
A report released last October by the investment banking firm Keefe, Bruyette & Woods (KBW), but gaining attention now, forecasts real estate commissions to decline by at least 30% due to ongoing threats to the industry.
The annual pool of real estate commissions could drop as much as 60% if courts ban cooperative compensation. KBW told investors it is “very likely” cooperative compensation — where listing agents share commissions with buyer agents — will be banned soon. They put the odds of a ban at 50% for the Sitzer/Burnett lawsuit and 75% for the Moehrl lawsuit, which is still pending.
KBW analysts wrote, “We believe disruption to the industry’s commission structure is all but guaranteed. While this disruption should improve consumer transparency around commissions, which economic theory suggests should reduce housing friction costs, the key question is whether this disruption actually changes anything in practice.”
NAR Guideline Changes
Last week, NAR announced new guidelines specifically related to cooperating commissions. They’ve instituted a new MLS rule prohibiting the offer of cooperating commission from a listing agent to a buyer's agent. However, the option to provide the buyer with a credit, which could compensate a buyer agent, is still allowed but cannot be promoted.
KBW predicts these class action lawsuits will likely lead to an outright ban on cooperative compensation. Under the most likely scenarios, KBW expects the real estate agent count to decline by up to 80%, with NAR members falling from 1.6 million today to between 300,000 to 600,000. That's over 1,000,000 agents potentially looking for other jobs.
KBW based this assumption on possible commissions of around 2% to 4% per transaction if listing agent commissions are separated, or unbundled, from buyer agent compensation. The firm also analyzed the number of homes sold per Realtor compared to international figures, suggesting the U.S. should theoretically have about 500,000 agents.
Timeline and Impact
The timeline for these changes is unclear and will depend on court outcomes. No matter who wins at trial, the losing party will likely appeal, potentially extending the timeline by years. However, over 60,000 agents left the business last month alone, indicating significant shifts may already be underway.
Fed Announcements and Buyer Activity
In related news, the Fed announced this week no changes to its discount rate. They expect to make three quarter-point rate cuts by year-end but are waiting until inflation nears their 2% benchmark sustainably.
Even at current rate levels, buyer activity has increased recently. It seems pent-up demand has desensitized some buyers to higher rates, prompting them to act now and plan to refinance later.
Conclusion
Ok so that’s it for today. Thank you for watching, and stay tuned for more updates on the ever-evolving housing market. If you’d like specific market data on your neighborhood, just send me a text or give us a call at 954-799-6867. And if you’re watching this on my YouTube channel and like the information, don’t forget to hit the like and subscribe buttons and the notifications icon, the bell, below. Until next time, this is Joe Hillner with Your Home Sold Guaranteed Realty signing off for now. Go Serve Big everybody! Be nice to each other. And I'll see you next week!