As a follow-up to yesterday’s post I found a few more numbers on the topic.  The table below shows data from the National Association of REALTORS^® latest Monthly Membership Report.

	10/31/07	9/30/07	% Δ (m.o.m.)	10/31/06	% Δ (y.o.y.)
Nevada	20,166	21,090	-4.58	20,678	-2.54
Nationally	1,363,758	1,366,869	-0.23	1,370,758	-0.51

Note: To see NAR’s Monthly Membership Report for all states click here.

So, Nevada’s numbers of REALTORS^® are decreasing faster than the national rate of decline. As shown in the table above, the state’s membership roster has declined 4.58% in the last month (of reported data) compared to a .23% decrease Nationally for the same time period.  However, as I reported in yesterday’s post, here in Washoe County our membership has decreased less than 1% during the same time period.  So the biggest declines are occurring elsewhere in the state.

But, perhaps, having a few less REALTORS^® competing for a dwindling number of sales might not be so bad.  Yesterday’s post received a comment from a reader asking the question how the 3,000+ agents in the area could survive on the small number of sales of late.  Intrigued as to how recent sales are translating into an annual income I ran the numbers and responded in the comments.  In case you missed my analysis I’ll repeat it here.

The NAR reports that the average REALTOR^®’s income amounts to only $23,000 per year.  How do Reno-Sparks REALTORS^®’ incomes compare?  Let’s do the numbers (I’ll use October’s data because that’s the month where I have the most complete data available).

According to recent Washoe County Assessor’s data , October’s sales consisted of 386 resales county-wide.  That’s 772 transaction sides (one Buyer’s agent and one Listing agent).  There were also 235 new home sales recorded for the same period. However, we can’t assume that all of these new home sales involved an agent.  In fact, I’m guessing one-half would be a generous estimate.  So, for this example, let’s add another 118 buy-side transactions.  That’s gives us 890 transaction sides for the month of October.  As we saw in yesterday's post, the NRED reported 3,176 Active agents for October.  That’s .28 transaction sides per agent for October.  For this example, let’s simply multiply that number by twelve to get an annual estimate. That yields 3.36 transaction sides per Washoe County agent for 2007.  For the sake of discussion, let’s use a 3 percent commission for each of those transaction sides.  Last week I posted the median sales price for October was $287,000.  That amounts to an $8,610 commission per sale per side, or an annual gross income to the broker of $28,953.  I say “to the broker” because, as you know, the broker receives the commission, and then divides it with the agent according to a pre-arranged “split”.  This split can vary greatly depending on the brokerage and a variety of factors (i.e. experience of the agent, the agent’s production volume, office expenses, etc.)  Let’s just say I have heard splits ranging from 50-50 to 90-10, and everything in-between.  Again, for the purpose of this example, let’s choose a commission split in the middle of the range, say 70%.  That provides an annual income of $20,267 per Washoe County agent…or slightly below the U.S. Census Bureau's poverty threshold for 2006 ($20,614 for a four-person household).

Who's Thriving in the Slow Housing Market?

On a another note I found an article that indicates not all those working in the RE industry are going hungry. Some of those who are doing a brisk business include: 

• Remodeling contractors
• The auction industry
• Home Stagers
• Appraisers

See Who's Thriving in the Slower Market for the story.

Comments

[Lindie]

Thanks Guy for the elaborate analysis. I'll stick with my comment that there is no way 3,000+ agents are making a living in this market. I suspect that the realtor business is just like a lot of other businesses. A relatively small percentage of the people do an overwhelmingly high percentage of the business. My guess is there are some agents making a good living, while many many of them won't do a deal this year. In other words, many won't make a dollar this year.

[GuyJohnson]

Thanks, Lindie.

Inre: "...many won't make a dollar this year."
I saw this quote in a Inman News article last week:
" 'Forty-three percent of people in our multiple listing service have not done a transaction in this whole year,' said Marlene Bridges, a Realtor for Sherman Smith & Associates in Tustin, Calif. 'A lot of people still have a license.' "

[Dave]

Maybe if each governing real estate board would make obtaining and maintaining one's real estate license a little more difficult (and expensive), the industry would weed out the low performers (who by the way are more likely to be involved in litigation). The net result would be that both the consumer and the realtor would be better off!

[Phil Hoover]

I suspect your market is much like ours in Boise; perhaps not quite as good however.
I have long believed that 90% of the business in our market is being done by the 10% of competent agents who know how to do business.
The old 80/20 rule is gone; it may be as high as 95/5.
The problem is that no one has stuck a fork in the 95% and told them they are "done".
Many have "real jobs" and continue in real estate, hoping to do one or two deals a year.

[Gina]

I have friends who keep a license just for their own home transactions. The stats don't show which or how many agents are actually 40+-hours-a-week in the occupation. The bureau of labor statistics shows the average amount made by agents annually by state, but again, there is no way to track which agents work as agents full time.

[Diane Cohn]

I would love it if our industry had some sort of agent activity meter viewable by the public. For example, if I'm an agent doing at least ten transactions a year, I show up categorized as full-time. If do more than 20 transactions a year, I show up as high-producing. Six to ten? Part Time Professional. Two to five? Occasional Agent. One to two? Hobbyist.

Why does this even matter? Because the more transactions you do in this business, the more you learn, and the better you become as a practicing professional. I'm sure some of those one-deal-a-year people are perfectly capable, but I bet most are near clueless because they don't do much. There is so much to know when it comes to the ins and outs of residential real estate... how can they be competent without actual practice?

[smarten]

As a follow up to Diane's post, do you realize that in Incline Village ["IV"]/Crystal Bay [where there are about 350 MLS member agents] and about 260 sales/YEAR, only 3% of those agents participate in one side or the other of 10> transactions a year? Does that mean the other 340 or so agents AREN'T full time?

Actually, it's kind of amusing. Went to Happy Hour at a local Tahoe Vista eatery last week and our bartender was a full time IV agent with a major "name" brokerage [Guy better add this profession to his list of industries profiting from the current SFR swoon]. I guess the moral of the story is don't quit your night job!

[Move to Reno?]

Wasn't there a movie about a part-time real estate who was a full-time police detective? While he was investigating homicides he was fielding real estate questions on his cell phone.

[Diane Cohn]

Smarten, though a high-producing agent in Reno-Sparks, I also belong to the Incline Village MLS, and by my own definition would be considered a hobbyist in their midst... I typically do one deal a year there as a buyer's agent.

While expensive to belong, I keep paying the dues because someday I'd like to live there, so I do actively watch their market and enjoy access to their data. Incline is an interesting little place, where everyone in town seems to be a real estate agent. It's extremely competitive.

My advantage is that because I don't live there, I have no attachment to local values. So as a buyer's agent, I look for every possible loophole and use every piece of data available to get the best deal I can for my clients. I have found that because inventory is so high and sales are so, um, infrequent, I can usually find a situation where the seller needs to get out and the buyer gets a great long term deal.

Each of my buyers so far has set a new low in terms of comparable sales whenever they've bought over the hill. So, please don't forget me if you're looking at Incline... I love any excuse to get to the Lake. ;)