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Canary in the coal mine: will 2007 be the first year of declining NAR membership in a decade?

I guess it's not quite a canary in the coal mine because the canary is supposed to warn us about trouble and I think we already know about the trouble in the housing market. (Zillow's Q3 Home Value Report indicated that US home values are down about 6% versus last year.)

Take a look at the # of dues-paying NAR members (aka Realtors): 1,357,993 as of November 2007. That compares with 1,357,732 as of 2006 year-end. That's the smallest annual increase (a mere 261 Realtors) in 10 years, and when the 2007 year end numbers come out we'll probably see an actual decline in the number of Realtors, the first since 1997. Gulp.

So what to make of this? Frankly, this is good news for the agents who remain in the industry. The housing slowdown is going to (and is already starting to) cause the bottom 10-20% of agents to find other professions, which benefits the remaining top performers. I take no pleasure in seeing Realtors getting forced out of the industry because of hard times, but I do believe that periods of market dislocation benefit the best players. This is true in disciplines as varied as investing (where world class investors outperform their benchmarks much more when the overall market declines than when it increases) and even Darwinian evolution (where more highly evolved subspecies flourish relative to their underperformers when conditions are harsher). Sorry to sound Machiavellian, but the real estate industry isn't for the faint of heart. Hopefully this will be a quick correction and the market will turn around later in 2008, and all of you will benefit from having survived the downturn.

Credit to Agent Genius for calling my attention to this.

Now here's your chance to call me a monster. Please be nice.

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Posted by Spencer Rascoff on 12/20/2007 12:50 PM

Comments (35)

nar, housing slowdown, realtors

35 Comments on Canary in the coal mine: will 2007 be the first year of declining NAR membership in a decade?

DEC

2007

I actually expected these numbers to be more dramatic. It is really interesting to see what the numbers are for the end of this year.

I think we will see a decline, but it seems that a lot of agents are trying to weather the storm and they are not leaving the trenches in flocks.

Everyone is waiting for the return of great times, but we are not promised, and even less guaranteed that they will be that favourable to us.

We will see how it all unfolds.

And if you want to be called a monster, than.... nah. I will stop right here.

There are a lot of agents that are inactive and I assume that some of them will stop paying the fees and go inactive.

Spencer, in my 32 years in the business I've seen several downturns. They are always welcome as a means of "refining" the talent pool. Unfortunately, another batch of bad agents will reappear when times get good again. If we could just close the door after these leave we would be better off.

Bill Roberts

I agree with Bill. Hopefully the NAR and our local ASSOCIATIONS will tighten up somehow the "requirements on becoming an agent", such as more required education and someone to tell new agents what it's REALLY LIKE to be in this business.

In the year pre-boom year of 2000, there were 766,560 members. Alongside the housing correction, there is bound to be a Membership correction as well.

Those that remain will be working harder, better trained,an dmore focused

Many agents joined as the result of the easy money during the housing boom. When it gets to be hard work again, they disappear.

Thanks for the numbers. I think when things get good again, even more will come into the business.

I hate to see people fail but at the same time I would love less competition. The double edged sword is that I believe NAR has gotten comfortable with incoming dues and we may see dramatic increases before the end of 2008

With this 'agent' adjustment, I wonder how the transactions per agent will adjust? With less homes actually selling and less agents, average transactions could hold somewhat study. Alright, I am off to look up what Machiavellian means.....

I think that a 20% drop in agents would not even be enough for most of us to notice. The bottom performers, and those that are looking for something easy weren't contributing anyway. I thin to have a really noticeable change in the agent side of the market there would need to be a 30%-40% decrease. That would cut into people that are producing more than one sale a year.

I think that we will see a 25% decrease in the agent count in a year. (2009 membership year) So, for the 2009 membership year I think there might be just north of 1,000,000 NAR members.

Spencer - you're far from being a monster. This is a correction that normally coincides with the cyclical nature of our business. It's simply one of the realities of our business.

It seem to me that most agents in my area (Tampa,FL) have seen about a 30-50% drop in volume. I would guess that in our area we will see a drop in Agents that is about 10% off that...so with any luck 20-40% will be gone by the end of 2008.

It will certainly be interesting to see what happens! Happy holidays!

Commissions have actually gone up, so I think we will continue to see a steady stream of new agents signing up to do one or two deals for family and friends. The biggest threat to experienced agents is all the new agents coming from high tech backgrounds who are raising the stakes by using new technology.

while I don't wish financial hardship on anyone, as I know it is painful, I do not feel sorry for agents who got into this business to make a quick buck, made no effort to get better, no effort to become true professionals, and now have to get out. I think it is better not only for those of us that stay, but better for the consumer who will be left with more true professionals and less part timers

Spencer, I expected the numbers to be lower. I also think Renee had a good point. NAR's got bills to pay, less members may be paying more dues.

It's funny how everyone wants money from us.....non negotiable.....but when we are supposed to get money....it's very negotiable!

Yes, I do agree that NAR will see a decline in numbers just as we expect to see local numbers decline. I think this slowdown will force a lot of part-time Realtors to rethink their profession.

Spencer, there will be a flight to quality and the better educated Realtors will thrive.

Interesting information. All the best at this holiday season.

DEC

2007

Here we go again: I really do not care what Zillow says... home values in Fort Worth are up 4.7% over 2006. It is just this type of careless hype that has buyers and sellers in so many decent US markets scared to make a move. Markets are local, Values are local. Increases and decreases in home values are LOCAL. Zillow should not deal in such negative generalities.

You monster!!!! Just kidding. Actually, I hate to see agents leave too, however the ones leaving are typically the ones who just jumped on the bandwagon a couple of years ago because of the boom.

Spencer, Whatever the reported numbers are I suspect that when you strip out those who are now part timers, etc. the real drop will be substantial.

This business is cyclical just as realtors are cyclical. It's keeping your clients satisfied while bouncing in and out of real estate. Or the person who changes companies every 6 months. People need stability. And we need to provide it as professionals.

YOU MONSTER! OK, I said it.....

Being observant and reporting your understanding of a subject does not make you a monster, but here is a thought that makes some think those of us that express our thoughts are MONSTERS........

......good for the rest of us that have worked hard to establish a business plan. Let the fallout begin for those that just stick their hands out hoping for a commission to drop into them without fully understanding the market or working towards higher levels of education.

Now would be a good time to elevate the entry levels into this business by setting higher standards than what most barbers have to go through to get their licenses and keep them. We need to make it harder to get into this business and harder to get out of this business because of the investment required.

Ask your state Realtor organizations and real estate commissions to require those higher education standards, and we'll all be better off.

Karen-

It's Drew from Zillow.

"Markets are local, Values are local. Increases and decreases in home values are LOCAL. Zillow should not deal in such negative generalities."

The 6% figure Spencer quoted was for Zestimates nationwide (roughly 50 million of them). I think it's pretty hard to dispute that many, many markets are seeing a decrease. But, that said, we definitely agree with you that real estate is local, local, local. There's no doubt each market is different, which is why Zillow publishes detailed breakdowns for specific areas around the country. Our quarterly reports currently cover 83 major metro areas. Regarding Fort Worth specifically, I'm not sure what the market is doing there. Texas is a non-disclosure state, which makes calculating zestimates within TX a challenge -- which is why Fort Worth is not on the list of 83 metro areas that we publish quarterly.

Hope this helps.

Drew: You are still missing my point. I do not dispute that many markets are down, but quoting a blanket figure of a six percent decrease in "US home values" is false and misleading. I do not care if it is an average. Perhaps you could have at least divided your statistical reporting and said that "for the number 23, or 14 or whatever" of markets that were down, they were down an average of ?? %, and for the however many number of markets that increased, the average increase was "blank" percent ?

I do know about statistics, but here... the reporting made it look like the home values of the whole doggone country had fallen. That was not the case. Could you please simply acknowledge the validity of my point ?

Some of the current slowdown is actually due to drops in values in certain markets, but much of the current slowdown is due to unbased emotional fears of many who see the misleading statistics and mistakenly think the drop is in every single market. You are doing more harm than good with your reports. Either report your results fully and correctly, or don't report them at all. Am I upset ? You Betcha ! Thank you !

I would think the number of agents is a trailing indicator. Im hoping the number in the Austin market goes down.

Spencer ~ I agree with Don above. Our business is WAY too easy to get into, and far too many get into the biz for all the wrong reasons. I think loosing a few along the way would be an improvement. I just wish it could be the crappy ones!!

DEC

2007

Karen-

I certainly see where you are coming from -- I just happen to not agree that the reporting in this post is misleading. Think about the target audience -- ActiveRain members, almost all of which are real estate professionals and know that real estate market trends differ depending on geography. If the target audience of this post were those in Fort Worth, then Spencer probably would have phrased it differently. Our focus with quarterly reports is to analyze & publish all the data that we have on the housing market, and let people interpret the data for themselves (that's why we let people download the excel spreadsheets rather than writing a detailed report ourselves). Nationwide, Zestimates fell 6% -- that's a fact.

What I will do is take your suggestion to our data team as something to consider reporting on in the future. Thanks for the feedback.

Drew: This is my last attempt at making my point. Saying that nationwise, prices fell 6% is like saying the average score for all the NFL games this weekend was 27-17. Statistically that may be true, but it doesn't tell anything about the score of the Cowboys game, or the Browns game, or the Jets game, or the Steelers game. The number may be totally correct, but it tries to say so much that it ends up saying nothing pertinent. Whew... I am done !

DEC

2007

I've seen realtors who in the past boom went on a buying spree, financing RV's, cars and toys. Now in the lean times, they are hiding from the repo man.

DEC

2007

An interesting post. I like the numbers, but what would be interesting would be to see how many agents didn't make it. Sort of a birth/death rate. I t would certainly put a different face on "Oh you're a realtor and make a lot of money for doing nothing." attitude that some consumers have about agents. :)