(graphic modified from Minneapolis Area Association of REALTORS report)
Using a little cut-and-paste magic, I wanted to take a look at the impact of the housing market’s shift over the last 4 years. Comparing total sales volume (in Dollars) in 2008 vs. 2005 shows that we’re down 40% in the 3 years since the market’s peak. Since most real estate agents & brokers earn their incomes from commissions based on the sales price of the home, you can see how incomes for the agents and their brokers are down dramatically. Just like any other business, changing times require a changing business models and practices. We’ve seen many real estate brokers close their doors, merge with other companies, or downsize this year. The biggest market players, CB Burnet and Edina Realty, which combined produce over 1/3rd of the sales each year, have both closed offices and reduced headcount to accomodate the new market realities. This is a necessary component of the right-sizing required to remain profitable.
Agents too have been in retrench mode. I’ve seen many leave the business or place their license “on ice” so that they stop incurring the many different costs associated with being an agent. I have also bumped into several agents as they now work a 2nd job trying to make up for lost revenues. This was a market ripe with excess and a downturn was inevitable so while these changes are painful, they are part of the natural balance of things and will leave us with a leaner, stronger base to build from when the market recovers.
As the law of averages always goes, there are some agents doing far worse than average and some doing far better than average. I feel lucky to count myself among the latter group but it has come at the cost of extra time and money required to keep activity and sales high. As a whole my company and office are doing above average as well, which I find is a testament to the agents, management, and environment we’re in every day. In fact, our parent company, Home Services of America, has been given a $250 million war chest by our owner, Warren Buffet’s Berkshire Hathaway, to use to go out and buy real estate brokerages that are fundamentally sound but challenged by today’s market.
In the broad economic downturn that is hitting our country, it seems as if most people are feeling some of its effects and I’d argue that the real estate agents and brokers are getting hit harder than most. In the past people argued that real estate agents/brokers made too much money… I think those same people would have a harder time arguing that point today.
Adversity can bring out both the best and worst in people and challenges like this bring forth opportunities for improvement in our tradecraft. While I’m not happy about the struggles that have befallen our market, I look at this as a chance for all of us to reset our expectations and actions and prepare us for a new beginning. I’m a firm believer that a positive attitude and making smart decisions leads to being “lucky” and consequently I’m encouraging all of my friends in the business to not lose sight of the opportunities available if they simply continue to think positive and act smartly.
