“Even Inefficient At Leaving”

Dec 2, 2007  |  Michael Wurzer

Russell Shaw is one of my favorite bloggers and today he predicts significant NAR membership declines over the next two years, lamenting that it will take that long:

Looking at the pattern of number of members of the NAR, plotted against number of sales made, it is clear that on the way up there is no meaningful lag in the agent numbers. On the way down takes a bit for the flock to properly thin. They are already on the way out – but in addition to being inefficient at selling homes they are even inefficient at leaving.

In addition to being hilarious with the line “even inefficient at leaving,” Russell is dead on with this assessment (which is just one of many reason why he’s a monster producer in Phoenix).  I wrote back in September that I’ve been predicting agent declines for years, and been consistently wrong, but the market continued strong throughout that time.   Now that the market has most definitely turned south in many, many markets, an agent decline is inevitable and it’s likely to be BIG.  My prediction (basically copying Russell): a return to 1 million NAR members by the end of 2009.

I’d love to hear from our MLS clients, or any others out there, about what they are budgeting for membership the next two years.  Is my prediction accurate?  Who’s prepared for that possibility?

4 Responses to ““Even Inefficient At Leaving””

  1. Bob Bemis says:

    Michael,
    I talked to a number of my fellow MLS operators at the NAR with this question specifically asked. The general answer was in a range from 10 to 15%, with 12 being the most often used number. On 1.2MM NAR members, 12% would knock nearly 150,000 out of the game.

    This is a good example of NAR’s goals not being in sync with its members’ goals. More agents mean more money for NAR (and all Realtor organizations including their MLS’s, ours included that depend on dues revenue). But more agents with fewer deals in the bucket means each agent earns less. Not good for agents. This is why NAR has never backed stronger licensing requirements, more continuing education requirements, or a minimum production requirement to maintain membership. To do so would cull the herd that feeds them.

    In the MLS world, where costs are often fixed regardless of the number of agents (within certain limits), a severe drop in agent count could mean some MLS’s (particularly smaller ones with no alternate income streams) would have to raise monthly fees, further hurting the fewer agents who remain. Fewer agents = higher fees. Higher fees = fewer agents. It’s a spiral that can further drive the consolidation of boards and MLS’s and increase regionalization.

    Perhaps with all the other “rethinking” we are doing in our businesses we need to include consideration of alternate revenue scenarios for the MLS. Perhaps the fee per agent per month formula no longer works. I’ll have to give that some more thought.

    PS – what’s with your Twitter? I don’t need to know where you are to hit you with the BlackBerry.

  2. I think Bob touches on a key point, although personally I think it discourages [ever] leaving the market. The cost for renewing a Real Estate license is trivial — generally less than a couple hundred dollars a year — especially with states like Florida that are offering the rock-bottom price of $5 until 3/08. In addition, you have the MLS dues, which vary widely depending on the market (anywhere from $200 to $800) and NAR dues, which are $80 for 2008. So the cost for being an “active” and registered Realtor is around $1000/year.

    I know many, many former Realtors and RE Brokers who have long since left the market but keep their membership & licenses active (often simply to sell their own or friends’ houses). A single $10,000 commission therefore carries the base cost for a full decade.

    15% drop-off? I highly doubt it. Two MLSes I’m familiar with had fewer than 5% leave this year, and this was a *terrible* year to be a Realtor. While there will always be some churn, I’d set the bar somewhere between break-even and 5% down, tops. Especially if economic factors make for a decent Spring season.

    -Matt

  3. I too have been predicting a membership drop off for a long time, and it really never happened. But my prior thinking was based on the premise that members actually intend to make their living at real estate sales–that premise is faulty in two ways. First, many members don’t have to make a living. They are retirees, non-working spouses, folks with other incomes who are simply looking for a socially acceptable way to spend time out of the house.In my former association, over 1/3 of the members had not completed a transaction in the last 12 months–and that’s not unusual! Secondly, I think too often we assume that members make their money from sales, and so we take the number of sales, divide by the number of members, and presto! We can talk about how little people are making in real estate.
    But of course that’s not true. Realtors make money investing, managing property, appraising, staging, building, etc. They are here to stay, regardless of lackluster sales.
    The other piece of advice I give associations is that they ought to plan for dues income of 20% OR LESS of their total income. That makes the membership dues/income drop much less drastic. Back in the early 80’sthe association for which I worked lost over 40% of its members in 6-8 months. We never knew what hit us! Never again, I said to myself.

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