Small Talk: The real estate market isn't as much fun as it used to be
NEW YORK >> Real estate agents are flummoxed by a housing market that's still trying to recover a decade after its historic collapse.
Agents are getting higher commissions as home prices rise, but have fewer houses to list because homeowners are reluctant to sell. Many owners don't want to put their homes on the market until they have more equity to use toward higher-priced properties, agents say. And the uncertain economy has left owners inclined to hold on to their homes. Meanwhile, there are more agents in the market competing for commissions than even just a few years ago.
"Our team is doing well, but I think in general, if there were more houses to sell, we'd be doing so much better," says Mark Ferguson, a sales team leader with the Pro Realty agency in Greeley, Colorado.
Ferguson, who's been selling real estate since 2001, focused on foreclosed homes during the housing crisis and the early part of the recovery, and went back to traditional home sales in 2013 after most of the foreclosure backlog was cleared. The current lack of inventory was a surprising turn, and is now limiting any expansion plans. Ferguson wants to add another agent to his team, but doesn't have the jump in sales he'd need to justify further hires. He had nearly $5.8 million in sales during the first quarter of this year, up nearly 6 percent from the first three months of 2015.
The drop in supply can be seen in the latest monthly statistics available from the National Association of Realtors, an industry trade group. In April, the inventory of homes available for sale was down 3.6 percent from a year earlier.
Stiffer competition among real estate agents also makes it harder to make money, especially since the improvement in the economy has made selling real estate more appealing to people in search of work. Membership in the National Association of Realtors totaled 1.17 million at the end of April, up from the post-collapse low of nearly 1 million in 2012. The Realtors had 1.36 million members in 2006, the year that the housing market began its crash.
"Everyone was dropping out of the business in 2008. Now we're flooded with real estate agents without a lot of inventory," says Janine Acquafredda, a broker with House N Key Realty in Brooklyn, New York.
Acquafredda's sales over the past year are down about 25 percent from the previous year. In addition to a shortage of available homes, she sees fewer buyers with deep pockets from other countries who are able to put cash down and finalize a deal quickly. One reason: the stock market drop in China, where the Shanghai Stock Exchange's major index is down 45 percent since June.
"The business is just not as much fun as it used to be," Acquafredda says.
When houses do go on the market, they can sell quickly because of the small supply. Bidding wars are common on the most attractive properties.
That makes it hard to find enough homes to show a prospective buyer. Deb Tomaro, who owns a one-person Re/Max agency in Bloomington, Indiana, recently picked out 12 homes and began driving the clients around for a quick look. Many of the properties were unsuitable for one reason or another, and two had been sold by the time Tomaro and the clients arrived. In the end, there were just four houses for the clients to seriously consider.
"We'll have to expand their search higher in price or go further out in the area," Tomaro says.
Because Tomaro is a solo agent and not part of a team, she has as much work as she can handle. Her sales have gone from $4 million in 2012 to about $10 million last year, and she expects to stay at about that level in 2016.
Brokerages that are expanding are doing so at a pace that reflects the current market.
"We're actually about to open our third office in four years. We're still growing, but it's that slow, steady growth," says Carl Billera, managing broker at BHGRE Valley Partners in Emmaus, Pennsylvania.
Billera expects his agency's sales, which rose 24 percent last year, to match that increase in 2016 because prices are higher. But he's not seeing listings at the pace he saw in the last several years.
"It's challenging for agents to try and grow their business because of listing shortages," he says.