Right now, there are more real estate agents in the U.S. than homes available for sale. The combination of consumer demand for single-family housing, limited supply, and folks being forced to find new work opportunities have all been contributing factors. What's going on, and what could it mean for real estate investors?
What's happening here?
At the end of January 2021, there were 1.04 million homes on the market in the U.S (down 26% from 2019's inventory), the fewest homes on the market in nearly 40 years. Meanwhile, the National Association of Realtors (NAR) has 1.45 million members, 4.8% more than the year prior. To put it in perspective, that's nearly 40% more agents hunting for deals than there are houses on the market.
Since it's relatively easy to get a real estate license, depending on the state you're working in, many new Realtors came from industries hit hardest by the pandemic, such as those previously working in restaurants or hospitality, as a way to try to turn things around.
Licensing exam pass rates vary by state, while exams generally include questions on property laws and market analysis. For context, Texas test-takers have a nearly two-thirds pass rate on the first try.
Redfin as a case study
Redfin (NASDAQ: RDFN), a tech-enabled real estate brokerage that hires agents as employees, furloughed 41% of its agents immediately following the start of the pandemic. However, Redfin is now hiring 162 people a week. Redfin CEO Glenn Kelman called it the most hiring the company's ever done in a recent interview.
What this means if you're buying or selling
RE/MAX (NYSE: RMAX) chief customer officer Nick Bailey explained to Dow Jones, "There are very low barriers to entry, in terms of the ease of getting a real estate license...But the barriers to success are very high." With minimal inventory and many agents fighting for access to listings and buyers, agents have to dig in to be successful, especially if they're just starting out.
That's obviously a good thing if you're listing your home for sale. While high prices and minimal inventory are bad for buyers, at least you're in a position to make your agent work hard for you.
As a seller in such a competitive environment, you might be able to get the listing agent to lower their commission. Not only is the supply-demand curve in your favor price-wise, but it's also in your favor for the agent's service. While the supply-demand curve is against you as a prospective homebuyer, it's your chance to make your agent hustle.
The Millionacres bottom line
The market dynamics are obvious for sellers, who are sitting in the perfect spot right now. But with such a competitive market on the agent side, you may be able to get your listing agent to lower their commission. If you know what you're doing, it might be worth considering doing a for sale by owner (FSBO) to maximize cash from the sale.
On the buyer side, while you're in a tough spot in terms of inventory, make sure you make your agent work. It may also be worth looking into the buyer rebate programs available in your state.