by Calculated Risk on 5/25/2009 09:11:00 AM

From the LA Times: Realtors are abandoning a listing ship

Already weakened by the sour housing market, the profession faces increasing challenges from Internet-based services that help people save thousands on a home purchase.

The number of agents typically declines in a housing slump and rebounds when the market recovers. But this time, "when we see an upturn in the cycle, any recovery in the ranks of residential real estate brokers will be limited by a reduced need for their services," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate.

"The real estate brokerage industry is not going away, but the combination of efficiency gains via the Internet and the cyclical downturn will both be significant forces to their rapidly shrinking ranks," Gabriel said.

The National Assn. of Realtors reports a 13% drop in membership since 2006.

Click on graph for larger image in new window.

This graph shows broker's commissions as a percent of GDP.

Not surprisingly - giving the housing bubble - broker's commissions soared in recent years, rising from $56 billion in 2000, to $109 billion in 2005. Commissions have declined to an annual rate of $57 billion in Q1 2009 - the lowest since 2000.

As a percent of GDP (shown on graph), broker's commissions are at the lowest level since 1993. All data from the BEA.

Here is a simple formula: Commissions = transactions X price X commission percent.

Broker's commissions increased because of both soaring prices and soaring activity. A double bubble.

Now a combination of lower prices, less activity, and innovation is putting pressure on commissions, and leading to fewer real estate agents.