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Tuesday, December 11, 2007

Broker's Commissions Decline Sharply

by Calculated Risk on 12/11/2007 11:34:00 AM

Jon Lansner at the O.C. Register writes: Home-sale commissions off $13 billion from ‘05 peak

Want to see more housing pain? Real estate agent commissions nationwide will tumble $10 billion to $55 billion this year, says figures from

By this Web site’s math, commissions nationwide peaked at $68 billion in 2005, and dipped to $65 billion last year. Now, $55 billion isn’t bad, by this math. The last time agents’ total take was lower was 2003 ($51 billion) — and in 2000, for example, it was just $36 billion.
This data is apparently a subset of the total brokers' commissions on sale of residential structures.

According to the BEA, total residential broker's commissions peaked at $109.9 billion in 2005 ($116.5 billion in Q3 2005 at a seasonally adjusted annual rate) and have declined to $81.1 billion (SAAR) in Q3 2007. Commissions have declined by $35 billion (SAAR) from the peak in Q3 2005.

Here is the BEA and NAR data for the last 3 years, and Q3 2007:

200420052006Q3 2007 (SAAR)
BEA Broker's Commissions (millions)$96,077$109,855$101,518$81,081
NAR Existing Home Sales6,778,0007,076,0006,478,0005,420,000
NAR Average Sale Price$244,400$266,600$268,200$267,500
Commission Percentage (calculated)5.80%5.82%5.84%5.59%

Real Broker's Commissions Click on graph for larger image.

This graph shows real broker's commissions (adjusted by PCE deflator), compared to existing home sales since 1969. Obviously commissions have tracked sales pretty well, although there was a strong growth in real commissions, since the late '90s, as house prices surged.

As sales and prices continue to fall in 2008, commissions will probably decline significantly.