Tyler Le/Insider
Many won't survive the housing crunch
When Chrystina Arnold closed her first sale as a real-estate agent in December, she hoped it would provide a springboard to more deals and the start of a promising career. But almost four months later, Arnold is still trying to close a second sale.
Arnold, who lives in Port Huron, Michigan, paid $89 in October 2021 for a self-paced online course to become a real-estate agent. But by the time she got her license, in June, the typical mortgage rate had nearly doubled, leading to a dramatic slowdown in buying activity.
That drop-off has made the past year a struggle, Arnold told me. The first service she enlisted to help her find clients scammed her out of $600, and that December deal didn't provide the financial windfall she needed. Even though Arnold represented both the buyer and the seller, the $57,000 sale netted her only a $2,300 commission — hardly enough to cover the various fees she pays to her brokerage, the National Association of Realtors, the company that sends her leads, and the multiple-listing service, a database where she can see homes for sale in her area. She's occasionally worked at a bar or delivered pizzas to supplement her fiancé's income and support her 6-year-old son. Despite the setbacks, she's not giving up hope yet.
"I love my job. I love the flexibility of it," Arnold told me. "The only thing I don't like is the financial insecurity that comes with it."
Though she remains optimistic, Arnold knows the odds are not in her favor — agents with less than two years of experience earned a median gross income of just $8,800 in 2021, research from the National Association of Realtors found. But daunting statistics like that didn't stop a wave of hopeful dealmakers from testing the waters earlier in the pandemic, when booming home prices promised hefty commission checks. The number of Realtors grew by more than 156,000 in the combined years of 2020 and 2021, according to the NAR, and peaked at a record high of 1.6 million in October.
As the pandemic's homebuying craze now seems like a distant memory, the slowdown in sales has forced a reckoning among real-estate agents who must decide whether the shrinking returns are worth the thousands of dollars and countless hours they're pouring into their businesses. The challenges are most pronounced for newer agents who are still building up their networks, face fierce competition from their veteran counterparts, and haven't yet weathered a downturn such as this one.
The spring homebuying season, when sales typically pick up and continue rising through the peak summer months, will be a crucial test for agents of all experience levels. A rising tide is no longer lifting all boats, and the industry is bracing to find out who's in it for the long haul.
'A low barrier to entry but a high barrier to success'
Jessica Reinhardt has seen this before.
A second-generation Realtor, she's watched plenty of people come and go from the business. Reinhardt began working at a title company in 1999 before getting her real-estate license in 2005. She survived the housing market's 2008 crash, something of a badge of honor among seasoned agents, and is now the president of the Denver Metro Association of Realtors. The organization's membership rose to a record 9,500 in September, a 20% increase from two years prior, prompting the group to hold packed orientation sessions for new members twice a month, Reinhardt said. Now DMAR is scaling back the frequency of those orientations and budgeting for a 10% reduction in membership this year.
"We know there'll be a decrease," Reinhardt told me. "We went through the same thing back in '06, '07. There was just an unprecedented amount of Realtors coming in."
Just as the housing market goes through booms and busts, so do the ranks of real-estate agents. Take the chaotic 2008 cycle: In 2006 alone, NAR added nearly 100,000 members and reached a peak of roughly 1.4 million. By early 2012, after the bubble burst, membership had plummeted to 964,000. And just as the number of Realtors swelled during the pandemic boom, the ensuing slowdown has already led to a decrease of about 74,000 members in the five months since the October peak. It's too early to say whether this is a seasonal dip, which typically occurs in the winter each year, or a sign of a long-lasting reduction. But Lawrence Yun, the chief economist for the National Association of Realtors, acknowledged that these "tougher times" for agents could lead to a smaller head count.
"The real estate industry is fiercely competitive with many entrepreneurs competing for clients," Yun said in an emailed statement. "Naturally, with fewer home sales, some will leave the industry."
Even before mortgage rates began their climb last year, the frenzied market presented its own challenges for agents. A decade of underbuilding left first-time homebuyers scrambling to compete against investors and older, wealthier repeat buyers, which made it tougher for agents to help their clients get into the homes of their dreams. Desperate buyers could make as many as 30 offers and spend countless hours elbowing through open houses before they finally won out. Reinhardt described it as "chaos."
"You're watching buyers who want to waive inspection and cover appraisal gaps, and every instinct in you is going, 'Oh, my gosh,'" Reinhardt told me. "It's hard to sit back and watch people be that vulnerable."
Yet those were still boom times for agents. In 2021, the typical agent had 12 transactions, up from 10 in 2020, and their median sales volume increased to $2.6 million, a year-over-year jump of about 24%, according to the NAR. Agents with 16 years or more of experience saw their median gross income rise to $85,000, up from $75,000 in 2020.
That all began to change in late spring 2022, when the Federal Reserve began raising interest rates to tamp down inflation. That translated to higher mortgage rates, ominous economic forecasts, and a lack of listings, which have spooked both buyers and sellers in the year since. Each month, Fannie Mae's Home Purchase Sentiment Index measures how consumers are feeling about home prices, mortgage rates, their job security, and, most importantly, whether they think it's a good time to buy or sell a house. The index, which ranges from 0 to 100, came in at a middling 61.3 in March, near the all-time low set in October and down from a COVID-era peak of more than 80 in summer 2021.
"It's just a terrible time for buyers," Shantih Moriarty, a veteran real-estate agent in Silicon Valley, told me. "People are still trying to hold on. They're still trying to claw and scrape their way into a house."
The gloomy market mood is driven by a confluence of factors that all discourage homebuying activity. Just as many buyers were incentivized in 2020 and 2021 by mortgage rates that were at or near record lows, the surge in rates over the past year has dramatically cooled buyer interest. The typical rate for a 30-year mortgage has surged above 6% — more than double the average at the same point in 2021. For a median-priced home of $470,000, that difference would mean roughly $1,000 more in mortgage payments each month. And even when a buyer has enough money in the bank to stomach the higher rates, the houses simply aren't there. While the number of homes for sale has been on the upswing in recent months, nationwide inventory was still 43.2% lower in March compared with typical levels from 2017 to 2019, according to Realtor.com. The hesitancy on the part of both buyers and sellers contributes to a familiar, self-fulfilling cycle — homeowners worry they won't be able to find another home, or are in no rush to give up their favorable mortgage rate, so they hold off on listing, which makes the situation worse for buyers.
This has left real-estate agents fighting over a dwindling pool of listings. In fact, there were more than twice as many Realtors in March as active homes listed on the market — a total of roughly 1.5 million agents compared with just 563,000 houses.
The sluggish market has thrown what was once seen as a lucrative career pivot into doubt. In Cha, a 46-year-old former fashion designer, got her real-estate license in the fall after moving to a suburb of Pittsburgh with her husband and 9-year-old son. The first home she marketed on behalf of an owner sold within a few days of listing in November. But now she and the more experienced agents at her brokerage share a common problem: They can't find enough homes for their clients who are looking to buy.
"There are enough buyers, but there's not enough sellers," Cha told me. "It's frustrating."
Only four in 10 new real-estate agents are confident they'll be able to have a long-term career in the industry, a survey conducted last year by Realtor.com found. The initial outlay to become an agent may be small — typically a few hundred dollars to take a course and exam — but finding clients can be especially tough for those who don't have a strong network at the beginning. The time commitment required to make a living at it can also come as a surprise.
"Getting into the industry as an agent, there is a low barrier to entry but a high barrier to success," Meghan Brown, the director of content and community for Realtor.com, told me.
A long-term investment
Of course, for every housing-market downturn, there's an upswing on the horizon. Yun, the NAR chief economist, argued that the shrinking number of Realtors could ultimately benefit those who are able to hang on, since the thinning ranks will lessen competition as things stabilize.
"In a sense, Realtors like to see fewer Realtors due to the large amount of industry competition," he told me.
And not every real-estate agent is suffering right now. Mary Gibler, a 28-year-old real-estate agent in Naples, Florida, got her license in October 2021 after working for several months as a broker's assistant. She had a successful first six months, closing nine deals, but took time off to focus on her coming baby once she could see that rates were rising and buyers were retreating late last spring. She began working again in January, a typically busy season in her area. Gibler got off to a slower start than last year, she said, but she began to find a groove around mid-February. She currently has three contracts pending and is working with two other sellers.
"It took me a minute to realize that homes weren't flying off the market in the same way," Gibler told me. "The buyers I worked with were more selective and took their time with their decisions."
No two real-estate markets are the same. But when prices were rising across the board during the height of the pandemic, it began to feel that way. As the market normalizes, it's becoming increasingly difficult to paint the national housing market in broad strokes — prices are now falling in some areas while continuing to rise in others — and these diverging trends are helping some Realtors in steadier markets find their footing. A recent Wall Street Journal analysis of data from the mortgage-data company Black Knight found that home prices were still rising on an annual basis in major markets east of Colorado but falling in western markets.
"We're no longer one market," Moriarty, the agent in Silicon Valley, told me. The earthshaking distortions of the pandemic made the "whole United States, and really, to some extent, the whole world, act very similarly," she said, adding: "Now we're broken up into a lot of individual markets again in a very profound way, and they're not going to respond the same."
That makes the job of a local real-estate agent trickier and more nuanced than it was a year ago. A good agent will know the market like the back of their hand — what a good offer will look like and what it takes to win. But those skills alone are no guarantee of success in the business.
"What makes a successful agent is somebody who knows how to market themselves and get referrals," Moriarty said. "What makes a good real-estate agent and what makes a successful real-estate agent have almost no crossover."
If you're new to the business, that news may be encouraging or dismaying, depending on how you look at it. Arnold, the agent in Michigan who has only closed one deal, told me she'd found it hard to get her name out there and secure clients. She joined a women's support group for real-estate agents on Facebook, where she found many others were experiencing similar challenges. Much like buying a house, she believes she's making an investment that will one day pay off.
When I caught up with Arnold in mid-April, a few weeks after I first spoke with her, she had encouraging news: One of her clients, whom she met at an open house, had just had an offer accepted on a $274,000 home. Arnold said she expected the deal to close in early May.
"I'm not the type of person to give up easily," Arnold told me. "I kind of like the odds against me. It just gives me more drive to beat those odds."
James Rodriguez is a senior reporter for Insider.