The downturn in the housing market isn't tough just on people trying to sell their homes. It's also tough on the people
who want to help those people sell their homes--real estate agents.
Locally, their ranks have thinned as more and more leave the field to search for better prospects.
Those who remain rely on years of experience, well-maintained referral lists, and long, long workweeks to survive.
"I'd say the biggest frustration I have is that I've got good listings and I can't get them sold," said Mark O'Hara, an agent with Century 21 Realty Group One who's a 34-year industry veteran.
"You spend a lot more money advertising them, and you might have had three houses sell in the time period it now takes to get just one. We're working a lot more for less money."
The Metropolitan Indianapolis Board of Realtors--which serves 10 central Indiana counties--says its membership has dropped to 6,968, down 11 percent since peaking at more than 7,700 two years ago.
Realtors are real estate agents affiliated with a local board of agents. They take additional classes, subscribe to a code of ethics, and pay yearly dues in exchange for the right to call themselves Realtors and gain access to the organization's computerized database of on-the-market homes.
Generally, Realtors earn a 6-percent commission on sales, with half going to the seller's agent and half to the buyer's agent. However, this arrangement varies from company to company, and often from individual to individual.
The reasons for the recent exodus from the profession are both numerous and obvious. The biggest is that there are too many homes chasing too few buyers. According to MIBOR statistics, sales volume in its service area dropped 21 percent in the last 12 months, from $4.8 billion to $3.8 billion. In the same span, the average sale price declined 5 percent, to $146,032.
Even though the number of new listings dropped 11 percent during that period, a bottleneck of unsold properties remains.
"We've got an 8-1/2-month inventory on the market right now," said G.B. Landrigan, president of Landrigan & Company Realtors.
He said that's a little better than a year earlier, but nowhere near a normal market, which would have a five- or six-month inventory.
None of which bodes well for the people who make their living putting buyers together with sellers. The buyers, well aware they hold most of the cards, want sweetheart deals and take plenty of time to shop around. Meanwhile, the agent-borne expenses of selling homes--listing fees, newspaper advertisements for open houses, and sundry other bills--remain the same.
And the agents still need to do a certain amount in transactions annually just to stay in business--typically $1.5 million to $2 million in sales, Landrigan said.
The tough times have shredded those not deeply committed to the profession, those whose financial circumstances don't allow them to weather a prolonged sales drought, and those who got into the business recently and for the wrong reasons.
"In such circumstances, there's a flight to quality," said Jim Litten, president of the F.C. Tucker Co.'s Residential Real Estate Services Division. "Clients don't want to use an agent who's part-time and doing one or two sales a year. Because they know that when times get tough, you need to have someone who knows what they're doing.
"In any business, the disciplined people who work hard, who have a commitment, who have a business plan, are going to be successful. The ones I call 'hobbyists'--those folks, when the market is challenging, are going to be very challenged by it."
Truth be told, even agents who put in the industry's standard 60-plus hours a week find these times a challenge. Old hands compare them to the apocalyptic recession of 1980-1982, when mortgage interest rates soared into the high teens, making home ownership beyond the reach of many.
Ross Hubbard of F.C. Tucker's Zionsville office came of age during that meltdown.
"I started in 1978 and had two years of glory, followed by two years of wondering what I was doing," he said.
Those high interest rates were a problem, but Realtors found creative ways to knock them down a few points, getting the numbers into the realm of reason. But this time around, there's no obvious way to finesse the problem: a backlog of homes that's created the mother of all buyer's markets.
"Most of us just feel beat up," Hubbard said. "We've been fighting this for so long. And a lot of Realtors are no longer in the business. I also teach at Tucker School of Real Estate, and there are less people taking the courses."
Though she declines to give hard numbers, Lynn Davis, director of career development and a senior vice president at Tucker, acknowledged "there has been a noticeable decline" in the number of people entering the business.
"This is my 18th year in this position, and I hope this isn't going to be my smallest or slowest year," she said.
When will it get better? Many Realtors think the bailout of the financial services industry recently approved by Congress will set the stage for better times next year.
But don't hold them to that prediction.
"I think we could have a good spring market," Hubbard said. "Or we could have a crappy spring market. We just go through these cycles. It's like an act of nature. You can't always be running uphill. Your profit line can't always be going up."
Leaving the field
In the meantime, shedding some of the industry's less-than-stellar performers isn't necessarily a disaster--at least for the survivors. When times pick up, they reason, the field will be less crowded.
"It's not bad to have some tough times every once in a while to make it a little more competitive and get some of the people out of the business," O'Hara said. "If 100 people get into it, maybe 40 of them will leave, even in good times. There's a lot of people that are just not suited for it."
"Real estate's always had a one-third turnover rate," Hubbard added. "There's constantly a third coming and a third going. Especially when things are good because everybody thinks they're going to do really, really well. They don't realize how difficult it is. Just the time consumption. You can lose control of your life if you're not careful."
Grizzled old hands may have a large enough base of repeat customers to survive the cycles. But the same can't always be said of newer entrants into the field. For them, being caught without a backlog of customer referrals and repeat business can spell doom.
"I think the average age for Realtors is like 52 or 53, so I'm still relatively young," said 34-year-old Angie Miller Brees of ReMax Legends Group. "It seems like most people are in it for a long time or they tank after a couple of years. There's not a lot of in-between."
Once upon a time, Brees used to drum up business by keeping an eye out for people with For Sale By Owner signs in their yards, then persuading them to let her represent them. But those signs have disappeared because sellers from the outset realize they need all the help they can get.
Last year started out pretty well for Brees, but then November ushered in a quiet stretch that lasted until this April. It was enough to make her rethink her career path.
"I really did a reality check," she said. "Should I stick this out financially? I can't really see myself doing anything else, so I made the decision to stick it out. And on April 1, my phone started ringing again, and here we are.
"I'm having an OK year, not a record-setting year. If I were single and we didn't have a dual-income family, I don't know if I would do it."
These days, like most agents, she's living off of referrals and repeat business, which she's scrupulously cultivated during her brief career.
"That's the only thing that saves me," she said. "That's really what's keeping me going--knowing those people hopefully will call me again."
Still, experts point out that things could be worse. After all, in real estate the only thing as inevitable as the next downturn is the next upturn. You just have to make sure you're around to enjoy it.
"If you asked the average guy on the street, they'd think that everybody in the real estate business should be on the food line," Litten said.
The reality, Litten said, is that 52,000 to 54,000 people will be buying or selling homes this year in central Indiana--many with the help of Realtors.
"Now that's a lot of people. And to put that in perspective, during our best year ever it was 67,000. It is what it is. If you come in and work, you'll find people buying and selling real estate."
Just not quite as many as a few years ago.