The rise and fall of real estate brokers and agents

By Bradley Markano • Jul 26th, 2011 • Category: Charts

This article reveals the historical population of DRE-licensed agents and brokers working in California, with explanation and forecasting about the future of real estate practice.

Chart last updated 7/26/11

  June 2011 May 2011 June 2010
Active Agents
194,950
196,804
211,875
Active Brokers
107,445
107,753
108,618

Information courtesy of the California Department of Real Estate (DRE)

The above chart tracks the number of active real estate brokers and agents licensed in California, based on data released monthly by the California DRE. These numbers exclude licensed brokers who do not use their licenses, and licensed agents who are not employed by a broker.

first tuesday analysis

In a stable market, a natural equilibrium develops in the ratio between active real estate brokers and agents. This ratio has historically found balance at the level seen on the above chart in 2002; approximately one active broker for every 1.5 agents.

After a protracted period of inflated agent numbers, the ratio returned to historic norms in 2011, with one active broker for every 1.8 agents in the first quarter of 2011. The crossover point on the chart, when the number of agents expanded dramatically, indicates the beginning of a real estate momentum bubble.

As real estate entered its boom phase of the market cycle, new agents arrived en masse with the optimistic belief that extra money could be made in real estate. At the peak of the boom, in late 2006, there were a total of 2.6 active agents for every active broker.

Keep in mind that these active licensee totals understate the real depth of the problem, as many licensees remained technically “inactive,” presenting themselves as licensees to speculate in property as principals or purchase property for family members without being employed by a broker. In October 2006, for instance, there were 261,683 active agents, but a total of 376,561 Californians held agent licenses. Compare this to the more stable period of January 2000, when there were 122,260 active agents and 196,524 total agent licensees.

Rather than just selling properties, the superfluous agents—active and inactive—also bought and flipped them, speculating in the market while operating as insiders pulling (or saving) a fee when they, their family members and their friends decided to purchase property they located. Even in late 2010 and early 2011, as we anticipate a return to core economic principles (supply vs. demand) and real estate fundamentals (price-to-rent ratios) in the housing market, the above chart shows the licensee population has already nearly returned to the standard 1.5:1 agent-to-broker ratio. Expect that to remain constant through the trough in licensee numbers which will develop going into 2016

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