June 2024

The state of real estate — a true turning point

YearRatio of REALTORS to Existing SalesNumber of REALTORSExisiting Home Sales

As the graph shows, the ratio of sales to REALTORS® is lower than usual. But that ratio may shift dramatically in the near future.

[The graph references REALTORS® specifically because it’s based on data from The National Association of REALTORS® (NAR). Although, for the purposes of this article, we’ll be referring to REALTORS®, these trends apply to real estate agents in general.]

There have been several pivotal moments in the history of REALTORS®. In the mid '70s, the number of REALTORS® more than doubled. In the fallout after the 2008 housing crisis, their numbers dropped considerably. And in the wake of the pandemic, the number soared to an all-time high of 1.6 million.

With the current inventory slump, there has been a significant exodus of REALTORS® in the past year. And with a landmark legal decision potentially changing the commission structure permanently, the REALTOR® landscape is about to experience another historic metamorphosis.

The question is: What does the future hold for REALTORS®? Let’s start at the beginning and work our way up to this present precipice.

A brief history

On May 12, 1908, The National Association of REALTORS® was founded in Chicago as the National Association of Real Estate Exchanges with only 120 founding members; by year’s end, that number had risen to 1,646.Footnote3

The 1910s saw the introduction of the first open house as a sales tool.

In the 1940s and '50s, soldiers returning from World War II bought homes in large numbers. The term REALTOR® was first used, and women became REALTORS® in record numbers.

From 1974 – 1975, the number of REALTORS® exploded, increasing by 224% from 134,362 to 435,485, making it the largest trade organization in the United States.Footnote3,4

By the mid-1980s, the REALTOR® population crossed the 800,000 mark.

The 2008 housing crisis

After the housing bubble burst in '08 due to a glut of sub-prime mortgages failing in rapid succession, banks repossessed homes and put them back on the market. This led to an overabundance of inventory and a lack of potential homeowners who qualified for a mortgage once the sub-prime terms were phased out. Housing prices plummeted, and the number of REALTORS® dwindled, dropping from 1.37 million in October '06 to around 960,000 in March '12.Footnote5

The housing situation in '08 led to the Global Financial Crisis, the most severe economic crisis since the Great Depression.

The pandemic

With the housing market booming and many people out of work due to the lockdown, Americans began applying for their real estate licenses in droves. The ability to work remotely made being a REALTOR® particularly appealing. More than 156,000 people became REALTORS® in 2020 – 2021, the biggest growth since over a quarter of a million people joined the REALTOR® ranks in 2005 – 2006.Footnote6

This pandemic-fueled influx brought the REALTOR® population to an all-time high of 1.6 million in October 2022.Footnote7 But pandemic inflation led to a steep rise in housing prices and mortgage rates, which, coupled with homeowners locked in at sub-5% rates being reluctant to sell, led to an inventory drought.That drought has led to a minor exodus of over 85,000 REALTORS® from October '22 to January '24.Footnote7 That number will likely continue to grow as many REALTORS® wait for their memberships to expire before exiting the workforce.

The current picture

While many economists fear that post-pandemic inflation may lead to another global financial crisis like we faced after the 2008 housing crisis, a team of specialists at Bank of America believes the U.S. will avoid another housing crash because of new legislation enacted to prevent a swath of risky adjustable-rate mortgages (ARMs) like the ones common in the early 2000s. In 2024, ARMs make up less than 5% of mortgages—compared to over 35% during the housing bubble.Footnote8

Bank of America believes our current situation is reminiscent not of 2008, but the early 1980s. “Back then, just like today, home prices had boomed for years before Fed officials were ultimately forced to hike interest rates aggressively in an attempt to fight inflation.”Footnote8 In the '80s, baby boomers had reached prime homebuying age, much the same as millennials have in this current market.

In the '80s, interest rates spiked to 18%, which cooled inflation but led to a recession. Interestingly, even with those sky-high mortgage rates and a recession, house prices remained steady. So, with current mortgage rates seeming to have topped out at less than half that astronomical '80s percentage, housing prices should once again remain steady or see marginal growth in the short-term.

The possible effects of a landmark settlement

As part of ongoing litigation, the rule allowing a seller’s agent to set compensation for a buyer’s agent is likely to be phased out. Fields on multiple listing sites (MLSs) displaying broker compensation must be taken down. Also, the requirement that real estate agents must subscribe to an MLS to offer or accept compensation for their work will be removed.Footnote9

What this means for REALTORS® is that the standard 6% commission may cease to be the norm. Homebuyers and sellers have always been able to negotiate commissions with agents to get the best deal, but this was not common practice. Now it likely will be. Some economists predict this could reduce agent commissions by as much as 30%.Footnote9

These changes have yet to take effect. As of the writing of this article, it’s unclear 1) whether these changes will actually occur, 2) if so, when, 3) how they would be implemented and 4) what the long-term effects of these changes would be for the real estate industry.

Looking forward

While the predicted lowering of commissions would obviously be a negative for agents, the potential upsides may outweigh the downsides.

Lower commissions lead to lower home prices, and with a change on a national level like this, lower home prices across the board would bring back into the fold many low- and moderate-income homebuyers who had been previously priced out.

It’s unclear how long it will take the effects of the ongoing litigation to alter commissions—and by extension home prices—but if and when those changes do occur, they have the potential to revolutionize the real estate industry overnight and may lead to the biggest boost to the market in decades.

With lowered commissions unlikely to draw in a huge influx of new agents, the agents that weather the current storm just may find themselves facing a flood of new clients at some point in the near future.

1 National Association of Realtors; 2005 to 2023 Existing home sales. Data accessed March 17, 2024.

2 National Association of Realtors; 2005 to 2023 Membership. Data accessed March 17, 2024.

3Number of Realtors in the United States (2024).” Written by Tony Mariotti. Published January 27, 2024. Accessed March 2024.

4About NAR: History.” Accessed March 2024.

5More realtors in the US than homes for sale.” Written by Brad Cartier. Accessed March 2024.

6Here’s why there are more real estate agents now than ever before.” Written by The Real Deal Staff. Published March 6, 2022. Accessed March 2024.

7NAR membership continues to slide in 2024.” Written by Brooklee Han. Published February 7, 2024. Accessed March 2024.

8Buckle up for more ‘turbulence’ in the housing market, BofA says—it’s a housing recession, 1980s style.” Written by Will Daniel. Published October 6, 2023. Accessed March 2024.

9Powerful Realtor Group Agrees to Slash Commissions to Settle Lawsuits.” Written by Deborah Kamin. Published March 15, 2024. Accessed March 2024.

MAP6561726 | 04/2024