The rise and fall of real estate brokers and agents

September 2012 ended with a total of 181,742 active real estate agents licensed by the DRE. There were 105,841 active brokers. The active agent population hasn’t been this low since 2004. Likewise for the broker population, which recently troughed in 2008. The current rate of new sales agents is roughly 1,000 monthly.

first tuesday expects the next big wave of new licensees to arrive around 2017, as home sales volume recovers.

Chart last updated 10/17/12

September 2012 August 2012 September 2011
Active Agents
Active Brokers

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

Track the trends in active California DRE agent and broker populations. Who’s still standing?

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

After a protracted period of inflated agent population, the ratio is fast returning to historic norms, with an average of 1.8 agents for every active broker at the end of 2011. In the first quarter of 2012, the ratio dropped to 1.7 agents for each broker. The crossover point on the chart, when the number of agents expanded dramatically in 2002, indicates the beginning of a recovery in the real estate market (and the possible formation of a new real estate bubble).

As real estate entered its boom phase of the market cycle in the mid 2000s, new agents arrived en masse with the optimistic belief that extra money could be made in real estate. In 2006, following the peak of the boom, there were a total of 2.6 active agents for every active broker. The high number of agents accompanied an inflated market, with unsustainable prices and little business sense.

Keep in mind that the active licensee totals on the above chart understate the real depth of the problem, as many licensees remained technically “inactive.” They presented themselves as licensees to speculate in property as principals or negotiate purchases for family members, all without being employed by a broker.

Credit given to the first tuesday Journal Online — P.O. Box 5707, Riverside, CA 92517.