Not an agents’ market, either
Carl Christoph Nuechterlein plunged into a real estate career in 2004 with the verve of a ‘49er heading for Sutter’s Mill. And just like the gold rushers, he’s now folded up his tent, not much richer for the effort.
“Sales volume dried up,” said Nuechterlein, 27, who closed about six escrows in Hemet a year ago. “I wasn’t making enough money.”
The air coming out of Southern California’s real estate balloon is sending more than a few agents packing. In a business where 15% of the agents make about 85% of the sales, according to industry experts, and the number of sales in California has plummeted 31.7% since September 2005, it’s no wonder that rookies and veterans alike are opting out.
“People come out of the woodwork when the market goes up, because they think it’s chic to be an agent,” said Syd Leibovitch, a broker at Beverly Hills-based Rodeo Realty. “When it changes, they leave -- even the longtime agents, who are tired and burned out.”
The California Assn. of Realtors, an industry trade group, projects a 6% drop in membership next year, to 197,000 from this year’s 210,000, said Leslie Appleton-Young, the group’s chief economist.
“About half of our Realtors today have been in the industry only four years or less,” Appleton-Young said. “Many have not experienced a downturn and find it challenging.”
Although current data do not reflect a drop in licensees yet -- there typically is at least a two-year lag between a market downturn and a drop in new and renewed licenses, according to the California Department of Real Estate -- history tells us a fall will come.
There are more licensees in the state than there are Realtors; a Realtor is a member of the trade group, and not all realty agents are members.
The last time the number of licensees peaked was in 1992-93, when there were 371,000 -- three years after the market reached its zenith, department spokesman Tom Pool said. The number then fell every year through 1998, to 297,000 licensees. Each month since then has seen an increase; in August, there were 511,000 licensed real estate agents.
“Clearly, we can’t sustain this,” Pool said. “There aren’t enough sales to go around.”
Nuechterlein found the business a tough slog from the get-go. He had a job selling computers for a major chain, earning up to $60,000 a year in commissions, but like so many others he thought he could make an easier buck in real estate.
He found his niche in Hemet -- a small, mostly blue-collar town in Riverside County -- where new homes were being snatched up by investors, who watched the value go up during construction and then sold for a profit at the time of completion, rented them out or kept them vacant, to be sold later.
Because Nuechterlein lived in the area himself, it was easier to drum up business. Taking a smaller commission assured him a fair number of sales, but he wasn’t rolling in income. When the market started to slump last winter, he decided to unload his own home and lived for a while on some of the $53,000 profit.
He rented a house in Orange County’s Lake Forest, where he hoped to be a listing agent for pricier homes. It didn’t pan out. When the slump intensified, he quit and found other sales work.
“This is not a get-rich-quick industry,” said Jodi Werner, vice president of the Orange-based Pacific West Assn. of Realtors, which predicts a 10% drop in its 14,380-person membership next year. “There is a lot of pressure.”
The changing market has also resulted in some consolidations and closures.
Sotheby’s closed an office in Beverly Hills. Coldwell Banker, which has gobbled up a number of competitors over the years, closed offices in Pacific Palisades and Fullerton and is consolidating two offices in Laguna Beach.
In most cases, dislocated agents have been welcomed into nearby brokerages, said Betty Graham, president of Coldwell Banker-Greater Los Angeles and Orange County. But some agents inevitably find another line of work. The company, the largest in Southern California, has already started to see a slight decline. It had 3,753 agents in June, compared with 3,990 the year before.
Coldwell Banker’s Fullerton employees will find a new home with Prudential California Realty, which is opening an office there to accommodate the agents, most of whom have over 20 years’ experience, said Prudential President Rich Cosner.
Still, “I’ve had agents leave in the last year,” Cosner said. “They’re going back to former careers.”
Philip Buck, a longtime actor and short-term Coldwell Banker agent, joined the realty business 2 1/2 years ago after seeing a number of relatives enjoy successful careers. “The market was phenomenal.”
The Westside agent took advantage of acting connections and helped put some fellow thespians into homes. He’s brokered multimillion-dollar sales and plans to stay the course for now. His Sotheby’s office closed recently, so he moved to Rodeo Realty in Beverly Hills. And he’s returning to his old job part-time.
So how does all the downsizing affect buyers and sellers?
Agents who’ve experienced Southern California’s up-and-down real-estate cycles say the housecleaning eliminates some of the fly-by-night and discount brokers. The mainstream agencies will absorb the best agents whose companies are shuttering offices, and clients will benefit from their experience and perseverance.
“A falling market can freak you out or give you an opportunity to do better,” Rodeo Realty agent Leibovitch said.