How Many REALTORS Should There Be?

People experienced in the industry know that when times are good, lots of people become REALTORS®. The question is: what is the right number of REALTORS® in a balanced market?

NAR Membership Trends

Here’s a graph showing NAR membership numbers for the last 25 years:

NAR Membership 1975-2009

1975 was the first year of the computerized MLS® system and you can see a boom in membership through the latter part of the 70′s up to 1980. The result of the savings & loan crisis, recession and the ensuing crash in commercial real estate (and residential real estate to a lesser extent) is clearly shown in the early 80s.

1985 – 2000 is the most statistically valuable portion of the curve for the following reasons:

• Lending during this period was still subject to strict anti-recession legislation (which ended in 1999 when the 106th congress repealed the Glass-Steagall Act)
• During this period there was sustained economic growth in production without speculative bubbles (except the .com boom of course)
• NAR membership levels stayed relatively constant during this period, with only minor fluctuations
• This period represented a relatively stable real estate market with only marginal overall annual appreciation.

During this time there were an average of 756,121 REALTORS® in the US.

“Ok – so that’s how many there should be right now?”

Not so fast – there are other factors at play:

Membership as Percentage of Population

Here’s a graph with data from NAR and the US Government Census.

NAR Membership as Percentage of Population

Looking at the same period as above (1985-2000) there REALTORS® averaged 0.29% of the population.

Real Estate Values

Here’s a graph showing average real estate values over the last 30 years:

Average Real Estate Prices 1970-2010

This graph shows an almost identical trend to the two others, but with a so-far softer landing than for previous corrections.

How Many REALTORS®?

Here are my numbers:

• Average US population growth: 1.04% per year
• Average portion of population who are NAR members: 0.29%
• Not taking into account any over-corrections

NAR Membership Projection Until 2015

According to this crude estimate, there are currently 211,570 too many REALTORS® in the US to conform to a historically balanced market. Based on prior corrections, history suggests they will leave the industry within the next few years.

So What’s the Good News?

This data is an excerpt from a presentation I recently made to the RealPageMaker board that was purposed to guide our sales expectations for the next 24 months. During my research I discovered that these numbers are slightly misleading – sure, the correction isn’t over, but the majority REALTORS® leaving the industry are the same ones who joined it spontaneously in the early part of the decade. They are the part-timers who wanted to “get rich quick.” My expectation is that as these people leave the industry, career REALTORS® will reap the benefits (many of the top producers I speak to regularly are already seeing this).