Full-Time Agents Are Less Than Half The Industry While Mandatory Dues Paying Is Getting Unpopular

September 19, 2024
  • NAR Membership Is Wildly Bloated By “Ghost” MLS Members
  • If NAR Membership Collapses, Research And DC Lobbying Efforts Will Stop
  • Florida Has The Most Real Estate Agents Per Capita, And DC Has The Fewest

Back in February 2024, NAR was feeling the heat of the Sitzer-Burnett decision the previous fall and struggling to come up with a soon-to-be-announced settlement proposal in March. At that point, NAR opted to stop being transparent about their membership numbers. They are likely anticipating a sharp drop in membership over the next 2-3 years and didn’t want to invite more criticism.

I’ve touched on this topic in the past, but I wanted to talk through the implications of the NAR settlement on their membership and what that would mean to the services they provide. There are a lot of assumptions and analyses below, and I shared them to understand NAR better and what the world could look like if they collapse.

I looked at two number series first. I have the NAR monthly membership data history since the early 1900s and the Bureau of Labor Statistics (BLS) annual data on full-time real estate agents and brokers since 2000. I munged it all together to arrive at the following chart and am making the following assumptions:

  • NAR Membership represents the lion’s share of U.S. real estate agents and brokers. Manhattan’s REBNY is notable because it is not a member of NAR.
  • Deducting BLS numbers from NAR results provides the share of part-time agents or shadow members (NAR members who joined only to gain access to an MLS)

Here are a few observations about NAR membership:

  • NAR Membership peaked in October of 2022 at ±1.6 million. In February 2024, it slipped below 1.5 million, and I suspect it will be slightly lower than that at the end of 2024.
  • As MLS systems sever ties with Realtor associations to escape the NAR settlement liability, membership should fall quite a bit. That’s because a huge swath of NAR members, whom I call “ghost” members, will leave as that requirement to join for access fades away quickly. “Ghosts” only join NAR to gain access to the local MLS system – they don’t need the services being offered. The business rules of an MLS and an association are fundamentally at odds now, and this separation should continue.
  • Full-time agents and brokers in NAR are already collapsing, reaching their lowest share in 23 years of data. The slower home sales volume is also pushing people out of the business. While sales are expected to rise somewhat with the beginning of the rate cut cycle, it’s been 2.5 lean sales years, and I suspect the damage has already been done. Membership renewal is once a year, so the drop is likely to be slow to begin.
  • NAR membership appears to be well more than 50 percent part-time – and the lion’s share of those members are probably MLS ghost members.
  • Since MLS sales account for 40% of all home sales, the conversion results in the number of home sales per agent member (assuming most agents are affiliated with NAR. Over the past 24 years, the average agent has sold one home per year. With the surge in agents during the pandemic era, the number of sales per agent dropped despite the rise in sales coming out of the pandemic.

As a ratio to total jobs, Florida has the highest concentration of agents, and the nation’s capital has the lowest. It looks like the opportunity to make a living as a real estate agent is a lot more lucrative in DC.

As far as services go, those monthly existing home sale and pending home sale reports and all those economists floating around the halls of NAR’s DC headquarters might not be supportable if membership falls sharply in the coming several years. If they throw in their expected drop in lobbying power, their effectiveness in the halls of the DC capital changes significantly. NAR can’t support all those supplemental services if membership falls off sharply.

The pushback on NAR mandatory membership is starting and will result in the loss of active agents and ghost members.

  • Michigan agents sued NAR in August about the mandatory membership rule in order to gain access to the MLS. “The plaintiffs say the membership rule “is akin to mandating membership in a union or other trade organization depriving members of free choice,” adding that it is “essentially a violation of the Anti-Trust laws, Economic Coercion, Unfair Restraint on Trade and Conspiracy.” 
  • Alabama Realtors want options for allocating their membership dues, or many agents will leave because of the legal risk. “The legal risk includes lawsuits filed this summer challenging mandatory NAR membership. And the letter seemed to obliquely refer to litigation the industry has faced over commissions: “Consumers require and deserve greater choice in making decisions about real estate transactions,” it stated. “Our members have requested the same flexibility.”””

It’s going to be a brutal reckoning for the NAR organization over the next few years. I would think their expanded legal costs will dominate NAR’s P&L.

ASIDE

MARKET AWAKENING FROM HIBERNATION? | A live interview with appraiser extraordinaire Jonathan Miller on the current state of the NYC market

CLICK HERE OR IMAGE BELOW TO REGISTER FOR THIS LIVE WEBINAR

Click on the image to register

Did you miss yesterday’s Housing Notes?

September 18, 2024

Rate Expectations Go Big To Go Home

Image: ChatGPT

Housing Notes Reads

Market Reports

Extra Curricular Reads