Saturday, February 10, 2007

Real Estate Agents Are Leaving The Real Estate Business

In November 2006 David Lereah, chief economist of the National Association of Realtors, predicted that the number of Realtors will drop by 6-8% in a year. This finally seems to be happening, as sales slow down and agents are no longer able to earn six-digit incomes as they used to do in 2004 and 2005. Sales started declining in 2005 but the number of agents kept growing until it reached the record of nearly 1.4 million in 2006. Today, too many agents are working for an industry where sales are contracting.

According to some estimations, there are 20 to 25% more agents than needed in the industry. Companies are considering reducing staff and agents themselves are turning to alternative careers. And while former agents are often happy with the job change, where they typically are able to secure a better income, so are agents who stay in the business as competition is waning.

This trend is likely to continue for quite some time now, as the industry shows further signs of decline. After a government report of lower-than-expected job growth in January was issued, interest rates on 30-year and 15-year fixed-rate mortgages dropped the week ending Thursday, February 8th. The one-year adjustable-rate mortgages dipped to 5.49% from 5.54% the week before. Interest rates decline for the first time since early December 2006.

Frank Nothaft, chief economist and vice-president at Freddie Mac, said the company expects the interest rates on 30-year mortgages to average 6.3 to 6.5% in 2007. This means essentially flat or slightly increasing rate throughout the year, which will probably lead to a decline in refinance activity.

Several smaller subprime lenders have closed down recently, including Mortgage Lenders Network USA Inc. and Wachovia Corp.’s EquiBanc Mortgage unit. New Century Financial said new loan volume is declining and reported fourth-quarter loss for 2006. Shares of HSBC, New Century Financial Corp., Countrywide Financial and Novastar dropped on Thursday, after predictions of lower mortgage activity were announced.

1 comment:

Mary K. said...

It's a disturbing trend to say the least.