Is the problem with the industry that there are simply too many agents? Updating the Tragedy of Numbers from 2022 with latest data… it’s getting worse, not better.
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Back in September of 2022, I wrote a post that took me an enormous amount of time to put together because of the need to pull data in and see what it said. The post from then is The Tragedy of Numbers, or Why (Some) REALTORS Should Embrace the Coming Storm.
I referenced both the FTC Butters Report and the NBER paper titled “Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry” and ended up concluding that some agents in the industry should welcome the end of the unilateral offer of compensation. (Remember, this was in 2022 and the monumental jury verdict in Sitzer was over a year away.) Why?
Because the tragedy of numbers for real estate, according to the data, was that increasingly high numbers of agents (REALTORS) pushed down the per-REALTOR commission income dramatically. I assumed that buyers would be left to fend for themselves, that buyer agency would plummet, number of REALTORS would be cut dramatically, and seller-side commissions would fall to 2%. Even with those dire assumptions, here’s what I wrote in 2022:
Under those assumptions, here’s what 2011 to 2021 looks like: Yes, REALTOR numbers would plummet even more than the W2 scenario. Overall GCI income would be cut in half as buy-side commissions go away.
But even at the lower commission rate, the average REALTOR would make more money. By 2021, the average REALTOR under this scenario would have nominal GCI of $142K, versus the $82K that was the actual — a 72% improvement. How is this bad for the professional REALTORS left standing?
I ended up concluding in that post:
Merely keeping membership at 2011 levels would have increased per-REALTOR GCI by over 150% in 2021 in real dollar terms. And nobody in 2011 thought there were too few REALTOR members at over 1 million. And no one could seriously argue that NAR would lose political influence with “only” a million members. That’s silly talk.
What truly hurts the competent REALTOR today is not the government, not the market conditions, not Zillow, not any bogeyman. What really hurts her is simpler than that: too many other REALTORs. Fewer is better.
I wanted to update that post, because it turns out that mid-2020 to 2022 was the best real estate market we have seen since the Bubble. In fact, quite a few people think it was the second RE Bubble. Some of them believe we are still in a Bubble today, even as transactions have fallen through the floor.
In the original post, I looked at numbers from 1975 to 2021. I updated them with 2022 to 2025 data, and wanted to take another look.
Please keep in mind that I am not an economist, and did not stay at a Holiday Inn Express last night. Nonetheless, I have capable AI assistants for research, and I think some of these conclusions are warranted.