Will there be enough agents to go around?

People who’ve “always wanted to get into real estate” usually wait until there’s absolutely positively no doubt that real estate is back! back! back!  Then they get their license and join a brokerage.  It makes sense intuitively, which means it’s neither a particularly good idea nor a particularly bad idea.  It’s just an idea.

But recently Calculated Risk alerted us to the startling fact that while California home prices have soared, the number of agents available to serve buyers and sellers hasn’t soared–and, in fact, may be declining.

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Which is a good thing, because while home prices have soared, inventory has cratered (see photo, below) here in Silicon Valley, and if agents, new or veteran, don’t have homes to sell, they find something different to do, like stocking shelves at Wal-Mart.

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Years ago I single-handedly developed a theory that:

  1. real estate booms create a need for more real estate agents, but that
  2. the need is at least partially illusory, because the increased demand for agents comes at least partially from buyers who are in the market solely because everyone else is and not because of any great desire to buy a home, leading to an exponentially increasing number of agents splitting a pie that doesn’t increase at the same rate

A few months later I discovered that I’d single-handedly developed the theory of the Free Rider Problem.  Curiously, the Nobel Economic Sciences Prize Committee never considered me.

Free riders are a problem in this and any boom market, and there’s many a Silicon Valley agent providing free professional services right now to buyers who don’t need them.  But apparently the glut of buyers hasn’t produced a glut of agents.

Yet.  If and when it does, we’ll know The End Is Near.

copyright © John Fyten 2015

 

 

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