The Sacred Commission: 3 Reasons Why Commissions Will Come Down.

During the housing boom, agents and mortgage brokers have done extremely well. In fact, word spread so quickly that we have seen large increases in the number of people making career shifts into the housing industry. From 1989 to 2001, the membership numbers for National Association of Realtors was around 800,000. However, from 2002 to 2007 we see a dramatic and steady increase to approximately 1.4 million active members. Why the sudden increase when for over a decade, membership numbers stayed relatively stable? Welcome to the world of basic economics. The fact that money was to be made in the industry and low barriers for entry, many folks decided to roll the dice and take a chance with real estate. Simple supply and demand. In addition, with a booming market and lending standards so low that you can smell the floor, selling homes and lending money seemed to be a no brainer. Prices kept going up in double-digit sprints and many in the industry saw this as a locked in yearly wage increase. After all, if your income derives on the underlying asset price and the price keeps going up, it is by default that you will make more money since you are paid a percentage of what a home would sell for. This was all fueled by easy credit in every aspect of life. For 7 years it seemed that housing would go up ad infinitum.

The housing market is now entering the first stages of a multi-year bear market. 2007 has seen the loss of 155+ lending institutions. Over 100,000 individuals have lost their lending related jobs. Many entering neophytes are victims of poor timing. They read and listened to the housing bull books and seminars 7 years too late. Many seasoned agents and brokers realize that housing ebbs and flows. These housing veterans have sufficient contacts to weather the storm and will try to hold the fort down during these down times. From my experience in the industry and simply looking at the wage earnings for agents, it is apparent that he Pareto Principle holds true for this industry. Vilfredo Pareto, an Italian civil engineer, observed that 80 percent of the wealth in Italy was owned by 20 percent of the population. How does this apply to agents? In the case of superstar selling agents, it is the case that 80 percent of the sales happen via 20 percent of the top producing sellers. They have deep contact lists and other attributes that make them successful. When you look at the median earnings of real estate agents in the U.S., you’d be surprised by what you find. A good agent is someone that can sell a home when no one else is able to do so. See, the last few years even amateurs were able to sell homes and oversights were masked by a booming housing market. Sort of like venture capitalist throwing money at any prospective company with a dot com in its name during the raging tech boom.

Capitalism is a great thing if you let it run its course without government intervention. For example, now that the housing market is slowing down many companies are falling flat on their faces for running poor businesses. The 155+ lenders that have imploded this year are victims of inefficient business models and the market is taking care of them. After all, these companies were raking in money during the boom times. Good businesses are built with diversification to weather multiple storms. Take a look at Proctor and Gamble and General Electric. During the good times, they ventured into other businesses that allowed them to have a buffer should one industry sector falter. Many of the lenders that are now defunct saw returns too appetizing in the housing industry. Instead of going into more conservative ventures with their revenues or build war chests, they decideded to reinvest into a business model that was unsupportable.

The internet is now a ubiquitous part of life in the U.S. Everyone uses Google to search for answers. If you don’t know the answer to a complex question, you can go to Google and find not only one response but probably a few thousand. Information is power. Even in the 90s, buying a home was a challenge because you didn’t have access to all the important pieces of information. If you wanted previous sales data, you would need to go to the clerks office or pay a title company to dig up the information. Most people never bothered to look at previous tax records. And finding comparable sales? The only viable source was the MLS which was under lock and key by the housing industry. Now with the advent of Zillow, ZipRealty, Redfin, HelpUSell, and other do it yourself services information on homes is no longer hard to find. The LA Times had a great article this Sunday about selling your home with different services. Do you want to know the previous sales price? This will be easy to find. What about comparable sales? Not only can you get this information but you will have it nicely displayed via a satellite hybrid image that you can sort out. And the best thing is most of these services are free or cost a small price. And in a market where 6 percent can mean the difference between you breaking even or going into a short-sale, many folks are opting to use discount services or doing it themselves.

So why will commissions drop? Here are three further reasons for the inevitable drop in commissions:

Misnomer: Only the Seller Pays the Fee

You always here this argument thrown out. Buyers shouldn’t hesitate in using an agent because it is the seller that pays the fee. The way the process is currently setup, the seller pays the typical 5 to 6 percent commission fee and should a buyer’s agent bring a worthy customer, will get a cut of the percent. This can be anywhere from 2.5 to 3 percent. So why is this a misconception? Like a stock that pays a dividend, the market already factors this into the price. You aren’t really getting the service for free because the underlying price is inflated to reflect this market standard. But as standards shift, say commissions go to a lower rate or flat fees, the price of the home will reflect the difference. We are already seeing this here in California where market pressure and multiple options are giving consumers different choices. And sellers that went 0, 3, or 5 percent down realize that 6 percent may be their entire equity, are willing to find creative ways to sell a home. Keep in mind in a hot market where the median price for Los Angeles County is $550,000, 6 percent is $33,000. As a seller, you may think twice about paying this especially in a tighter market.

This priced in model happens in many financial instruments. If you look at options that are nearing a dividend pay date, the market has already priced this into the premium. So you really aren’t getting a good deal even though this is a sort of slight of hand financial gain. And many professionals will argue that you can’t get the service that they can provide at a lower cost. This may be true depending on the person you hire. But look at the professional Hovnanian Enterprises cutting prices in their Deal of a Century campaign to unload homes. In some cases, these professionals are lowering prices by $100,000. Now that will get your attention. And these homes are new units so you don’t really need to worry about wear and tear and in many cases, these builders are now offering financing to move inventory. You can see why a downward market will put pressures on commissions.

Access to Information: MLS, Competition, Down Market

Have you used Zillow? Know about Craigslist? Ever browsed homes on ZipRealty? Then you are benefiting from the competition brought on by the industry. Many of these companies realize that you can make money from other venues such as advertising and taking a lower fee and making it up on volume. They realize that a small piece of $550,000 is enough money to invest millions of dollars into new business models. In addition, the competition is now fierce since sales are dropping and credit is tight, so now your option may be limited to a few qualified buyers that are absolutely determined to buy right now. A good agent is now earning his money trying to sell a home. No longer are multiple offers coming in like the good days. The market is now different. Many new industry folks are unable to deal with a down housing market and are going into this as a trial by fire. This is their first experience with a down market. And the last 7 years were a complete anomaly so anyone thinking we will be back to that is hoping for a deal of a century that will not come again for another century.

It is easy to find information on comparable home sales. You can easily access previous sale prices. These companies at the vanguard are finding that many buyers and sellers are willing to get their hands dirty if that means they will save $20,000 to $80,000. I always get a kick out when the rebuttal is, “well I wouldn’t expect to pilot a plane just because it is cheaper.” Flying a plane is not like selling a house. Doing heart surgery is not the same as showing an open house. There is a clear difference. Will it require work if you decide to do it? Of course. Just like owning a rental property. You will have issues come up but that is why you are rewarded financially. Otherwise, everyone would be doing it. Even savvy attorneys, title companies, and discount brokers are capitalizing on this market. If you are too lazy to review sales on Zillow or ZipRealty, drive around and see a few comparable homes, and read one of the thousands of real estate books out there then yes, maybe you should fork over your money to an expert.

Cost of Housing: People Will get Dirty for Tens of Thousands

When you are selling a $100,000 home in a slow market with few buyers, agents do earn every penny for their hard work if they bring a qualified buyer and the deal closes. Many agents across the US are not in prime areas and the percentage is not that much in nominal terms. But in the last few years, if you managed to get a listing in SoCal all you needed to do was list it in the MLS (if that) for $600,000 in a decent area and you would get multiple offers. In fact, sellers even put into their listings “sold as is” expecting buyers to put up or shut up. And guess what? Homes sold without inspections many times. Lenders couldn’t careless since banana republic mortgages were being bought by investors. So the sellers were in absolute control. It was the best sellers market in decades. It’ll be interesting to see how those in the housing industry that haven’t seen a downturn will react to this market shift (remember the jump of 600,000 NAR members since the boom?). Many of course are calling for a bailout and corporate welfare but this has little chance of making any impact in California or other high priced areas where prices are disconnected from the reality umbilical cord.

Many sellers that bought in 2004, 2005, 2006, and even 2007 that are looking to sell are quickly realizing that 6 percent is a big deal especially if they are swimming underwater. Any smart agent realizes that in slow markets quality buyers must be courted with lower prices and this may include rebates. No amount of marketing or savvy advertising will make a lender fund a buyer; you may have a willing buyer but if they don’t get financed, the deal is going nowhere. The market is changing and to be honest, those in housing will have to revert to old school ways of doing things. Adding repairs and sprucing up houses to catch a now dwindling amount of buyers. Throwing in discounts if possible. More aggressive marketing directed to bringing in qualified buyers (take note on Hovnanian advertising approach). And no, we are not even remotely close to a bottom. We had a 7 year housing bull market and only in late 2006, did we shift into a slower housing bear market. Heck, Los Angeles County returned back to its historical median record price of $550,000 last month so we haven’t seen a correction here. Expect this to last 3 to 4 years. Moreover, these new services are built to cater to price conscious buyers and sellers; in down markets with tighter credit, nothing is more precious than price.

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From Administrative Assistant to Loan Officer: GDP Down Markets Up! Welcome to Crazy World USA.

You need to check out this post over at CNN Money:

"(Fortune) -- Dear Annie: Please settle an argument. My daughter is bright, articulate, and ambitious. She is 26 and has worked her way up from an administrative-assistant job to loan officer at a large bank in Miami, and I really believe (okay, maybe I'm biased) that her talents and excellent people skills could take her all the way to the top. Just one problem: She dresses like a streetwalker. I have told her that wearing spike heels, ultra-short skirts, and low-cut blouses to the office will hurt her chances for advancement, but she says this is her style and she is sticking with it. Do you agree that she's making a mistake? If so, will you say so in your column? Maybe she'll listen to you. -Dade County Dad

Dear D.C.D.: A strong sense of individual style is a wonderful thing, but I have to agree that your daughter may be taking "business casual" a bit too far. The trouble with dressing provocatively at work is that it could distract people from her other assets...You can read the rest here. "

The problem with a market frenzy as we just had, many people will mistake sales ability with financial acumen and business skills. As you can see from the above, this dad is concerned about his daughter dressing as a "streewalker" to advance in the loan industry. Now, I have nothing against streetwalkers (funny title since all of us walk the street but anyways), but I do have something against these people suddenly labeling themselves financial professionals. Never would I go to midnight Sally for financial advice, it isn't her skill set. Ever hear about the administrative assistant who became a dentist the next day? Or what about Mike the Starbucks employee who became a defense attorney overnight. I'm sure you know many people who up and left their manufacturing jobs to become surgeons the next day. These so called professionals are nothing but glorified sales people. Looking at BLS stats most real estate agents, brokers, or lenders have little to no college education. I have my real estate license and was once part of the industry and can attest to this from first hand experience. And many mortgage operations run on the premise of a frat or sorority house. There are professionals in the field but very few, I would argue that 20 percent of the entire market truly have any financial sense. You can read up on the Vilfredo principle to understand why my reasoning for this exists. The rest are peddling agents of the Wall Street banks and little do they know that they are the first to get the axe.

Again the market will be purged and is being purged. My phone has been ringing off the hook with mortgage brokers calling me regarding my investment properties. Funny how last year I had a hard time reaching them trying to refinance my out of state property; I guess they figured my modest investments that were cash flowing wouldn't give them as much as the subprime no-loan doc they can push to some wanker with no down payment. Apparently now they have some interest in doing business and made time for me on their busy schedule. Suddenly those subprime loans don't exist and solid credit worthy customers are far and few in between because there is no way in hell we would invest with them; how do you think we've become financially successful? It wasn't by getting the most skewed loans and spending frivolously; the irony is those that are financially successful don't front like those that aren't. Isn't that sweet?

Low barriers to entry plus high wages equals a big draw. I argued in a previous post that we have become largely codependent on real estate as a nation. Nearly 30 percent of all job contributions for the last seven years has been real estate related. This is incredibly large because for the other decades we have averaged 10% growth in this field. Again the market is largely distorted but the world is taking heed and that is why the dollar hit another low in relation to the Euro. Yet folks here are somehow using Voodoo economics because GDP got slammed in the first quarter and stocks acutally went up! My graduate professors must be scratching their heads because what they taught us about business models doesn't apply to the credit extravaganza model of investing we are living through. GDP took it in the shorts today thus letting the markets know that yes, housing is having a large impact on society.

We have a lot at stake with this bubble bursting but so does China. I mean take a look at all the crap laying around your house. I can assure you that 70 percent of everything you own is out of the People's Republic. So if we stop spending and it looks that way, China is going to get a double kick in the groin. The Wall Street Journal showed the first decline in years in Mortgage Equity Withdrawls. Now you can connect the dots; massive hit in housing, less equity to spend, thus leading to less consumer spending.

My bias is that being a professional connotes a certain expertise in an area. Finance and economics are very complex fields; heck even after graduate school I continually have to refine my knowledge. And I can tell you in many of these operations looks do matter especially in the lending and agent side of things. Why do you think we have restrictions in the first place? So things wouldn't run a muck. The hard thing will occur when the economy will need to absorb these people back into the work force. They are going to get a major pay cut because nowhere else are they going to earn six figures without some sort of professional training. Time to go back to school and thus reducing productivity in the workforce. See, at least with the tech bust many people had B.S. degrees in engineering or computer science. They had transferable skills to positions that paid middle class incomes. What about these people?

Am I off with my reasoning??

Lost: Agents Find Their Way Home

I rarely watch television. But one show that I really enjoy and regularly watch is Lost. It is a show about a group of castaways, from all walks of life, redefining their lives and trying to find out who they are on an isolated island after a horrific plane crash. In the process, one’s past life does not matter as long as you can make and become who you say you are. An office man with a disability becomes an uber-hunter and leader. An ex-convict is given the opportunity to find his new morality. And most importantly, a shoe shine boy is able to make millions in real estate speculation?

Okay, maybe that last part was inserted by your author but you would think that by looking at the number of real estate agents, everyone decided to castaway their old jobs and ride the housing boom gravy train. Agents, brokers, lenders, construction, and home builders all benefited mightily by the housing boom. In addition, travel agencies and consumer outlets did well too with the newfound equity wealth of many. A virtual ATM had been slapped on to the side of your stucco two-bedroom condo, courtesy of the housing boom. The Los Angeles Times has a real estate section each Sunday, more like a housing propaganda section, but the last few weeks of articles are pointing toward a slowing housing market and are creeping their way into the paper like the tide at your locally polluted beach. This last Sunday they had an article titled “Not an agent’s market either” which talked about the apparent boom and now bust for new real estate agents. Currently there are 510,000+ agents in California. 50 percent of agents have joined the ranks in the last four years according to the article. This would mean that none of these agents have faced a real downturn. Let us read a section in the article describing a recently minted new agent LA Times Article:

“Nuechterlein found the business a tough slog from the get-go. He had a job selling computers for a major chain, earning up to $60,000 a year in commissions, but like so many others he thought he could make an easier buck in real estate.”

Okay, so first we have a case-study of someone earning a middle-income leaving their job to enter real estate. Little did he know that real estate ebbs and flows in cycles Real Estate Cycles from 1800 till Present. But now that the market is shifting he is beginning to rethink his new career choice. Let us look at another statement in the article:

"This is not a get-rich-quick industry," said Jodi Werner, vice president of the Orange-based Pacific West Assn. of Realtors, which predicts a 10% drop in its 14,380-person membership next year. "There is a lot of pressure."

This isn’t a get rich industry? Oh really? Then why are all the Tom Vu late night commercials touting get-rich-quick schemes in real estate? Heck, I even see Donald Trump doing a learning Annex here in Southern California in November. Come on, these talking heads are now doing a good cover your a** (CYA™) technique since they know the market is shifting dramatically. But in real estate, where we are constantly told how limited land and space is, will there be enough of the pie for everyone?

“The air coming out of Southern California's real estate balloon is sending more than a few agents packing. In a business where 15% of the agents make about 85% of the sales, according to industry experts, and the number of sales in California has plummeted 31.7% since September 2005, it's no wonder that rookies and veterans alike are opting out.”

Read that very carefully you aspiring Tom Vu, 15% of the agents make about 85% of the sales. The Pareto principle applies here as well. Italian Economist Vilfredo Pareto observed that 80 percent of tax revenues were received by 20 percent of the Italian population. He went on to conclude in many economical systems that an 80-20 rule would apply. Residential real estate in this country also applies. Again, the facts are pointing toward a declining market and many fail to realize what will happen to these agents when the market dries up completely. Is the well deep enough to maintain these new comers on life support? I doubt it. Then what will happen to the economy? This is the main question. I pointed out in one of my previous posts Realtor Mantra that 40 percent of new jobs are linked to the massive housing boom of the 21st Century.

It is hard to beat a dead horse, hearing the thud of your shoe against his stale skin, but the mainstream media is only starting to point out what many on the housing bear circuit have been purporting for the last year (some even longer). Do people think, like our above case study Nuechterlein that they will be able to waltz right in back to their old job positions? I doubt it especially when an economy is contracting – just look at the latest GDP numbers. Many folks will soon realize that they are lost and will quickly need to redefine themselves. How they will go about this is another topic in itself.

Filed in: Realtors real-estate housing-data mainstream-media

Realtor Mantra: Buy Today, buy Tomorrow, buy Yesterday!

Let us warm up our brains and do a visualization activity shall we? Imagine you are in a forest being chased by wild boars. You run through the green and brown shrubbery and hear the grunts of the boars as they follow your scent. Your breathing is intense and you run at full pace toward a light that you see creeping through the forest foliage. As you approach the light, you realize it is heading toward a steep and rocky cliff. The boars are gaining ground. What are you to do? You only have a few minutes and things are getting worse by the second. But then you realize you are a card holding Realtor! And you remember the speech given to you last month about real estate always appreciating and growing branches into the sky! Heck, the speech even went so far to discuss that everything in life given the right mentality goes up like a hydrogen powered German Hindenburg. As you remember this the boars surface, hungry for your flesh. You smile and hold your mantra to your heart and jump with pure glee.

So what is the point of this story? Besides the fact that the boars were only chasing you because you had unopened beef jerky in your left pant pocket the story serves as an example of faulty logic even in the face of imminent danger. Yahoo Finance had a top story today discussing the massive drop in new home prices. The headline reads “Home Prices Plunge by Most in 35 Years” and the article contains this as the opening paragraph:

“The median price of a new home plunged in September by the largest amount in more than 35 years, even as the pace of sales rebounded for a second month.

The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new home prices was even sharper than a 2.5 percent fall in the price of existing homes last month, which had been the biggest drop on record.”

Even in the face of this we get talking heads such as David Lereah, King of all things delusional discussing that the worst is already past for housing. Even Greenspan jumps in by saying real estate has seen the worst, but not yet. Huh? Are we taking notes out of the Karl Rove handbook or are we testing our ability to use Orwellian double-speak? So let us dissect the article. Last month we had a record drop of 2.5 percent reported by the Commerce Department for August housing data. This month, we get a drop of 9.7 percent for September which is four times the amount of the past month. These are year over year figures so this is a trend. By my account, when you break a record two months in a row you have not seen the worst. Anyone who has taken a basic economics class realizes that macro trends take time to filter through the economy. Reversion to the mean at times is slow but at other times can happen very quickly. But listening to these folks is like having a four year old translate a Chinese television program to you in Oxford English and expecting it to be 100 percent accurate.

You are starting to see a paradigm shift. Those associated with housing have had centralized meetings regarding their message.

“How should we address inventory rising?”
“What about year on year price drops?”
“What can we say when home builders are losing 50 percent of their market cap in one year?”

And these brilliant minds of America came up with a slogan that would even baffle Einstein for years. The bust and slow down is already over! Wow! Simple yet so profound. These real men and women of genius decided that their campaign message would be to preempt any bust or down turn talk by already saying that it occurred. Forget the fact that the last six years of real estate appreciation would look like a rocket ship flying off of your Excel spreadsheet. Forget the fact that we are in unprecedented territory and have never witnessed such massive credit expansiveness linked to one industry. Even Bloomberg magazine links 40 percent of recent jobs are somehow related to the current housing boom.

Bloomberg 40 Percent Linked to Housing

But again, why let facts get in the way! These are things of the brain and who wants to waste their time using a worthless organ when you can go with Jim and the Twins and speculate, flip, and use massive credit to become the next Donald Trump. You need to give it to the housing industry for this tactic. They are simply protecting their interest (and livelihood for that matter).

So why is the party only beginning? Let me list a few major reasons:

1. Sky rocketing inventories
2. Massive number of loan resets
3. Buyer and seller psychology

Regarding point one, sky rocketing inventories by simple microeconomic theory will force prices down. Homebuilders have created a massive glut of homes on the market that will continue to saturate 2007. For you mathematicians you can figure out inventories by this very complex Calculus equation:

Homes For Sale – Homes Sold = Remaining Inventory
More homes for sale plus less homes sold equals more inventory! Damn, my head hurts when I do math so let us move on to point two.

This year it was estimated that 500 million in loans reset. Next year it is estimated that 1 trillion (yes, that is a Mr. T) will reset as in 2008. So if so much has gone into reset this year why haven’t we felt the boars teeth in our leg? Because this year, many folks were still able to refinance and unload homes to greater fools. Yet 2007 will prove to be the year were the buck stops for housing. I discuss this in detail in another one of my post so I won’t go into that further. Point three regards market psychology.

Remember the current Yahoo headline? They use the word “plunge” as in “yo, he took a massive plunge on that motocross jump dude.” Or the word conjures up memories of you standing over the porcelain throne plunging away to fix the toilet. Either way, pain or crap, we are in for it and this is only the beginning. Yet listening to real estate agents you would think that today is the absolute greatest day to buy because as the fool you are, you missed out on the equity run. This Johnny come lately mentality worked when year on year gains were in the double-digits. But how do you sell a 9.7 percent drop? Easy! Just say this:

“Hey when I told you the 2.5 percent drop was the lowest ever and prices would go up I was off one month. This 9.7 percent drop IS the real lowest and now we are set to soar to the moon.”

You can modify this script to fit your needs and modify it to incoming figures but you get the point. Market psychology is shifting quick and the mainstream media is now using stronger words in headline stories. There was a story on ABC this week about a couple that didn’t realize there payment had adjusted from $1,700 to $3,800 a month. There explanation? They didn’t read the fine print. The lender didn’t mention a reset happening so soon. Oh, and the lender said boars don’t bite and you can fly as if you were tripping on LSD. Well, they didn’t say that last sentence but at least that would have more semblance of reality than the drivel that they are currently spewing.

Filed in: Realtors real-estate housing-data

C.A.R. says 2007 will see a -2% Drop in California. Does This Feel like a 2% Yearly Drop?

This quote from the L.A. Times article today:

“Now, the housing boom is over, with the slowdown expected to continue next year, according to a new forecast by the state's real estate agents. The median price of an existing California home will decline 2% to $550,000 in 2007 from a projected median price of $561,000 this year, according to the California Assn. of Realtors. Sales are projected to decline 7% to 447,500 units from 481,200 this year.”

Okay, for one thing the C.A.R. has already demonstrated that they were wrong with their $561,000 prediction so why in the world are we to believe their rosy colored scenario of a 2 percent drop in 2007? They are predicting a moderate correction of $11,000 across the state of California. In addition, they are predicting sales dropping off by 7 percent. Are we following two different markets or are we drinking from two different data fountains? For one, sales are down a whopping 30% across the state from last year according to DataQuick. In addition, that two percent drop has already occurred! For example, Southern California has already seen a 2% drop since the peak in June 2006 of $493,000; by the way, we currently stand at $484,000 for those keeping track. For one, the C.A.R. will be wrong since they predicted a double-digit gain this year for the state when most likely, we will hit zero percent or even negative territory by year end. Great source of unbiased information. Did I mention they are an association of agents?

So you want to investigate yourself? You say, this isn’t that bad right? Take a look at ZipRealty. They list 116,391 properties in the Greater L.A. area for sale. Want to guess how many are reduced listings? 48,136! In other words, 41 percent of L.A. county listings have been reduced or "cut" as I like to say. In addition, keep in mind this does not factor in listings that have expired or properties that have been taken off the market. What is also happening is agents are removing properties from the MLS and simply relisting them. So the 41 percent number is a low-ball number.

Now ask yourself this simple question: if the market was so hot why would nearly half of all listings be reduced? Not only that, why have sales dropped 30 percent from last year? Do these numbers line up with the C.A.R.’s glorious predictions?

Filed in: Realtors mainstream-media housing-data Southern-California-Housing

Realtor Bubble

Notice how the chart treads the 800,000 membership line for over a decade and then all of a sudden in 2002 there is a sharp increase to 1.4 million. If you go to www.salary.com, you’ll find that most agents only make about $30,000 per year. The top 5 percent of agents rake in the six-figure incomes but many agents chase the illusive “gold rush” only to find a sales job in a declining market.

The timing is bad for many that are jumping on the bandwagon lately. As was the case with technology, many made enormous amounts of money in the 90s decade. Yet like a drip from a leaky ceiling, the drops falling to the floor only indicate a larger problem. The pent up demand will only increase – by looking at this graph, it may be the case that 2007 will be another year of increasing demand for NAR membership. Why? Well what do you think the lay public thinks when they see for sale signs all over the place and many sellers blasting the media to sell a product. If anything, it will give the perception that real estate is still a hot deal.

Many on this board are immune to this logic since we swim in housing forums and blogs and won’t be surprised when the wave hits; but the common Dick and Jane will get hit and have their shorts knocked off like the adolescents taking their first swim in the ocean. The above graph shows the national hype and I find no better word than “obsession” regarding real estate. Why, for over 15 years does membership hover around 800,000 to a sudden doubling in only three years? Can it be a massive influx of advertising, media shows, and other propaganda?

Think of the media as taking Carleton Sheets, Robert Allen, and Donald Trump and instead of having them on 3AM with the other charlatans pumping colon cleaners we have given real estate the “ok” as a get rich quick for everyone. Yet, when everyone is rich I ask who is poor?

Filed in: Realtors real-estate