Real estate agents selling more, making less

<p>Across Sonoma County, people are working harder for less money.</p><p>Few know that better than real estate agents, who sold more homes in 2009 than any year since 2005 but saw their commissions fall for the fourth straight year, perhaps hitting their lowest level in a decade.</p><p>“We're working twice as hard for half the money,” said Rick Laws, manager of Coldwell Banker in Santa Rosa.</p><p>The county's real estate sector, which enjoyed unprecedented prosperity during the housing boom in the first half of the decade, has seen first-hand the harsh effects of the Great Recession.</p><p>The downturn has cut their incomes, increased their work days and sent hundreds of agents looking for other jobs.</p><p>Laws, who oversees the county's top-producing office, today has about 110 agents, down about a third from three years ago. Brokers or associates for two other firms, Hurd Real Estate in Santa Rosa and Frank Howard Allen in Healdsburg, each said the number of their sales agents is down about 20 percent.</p><p>“Most real estate companies haven't made money for a while. They're breaking even at best,” said Tom Lawrence, a broker associate with Frank Howard Allen in Healdsburg.</p><p>Lawrence formerly worked in the company's Windsor office, which was closed two years ago to control costs. He called this downturn the worst in his 39 years in real estate, affecting more businesses than ever that are involved in the transactions and the preparation of selling homes.</p><p>Windsor, he said, had three title companies a few years ago. Today, there are none.</p><p>In 2005, when the median-priced Sonoma County home sold for a whopping $595,000, real agents sold an estimated $3.5 billion worth of single-family homes. But the results for 2009 suggest that the sales volume has fallen to less than half that amount, about $1.6 billion.</p><p>The industry's problem is not a lack of sales. Agents sold nearly 4,700 homes in the county last year. That was their best showing since 2005, when 5,900 homes changed hands.</p><p>But while sales rose for the second straight year, real estate companies saw their revenues continue to fall.</p><p>Exact figures aren't available, but by one rough measure the county's real estate industry has seen more than $100 million in annual income evaporate since the peak of the boom.</p><p>Most real estate agents work on commission. Traditionally, the agents representing buyers and sellers agree to split a commission equal to about 6 percent of the sales price, although the number, like everything else in real estate, is subject to negotiation. Nationwide, commissions averaged 5.29 percent last year, according to Real Trends, based in Castle Rock, Colo.</p><p>While agents sold more homes last year than in 2007 and 2008, the value of each transaction has tumbled as the market has shifted from resale homes costing a half-million dollars or more to foreclosures and short-sale homes priced below $300,000.</p><p>The county's real estate sector may have taken in around $95 million in commissions last year, down from more than $200 million in 2005. The estimates are based on total commissions of 6 percent on transactions.</p><p>The shakeout has forced hundreds of agents to the sidelines in Sonoma County, reversing a rapid expansion the industry's ranks during the first half of the decade.</p><p>During the housing boom, rising home values helped to swell the number of real estate agents in the county and across the nation. The National Association of Realtors says its membership grew 80 percent from 1999 to 2006, and since has declined by nearly a fifth to 1.1 million.</p><p>In Sonoma County, the number of agents paying to use the region's multiple listing service climbed from 1,900 in 1999 to 3,200 in 2006, the service reported. The number since has fallen by 11 percent to nearly 2,900.</p><p>Half a million Californians still hold a real estate license, a figure that has decreased only 8 percent from November 2007. More telling, however, is the sharp drop in those who want to enter the field. Less than 2,300 residents took the state real estate exam in November, compared to more than 14,000 reported for November 2005.</p><p>Membership in the North Bay Association of Realtors has fallen a mere 6 percent to 3,100 since 2005.</p><p>Longtime agents and brokers said many colleagues are keeping their licenses and memberships, but they have gone out to find second jobs to make ends meet.</p><p>“People are holding out the hope that they're going to be able to go back and have a real estate career,” said Sally Crain, a broker with Hurd Real Estate in Santa Rosa. “And what they're doing is treading water.”</p><p>Home prices peaked in 2005, when the median hit $619,000 that summer. The price tumbled to a low of $305,000 last February, and by December had risen to $389,000.</p><p>The changed real estate landscape has disoriented both buyers and sellers, and real estate agents say part of their work is addressing the resulting concerns.</p><p>“This is the most insane time I have ever seen,” said Crain, who has been in the business for 35 years. “I am constantly apologizing to my first-time buyers for this to be such a stressful experience.”</p><p>The stresses include getting turned down for loans because a home price is deemed too high or the buyer's credit worthiness doesn't meet new, strict standards.</p><p>Buyers involved in a short sale, where the price is less than what the seller owes on the property, can languish for months while a bank decides whether to accept the deal. And those trying to buy previously foreclosed properties can put in offer after offer, only to lose out to other buyers.</p><p>“You are digging and you are fighting it out,” said Adam Menconi, an agent with REMAX in Santa Rosa. “There is no such thing as an easy sale.”</p><p>Sellers, meanwhile, have what Lawrence called “a tremendous amount of mental equity” in their homes. As such, they have trouble hearing that their neighborhoods contain plenty of comparable properties that recently sold for tens of thousands less than their desired selling prices.</p><p>The median income for members of the National Association of Realtors fell to $36,000 in 2008, down from $42,600 the year before, the most recent data available.</p><p>But just as in salmon fishing, where a tenth of the fishers catch half the fish, there are real estate agents doing very well and those who are struggling mightily. Not surprisingly, experience is a major factor. The median income nationally for an agent with two years or less experience was $8,600 in 2008, the most recent year available.</p><p>“It takes a really unique person to have the confidence to work on a commission,” said Walter Molony, a spokesman in Washington for the national association.</p><p>Agents and brokers said they expect the market to improve, but not by much until the nation creates a lot more jobs.</p><p>In the meantime, many have looked beyond sales to property management, investment management or other activities. Ninety-seven percent of national members have some secondary specialty, Molony said.</p><p>Not all is glum. For example, agents and brokers said they are encountering new buyers who previously were priced out of the market.</p><p>“When you give somebody the keys to a home they never thought they'd own, that's a pretty fun thing,” said Laws of Coldwell Banker.</p><p>Herman Hernandez, a broker with Frank Howard Allen in Guerneville, said the downturn has prompted him to redouble his efforts to get out to community events and to keep in contact with Russian River residents.</p><p>“I've had people say, ‘Are you running for office?'” said Hernandez, in the business for nearly 36 years.</p><p>He tells his agents, “Out of sight, out of mind,” and “There is business out there and you just need to get out there.”</p>