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NEW CFA REPORT DOCUMENTS THE COSTS TO THE INDUSTRY AND CONSUMERS

Today the Consumer Federation of America (CFA) is releasing a new report – “A Surfeit of Real Estate Agents: Industry and Consumer Impacts” – that uses industry sources to document the costs to industry and to consumers of too many residential real estate agents.  More than 1.5 million residential agents (including brokers) compete for home sales usually totaling 5 to 6 million annually. 

Those costs include: 

  • economic inefficiencies including an inordinate time spent by agents finding clients,
  • relatively low incomes of many full-time agents,
  • frustration by these agents and by many consumers who must deal with inexperienced agents,
  • reinforcement of relatively high and uniform commission rates, and
  • damage to the reputation of the industry.

“A large majority of practicing real estate agents have recently received their license or work part-time,” said Stephen Brobeck, a senior fellow at CFA.  “These agents usually charge the same commission rates as experienced, full-time agents yet in general offer worse service and deprive experienced agents of needed clients.”

In examining home sales in three cities – Jacksonville (FL), Minneapolis (MN), and Albuquerque (NM) – the study found that marginal agents (with five or fewer sales a year) received an estimated 25-30 percent of commission income.  According to data collected by the industry from Realtors in 2021:

  • the median net income of all sales agents was $25,000,
  • the median net income of sales agents with less than two years experience was $7,800, and,
  • the median net income of all brokers and associate brokers was $57,100.

The report documents complaints by many experienced, full-time agents of the incompetence and/or inattention of other agents that also harm consumers.  And it emphasizes that because of the “surfeit of agents,” real estate agents and brokers feel financial and/or peer pressure to keep commission rates relatively high. 

“Without 5-6 percent rates, even fewer agents would survive financially in today’s marketplace,” said CFA’s Brobeck.  “Ironically, relatively high rates attract new entrants into the industry, increasing competition for clients and reducing individual income for all.”

The report raises the question of whether the industry should make greater efforts to ensure the competence and commitment of new agents.  Such efforts could include more stringent entry requirements and required mentoring of new agents.  A future CFA report will address in depth these two issues.

To help ensure selection of a competent, conscientious agent, CFA recommends not only consulting friends and family but also reviewing information about agents on Zillow and Realtor.com.  CFA’s Brobeck said: “Look especially for information on recent sales experience and customer comments that are detailed and positive.”

Posted On Monday, 10 July 2023 10:22 Written by
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Posted On Sunday, 09 July 2023 12:58 Written by

The Cape Coral metro area has more than made up for the plunge in new listings caused by the storm

Listings of homes for sale in the Cape Coral-Fort Myers, FL metropolitan area have recovered after plunging in the wake of Hurricane Ian last fall, and sales have begun to bounce back, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage.

In the two months after the devastating September 2022 storm, there were 900 fewer new listings in Cape Coral-Fort Myers than there would have been had the storm not hit, according to Redfin projections. But in the six months after that, there were 1,314 more new listings than projected, more than offsetting the shortfall. To put it another way, the metro had gained 415 more new listings than it had lost by early May. The Cape Coral-Fort Myers metro area will be referred to as “Cape Coral” for the remainder of this press release.

New listings are likely outperforming expectations due to a backlog created by the storm; homeowners who paused their selling plans or delisted their properties in the wake of Hurricane Ian are now putting their homes on the market. There are likely other homeowners who didn’t intend to sell before the storm but are now moving because their home was damaged and/or they want to live in a safer area.

“Intense storms are becoming more frequent in Florida due to climate change, but homebuyers are still moving to the Sunshine State in search of warm weather and relatively affordable home prices,” said Redfin Senior Economist Sheharyar Bokhari. “But as homebuyers have moved into Florida, insurers have moved out, leaving homeowners with fewer and more expensive coverage options. Ultimately, lower-income residents may be pushed out of the riskiest areas due to rising insurance and rebuilding costs. Those who can afford to remain will likely see their home values appreciate at a slower clip as the dangers of climate change become impossible to ignore.”

Insurers aren’t just leaving flood-prone areas; State Farm and Allstate recently announced they will stop issuing new homeowner’s insurance policies in California due to climate risk, citing increased exposure to catastrophes including wildfires.

The analysis focuses on home listings, but it’s worth noting that scores of vacant plots have also hit the market in Cape Coral after the homes atop many of those lots were destroyed. There were 6,167 land listings in Cape Coral as of June 16—comparable with the number of home listings (6,619). Some don’t mention the impact of the storm or the potential for future natural disasters. Other listings do mention Hurricane Ian, and tout the opportunities for builders and homebuyers despite continued storm risk.

While some people who moved to Florida during the pandemic are leaving, new out-of-staters continue to move in, which is incentivizing homebuilders in Cape Coral to keep building, according to local Redfin Premier real estate agent Isabel Arias-Squires.

Florida has doled out 80,000 residential building permits so far this year—more than any other state but Texas. Arias-Squires noted that new-construction homes in Florida have the advantage of being built under the most recent building codes, providing better resistance against natural disasters

Sales Are Bouncing Back, But Haven’t Fully Recovered

In the three months after Hurricane Ian, there were 723 fewer home sales in Cape Coral than there would have been had the storm not hit, according to Redfin projections. In the following five months, there were 538 more sales than projected. That meant that by early May, the sales shortfall had shrunk from 723 to 185.

The fact that home sales in Cape Coral have started to recover indicates that many homebuyers continue to prioritize waterfront views, relatively affordable home prices and lower taxes above climate concerns.

Cape Coral is the seventh most popular migration destination for homebuyers, according to Redfin’s latest ranking. Four other Florida metros—Miami, Tampa, Orlando and North Port—are also in the top 10 as the Sunshine State attracts house hunters from New York, Chicago and other major metros.

Hurricane Ian Had No Major Impact on Home Prices

“The storm’s effect on prices was likely muted because at first, new listings fell, which pressured prices to rise due to a shortage of homes for sale. But new listings then more than recovered, which pressured prices to fall because there was more supply than usual,” Bokhari said. “In the end, the two effects canceled each other out.”

To read the full report, including charts and methodology, please visit: https://www.redfin.com/news/hurricane-ian-housing-lookback-2023

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