Burk Baker is having a slow year.
The founder of the eponymous Burk Baker’s School of Real Estate and Appraising has been a certified real estate instructor since 1977. Some students enrolled to earn some extra income on the side. Others declared real estate to be their chosen profession.
But since the recession began in 2007, Baker has noticed two disturbing trends: His class size has dropped from 30 students to 10, and the school receives only about 30 applications per month, a major decrease from as recently as five years ago.
The perception exists that now is not a good time to be a Realtor, Baker says. The national housing collapse has barely touched Louisiana, by comparison with other states, but stricter lending standards and a consumer confidence crisis have chilled a thriving market, which received a boost from Hurricane Katrina.
Potential homebuyers, nervous about the economy and the possibility of higher taxes and health care costs, now are waiting patiently instead of taking advantage of low interest rates and negotiable home prices.
“It’s harder to sell houses, and it’s hard to find buyers that qualify,” Baker says. “If you feel you won’t make money, why get into real estate? If you are a Realtor and not making money, why spend what you do have on continuing education?”
Baker is not alone in making such observations.
The Greater Baton Rouge Association of Realtors projects a 5% to 8% decrease in licensed Realtors for 2011. Home sales have been flat through October, says Herb Gomez, GBRAR’s executive vice president, noting it’s been difficult to find qualified buyers.
Some Realtors are going weeks and months without a sale. And as professionals working on commission, the lack of market activity is affecting their financial bottom line.
“You have some agents that close between three and five sales a month, and then there are a number that probably haven’t closed a sale this year,” Gomez says. “Some got in the business thinking they could make some money at it and found out it’s a little more difficult than they thought.”
The Louisiana Association of Realtors also projects a membership deficit of 3% and 4% based on estimates from smaller associations statewide. LAR’s membership has fallen from a peak of 12,763 in 2007 to 11,021 in October, according to a national report.
Areas with more activity, like Lake Charles and Shreveport, have provided a cushion from losses in other parts of the state, says Malcolm Young, CEO of the state association.
Louisiana is following a national trend. The National Association of Realtors’ membership has decreased from a peak of almost 1.4 million in 2006 to almost 1.1 million in October.
But those numbers don’t mean Realtors are leaving the business altogether, says Mark Gremillion, licensing and education director for the Louisiana Real Estate Commission. Some Realtors might be changing their licenses to an inactive status with the intention of returning to the industry once activity increases in their market.
There hasn’t been a significant decline in active state licenses in the past three years. There were more than 18,000 licensed agents in Louisiana as of October. Of those, about 14,000 licenses are active.
Gremillion says decreases in association memberships don’t reflect the status of the industry. When times are tough, he says, some Realtors opt out of their association because of the dues.
“Renewing a license isn’t all that cost-prohibitive,” Gremillion says. “But board fees and MLS fees, among others, are something that, if a Realtor isn’t doing much business right now, they would probably look at.”
The renewal process for 2011 real estate licenses has started, and state and local associations will have a clear idea of their numbers when the deadline ends in December. If past experience is any indicator, Gomez says, there will be a significant drop.
The decreasing number of Realtors can’t solely be attributed to post-Katrina growth, Gomez says. The economy also plays a large role in how creditworthy buyers view the market.
The inability of some Realtors to sell houses each month weeds out people dabbling in real estate on a part-time basis and also people attempting to start independent firms. The profession always will be attractive to those in it who gross more than $1 million through commissions. The reality is those Realtors with continued success in the business work hard to reach that point.
“There’s the old saying that 20% of the people do 80% of the business,” Gomez says. “I think there’s some truth to that. Around 30% or 40% of the membership do most of the business while others sell one or two houses a year, not enough to make a living.”
The days of part-time agents aren’t necessarily over because the housing market will eventually rebound, Young says, even if it doesn’t happen until late next year or 2012. One unknown factor is whether the newly elected Congress will pass legislation to support the housing market.
Gomez believes the decline in the number of Realtors—while negative for real estate associations that depend on dues to provide services to their members—is positive for people still experiencing modest success.
“If you have fewer in the business, that means less competition,” he says. “It means that the ones … that are successful and who have done the hard work are going to reap the benefits of staying in real estate when things get better.”
The results of the decline have affected Baker’s school, but he remains optimistic about the future of the industry. He recognizes that smaller enrollment might lead him to increase opportunities for online courses. The Capital Region market might remain depressed over the next few years, he says, but it eventually will rebound because of the presence of state government, industry and two major universities.
“I think it’s the time to get into real estate,” he says. “Eventually the market is going to come back, and those that are in it can hit the ground running. The public just doesn’t see it like that.”
