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Spokane, Washington  Est. May 19, 1883

Realtors caught in ‘perfect storm’


A sign stands outside an unsold home in east Denver last month. Associated Press
 (Associated Press / The Spokesman-Review)
Associated Press The Spokesman-Review

WASHINGTON — Plummeting stock prices. Mortgage lenders filing for bankruptcy or shutting down. Layoffs at homebuilders and banks. Soaring foreclosures and loan defaults.

Damage from the nation’s slumping housing market is evident throughout the economy and permeates financial markets. Add real estate agents to the growing list of victims.

The National Association of Realtors expects membership rolls to decline this year for the first time in a decade. The group ended 2006 with nearly 1.4 million members — almost double the roughly 716,000 it had in 1997 — but expects 2007 to close with 1.3 million, a drop of more than 4 percent.

Agents’ ranks continued to rise even after the market began to cool about two years ago because of the 18-month lag between the downturn in sales and membership, says NAR spokesman Walter Molony.

Trade groups in two of the hardest-hit states — California and Florida — also forecast membership drops. The California Association of Realtors is expecting its first decline since 1997, forecasting a year-end tally of 185,000 members compared with more than 199,000 last year. The Florida Association of Realtors currently has about 154,000 members compared with more than 161,000 last year at this time, but expects flat membership by year-end.

Colleen Badagliacco, president of the California group and in the business since 1980, says many agents joining the last three years wanted to cash in on a hot market but weren’t prepared to endure what she calls the “ugly perfect storm” that attracted more agents than a sagging market can support.

In California, applicants can get a conditional real estate license after taking one class, a loophole that will close after Sept. 30 when three classes will be required.

“You had very inexperienced people doing very expensive transactions,” Badagliacco said. “There is the opportunity to make a lot of money, but the downside is there are a lot of fixed expenses whether you’re earning money or not.”

Fixed expenses include advertising and marketing, and everyday costs, such as gasoline in the car needed to drive clients to look at properties.

A report from the Federal Trade Commission and the Department of Justice in May confirmed that while the Internet has become an important tool in residential real estate, consumers have not saved as much as they expected. Outdated state laws and business practices stand in the way.

That’s where real estate agents come in. The median agent’s commission increased 25.5 percent to $11,549 between 1998 and 2005.

Badagliacco said she knows people like to “poke fun at the Realtor in the nice car,” but she expects there to be fewer objects for pokes and jokes in coming years.