Wednesday, December 28, 2005 | Finding a real-estate agent in San Diego is not difficult.
It’s not hard to see why. There are now more than 470,000 licensed agents in California, up from 302,789 in October 1999.
The glut of real estate professionals in the state, combined with slowing home sales, worries Alan Gin, a professor of economics at the University of San Diego’s Burnham-Moores Center for Real Estate.
Gin said some of San Diego’s real estate agents will doubtless lose their jobs if the local housing market continues to cool. Those who are left will find themselves diving into a rapidly evaporating pool of sales, he said, and that could have serious consequences for the local economy.
“It would hurt the economy, because so much of the activity has been related to real estate,” Gin said.
If property values start falling, Gin said, that could be a double-whammy on the economy. Homeowners could see the value of their properties drop and houses selling for less money mean lower commissions for the people selling them.
Those commissions, Gin said, have been one of the major underpinnings of the local economy.
Gin pointed to a recent study conducted by the University of California, Los Angeles, that found that the national gross domestic product went up 3.3 percent in the second quarter of 2005. The study shows that 0.5 percent of that rise was due to real estate commissions.
That’s a crucial figure, Gin said.
And that proportion could be even higher in Southern California, Gin said, given the area’s high home prices.
Not everyone shares Gin’s views that the economy may be overly dependent on real estate agent commissions.
Russ Valone, president and CEO of MarketPointe Realty Advisors in San Diego, said that many of the newly licensed real estate agents are not serious players in the field. They are more likely to be part-time, independent entrepreneurs looking to supplement their income, he said, rather than job seekers looking for a new career buying and selling real estate.
“This is not an unusual event,” Valone said. “Any time the real-estate market gets hot, you end up getting a bunch of people that flock to the real estate market.”
Charles Jolly, president of the San Diego Association of Realtors, agreed with Valone. He said the flattening housing market may have an effect on the local economy but not because too many local residents are dependent on that sector for their income.
“I think that’s negligible, I don’t think it’s a profound effect on the local economy,” Jolly said.
Jolly said many licensed realtors do not rely on commissions from selling homes as their primary earnings. Therefore, he said, any doomsday scenario surrounding depleting commission incomes is likely to be cushioned as part-time realtors move on to their next source of extra income.
“Historically, smaller numbers of agents do a big volume of business,” he said. “There’s always a few that work hard and make good money…they will probably work a little harder.”
Valone said most real estate agents worth their salt realize that the market runs in cycles. Therefore, many will already have foreseen that there may be rough seas ahead, and will have planned accordingly.
Gin is not so sure.
Regardless of whatever contingency plans San Diego’s Realtors may have in place, a slowdown in home sales could still have serious ripple effects on the local economy, via the increased proportion of people employed in the real estate business, he said.
“They have less money to spend on going out to eat, on buying products, on remodeling, and that has an effect on the rest of the economy.”
If property prices start falling rapidly, Gin said, those ripples could well turn into waves.
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