As housing slumps, realtors quit

After three years showing houses in Atlanta's hilly suburbs, Dee McMahon is finished with real estate.

Yanking up her custom-made "For Sale" signs in her North Lake neighborhood rattled her ego, she admits. But when Ms. McMahon closed her final sale, a house in Snellville, Ga., in late November, the mother of two felt a swell of relief.

"Now I can finally get my own house back together," she says. "I'm nervous about the future, but I feel happy."

McMahon is one of thousands of real estate agents across the US wandering with mixed emotions and uncertain prospects through the debris of a real estate gold rush.

As many train for new careers, return to old ones, or wait tables until prices rebound, the plight of the real estate agent – average age, 51 – reveals the human dimension of how loose lending, raw opportunity, and self-determination produced a housing bust that has stunned the US economy.

"They've tasted success and big money, and now their standard of living has been rocked and reality has set in," says John Baen, a real estate professor at the University of North Texas in Denton. "The whole [economy] has been built on real estate. When the music stops, what is left?"

Americans are still drawn to working in real estate, according to the National Association of Realtors, which says its membership rose this year to 1.35 million. That growth in the ranks may be attributed to unaffiliated agents scrambling for clout in a tough market rather than an indication that the total number of agents is rising, the NAR acknowledges.

Evidence is growing that agents, especially in hard-hit markets like Florida, California, and Georgia, are closing up shop in large numbers, experts say.

Here in Atlanta, the number of agents letting their licenses lapse is growing at a faster pace than the number of overall licenses held. Nationally, an average agent's income dropped from $49,300 to $47,900 between 2004 and 2006. Not helping that trend is the cold fact that, according to Standard & Poor's house price index, home prices dropped precipitously in 2007, breaking the record 6.1 percent annual decline in 1991.

In Cape Coral, Fla., where only 30 percent of agents sold even a single home last year, real estate agents are "dropping out" daily, says local realtor Ginette Young. The Oregon Association of Realtors reports an 11.5 percent decline statewide of licensed agents in the past year.

Many of those who leave quietly shelve their signs. Others go out big: In Gilbert, Ariz., the fastest-growing city in the fastest-growing state, RE/MAX 2000 closed 13 offices throughout the Valley of the Sun, laying off at least 20 employees and scores of contract agents right before Christmas. The company couldn't meet its expenses.

Real estate is a line of work filled with mothers returning to the workforce, older workers squeezed out of lifetime careers, and young opportunists looking to trade sweat equity for potentially big cash-outs. Indeed, the industry norm is that only 4 percent of agents choose real estate sales as a first career.

In Georgia, realty ranks had swelled to 48,000 at the peak of the market. In the end, many say, there were too many inexperienced agents hawking houses.

"There's a lot of money being spent [on real estate classes] teaching agents how to waste a year of their life," says Atlanta agent Sandy Koza. "Then you get a downturn and a bunch of people get bumped. To [experienced agents like] us, it cleans out the business a little bit."

Florida's Cape Coral, a canal-sliced beach community, saw 800 building permits a month fall to 25 to 30 in the past year. The rapid slowdown left real estate agents, investors, and brokers holding the bag on big-money deals.

"It's a gold-rush mentality," says Michael Davis, an economist at Southern Methodist University's Cox School of Business in Dallas. He has been struck by how many agents, brokers, and investors, acting against conventional wisdom of portfolio management, converted large percentages of cash holdings into only a single and somewhat risky investment: property. "I don't know whether they're ignorant or optimistic, perhaps a little of both," says Dr. Davis.

Many others became the foot soldiers in the housing boom, second- or third-careerists drawn to the self-determination, relatively low entrance costs, and perhaps even the allure of the trade as embodied by novelist Richard Ford's legendary character Frank Bascombe, an angst-driven realtor who wanders the Jersey Shore for deals and revelations.

A former computer developer, Thomas Banecke of Sandy Springs, Ga., spent most of the summer baby-sitting a new condo development – usually a plum assignment. But when the Atlanta condo market tanked, foot traffic dwindled to almost zero.

Mr. Banecke is now back in the computer business and is putting his real estate career on hold. In some ways, he says, the cold housing market forced real estate agents, especially rookies, to confront their own abilities, schemes, and dreams. Upfront costs, marketing, association fees, and the crucial contacts are either more costly or harder to procure than an aspiring real estate agent usually expects, Banecke says.

"This kind of thing will wipe up a whole bunch of people who thought they could do this to make a living," he says.

As for McMahon, the Atlanta agent, she still had a nice listing book and plenty of leads when she called it quits. In the end, unreliable buyers, surly sellers, and a lack of office camaraderie contributed to a decision that solidified when home sales and prices dipped. "I was waiting for a time to kind of swing out," she says. She's planning to become a high school science teacher.

One problem for out-of-work agents is that their skills may not transfer easily to other careers. California is waiting to hear on a $9 million federal retraining grant after 6,000 people lost their jobs in the housing industry since September.

But Dr. Baen of the University of North Texas is optimistic about their futures. "These people are hustlers, hard workers. They're used to getting on the phone," he says. "They'll end up in insurance, in mutual funds, in retirement planning, and commodities."