The business of selling houses is not a small-change enterprise. Total existing home sales in 2018 tallied 5.34 million single family houses, condominiums and townhouses that sold at an average $298,200 each, tallying to $1.592 trillion. Add in the 617,000 new home sales at an average $385,000 per dwelling ($237.5 billion) and total dollar volume of home sales hit $1.83 trillion.
For those in the business of selling homes, where they worked can materially impact their sales volume in both number of closings and prices and the length of time, and investment in marketing and closing properties. Just like most other businesses, some locales are better than others from an economic perspective. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy. The same is true regarding best housing sales locales and the resulting demand for real estate agents.
To estimate the best (and most challenging) markets for residential real estate agents, WalletHub broke their analysis down into two major components: Job Opportunity & Competition and Real Estate Market Health. Weightings, metrics and factors for each follow.
Job Opportunity and Health 60 Points – or 5.45 Points for Each Metric
- Sales Per Agent
- Median Home Price
- Monthly Average Starting Salary for Real Estate Agents — until reviewing this study a year ago I was not aware these data existed TJ
- Annual Median Wage for Real Estate Agents
- Real Estate Employment Attractiveness – number of agents per 10,000 working age population & number of real estate agent job openings per 100 resumes
- Real Estate Employment Growth 2015-2017
- Annual Median Wage Growth for Real Estate Jobs 2015-2017
- Unemployment Rate
- Projected Real Estate Agent Jobs Needed by 2026 per capita
- Number of Work Hours & Pre-license Work Hours Required to Get a Real Estate License
- Google Search Index for Real Estate Agents
Real Estate Markets Health 40 Points or 5 Points for Each Metric
- Home Turnover Rate
- Housing Market Health Index – homes sold gain, sales previously foreclosed, foreclosure ratio, Zillow Home Value Index – year-over-year change, REO stocks (bank held properties), mortgage holders in negative equity – delinquent under water homeowners
- Zillow Home Value Index 1-year Forecast — (what home prices will be a year from now
- Days on Market
- Average Ratio of Home Sales Price to Listing Price
- Residential Building Permit Activity – number of permits per capita
- Share of Home Flips – arms-length transactions reselling within 12 months
- Fastest Growing Cities – WalletHub rankings
Data sources included U.S. Census Bureau, Bureau of Labor Statistics, Zillow, Indeed, Projection Central – State Occupational Projections, ATTOM Data Solutions (RealtyTrac), InvestmentFourMore and WalletHub research.
Using these data, WalletHub looked at 179 U.S. cities (including the 150 with the largest population and with at least two cities from every state). Each metric was graded on a 100 point scale, with a 100 rating assigned to most favorable conditions for real estate agents. The metrics were then weighted by the points assigned. Some of these data were only available at the state level.
What are the best markets for real estate agents based on WalletHub’s methodology? The top-10 for 2019 are included in the following table. In addition to the WalletHub data, also included are the job growth rates for the associated Metropolitan Statistical Area (MSA) or the Metro Division for the 12-months ending March 2019. Agent revenue is typically a function of median price and sales volume, both of which are impacted by job growth. In the 2018 study, all but one of the top ranking cities had better overall MSA job growth rates than the U.S. This year, four performed below the U.S. level of 1.71 percent: Washington, D.C. at 0.90 percent, Boston and Oakland at 1.19 percent, and Denver at 1.51 percent.
The next table lists the 10 most challenging markets for real estate agents in 2019. Two of the 10 posted a net decline in the total number of jobs for the 12-months ending March 2019: Fort Smith, Arkansas at -0.53 percent and Shreveport, Louisiana at -0.94 percent). There only 17 of the total 442 MSAs and Metro Divisions that posted job losses in the period.
To read the entire study from WalletHub click https://wallethub.com/edu/best-worst-cities-to-be-a-real-estate-agent/18713/
To read the Stewart Blog on this same study in 2018 click https://blog.stewart.com/stewart/2018/04/26/another-top-10-list-best-and-worst-places-to-be-a-real-estate-agent-in-2018/
There is a lesson to be learned and remembered in these type of studies that depend on data from prior years to categorize and forecast a year in advance. Denver, Colorado, for example, was a hot market in 2018. Housing sales in the first three months of the year (single family + townhouse + condos) totaled 11,154 closings. That dropped by 5.5 percent to 10,545 for the same period in 2019. Denver’s employment growth rate was 2.69 percent, sinking to 1.51 percent for the same period in 2019. Albuquerque, in contrast, saw sales essentially remain flat with 2,462 transactions January through March 2018 compared to 2,481 for the same period in 2019. Employment declined from 1.03 percent a year ago to 0.84 percent in 2019. Over the same period, U.S. home sales dropped 6.6 percent while job growth rose from 1.59 percent to 1.71 percent. It would not surprise me if Albuquerque’s market will continue to outperform Denver in 2019 — as it has done so the in first quarter of 2019.
As we economists say, “Forecasting is difficult, especially the future.”