OLMIS

by Dallas Fridley
Published Dec-20-2011

An Older Workforce Earning Less Broker and Agent Commissions

Real estate industry employment in Oregon basically held steady in 2010, rising by 200 to average 31,200 jobs. The industry fell 12.4 percent from its 2007 peak of 35,600 jobs but despite that drop, real estate remains above its 2004 "pre-boom" employment level of 30,000.

Oregon's real estate industry encompasses far more activities than just land, home and commercial property sales. The real estate industry has eight component industries, as show in Table 1. The employment and wages data presented in Table 1 includes all real estate jobs covered by Oregon's unemployment insurance system. This is an important distinction, as real estate brokers and agents are excluded from unemployment insurance coverage in Oregon and are therefore not included in the employment and payroll data shown in Table 1. Real estate brokers and agents working on a commission sales basis do represent a large chunk of the industry's employment in Oregon. In 2010, commission sales brokers and agents commanded about 42 percent of all jobs in the real estate industry, while property management, property appraisal, warehouse and self storage, and leasing activities provided about 58 percent of the industry's jobs in 2010.

Holding a real estate broker or agent license doesn't necessarily indicate employment - only the active ones engaged in sales and affiliated with a licensed broker or real estate company are included in the industry's employment. Active brokers and agents are reported as part of the real estate industry through the Current Employment Statistics (CES) program, which is a monthly survey of businesses. For that reason, the Quarterly Census of Employment and Wages (QCEW) reports fewer jobs in the real estate industry than CES. The sources of QCEW data are employer payroll tax reports. In Graph 1, the jobs associated with commission based real estate brokers and agents are represented by the area between the QCEW and CES trend lines.

From a job standpoint, brokers and agents are captured by the CES industry series but without QCEW payroll data, the earnings side of the equation is difficult to address. Annual pay for the real estate activities included in QCEW averaged $31,987 in 2010, well below Oregon's $41,669 all industries average wage. Covered payroll in real estate totaled $584 million in 2010, far below its $677 million peak reached in 2006. Real estate industry annual pay in 2010 ranged from a low of $19,065 in mini-warehouse and self-storage unit operators to a high of $66,597 in other activities related to real estate. From an employment standpoint, real estate property managers represented about 45 percent of the real estate industry's QCEW total, while offices of real estate agents and brokers (non-commissioned) provided about 12 percent.

More than one in four real estate, rental, and leasing industry workers were 55 years of age or older (27%) in the fourth quarter of 2010 compared with one in five (20%) for all private industry workers in Oregon. Although the workers in real estate, rental and leasing are older, their average monthly earnings during the fourth quarter of 2010 actually favored the 35 to 44 age category. Monthly earnings in Oregon's private sector were highest for the group aged 45 to 54, while the 55 to 64 age group also finished above the 35 to 44 year olds. Turnover doesn't appear to be a big problem across all age groups, but it is interesting to note that workers age 65 and older in real estate, rental and leasing had the lowest turnover despite earning less than the 25 to 34 age group. New hires followed a similar pattern, with real estate, rental and leasing workers age 35 to 44 commanding the highest monthly earnings, while private industry earnings favored the 45 to 54 age group.

Brokers and agents earning real estate sales commissions are essentially self-employed and not covered by Oregon's unemployment insurance system, leaving more questions than answers concerning earnings. A 2009 report prepared by ForSaleByOwner.com provides an outlook for commissions paid to real estate agents and brokers in the U.S. from 2000 to 2008. The average commission rate in 2008 rose to 5.2 percent while average commission paid per home sale was $12,600. The commission rate is certainly important, and between 2000 and 2008 it ranged from a high of 5.42 percent in 2000 to a low of 5.02 percent in 2005. But it was growth in the average sale price that lifted the commission per home from less than $9,700 in 2000 and 2001 to average nearly $14,000 in 2006.

The National Association of Realtors, which provided sales data for the report, estimated existing home sales in Oregon totaled 55,200 units in 2010. Sale prices for existing homes in the U.S. averaged $172,900 in 2010, and lacking state home price data, the U.S. average yields an Oregon 2010 sales total of about $9.6 billion. Applying the commission sales rate (5.2%) yields a commission total of around $496 million or $8,991 per home. To put a regional spin on this, Portland metro's median home price was $237,300 in 2010, while the Salem metro reported $173,500, and the Eugene-Springfield median was $196,300. Using the average commission rate (5.2%), a median priced home in Salem would be expected to turn a commission of around $9,022, while a median priced home in Portland would fetch a commission of about $12,340.

With a ball-park estimate of about $500 million in 2010 sales commissions for existing home sales in Oregon, real estate brokers and agents are still due credit for new home sales, land and property sales, commercial and industrial buildings, farms and other property types. Often working part time, semi-retired or combining real estate sales with another career, it would be difficult to come up with an average for commission earnings. With just under 13,000 active brokers and agents in 2010, the commission estimate for existing home sales alone indicates earnings of about $38,400 per head, well above the $31,987 average reported for the real estate industry in QCEW.