Are There Too Many Real Estate Agents and Loan Officers

The title for this blog came from this HousingWire article:  There Are Too Many Real Estate Agents and LOs. It’s A Problem

The author, James Kleimann, was also on this recent HousingWire Podcast discussing the article.

TLDR:  There are way too many agents and Loan Officers (LOs), and the vast majority don’t produce.

There are about 343,000 LOs competing for about $1.2 to $1.4 trillion of loan volume in 2023.

That is a staggering number of LOs when you consider that the mortgage industry funded $4.4 trillion in 2021.

So, while many LOs have abandoned ship, the remaining LOs are fighting for what is about 25% to 30% of 2021’s volume.

So, overcapacity is the understatement of the year.

Similarly, there are about 1.5 million Realtors competing for about 4.5 million existing home sales this year.

So, overcapacity is the understatement of the year. 😊

People are washing out of the industries though, as there are now 1/3 fewer loan officers than in 2021.

And the percentage of agents with less than 2 years of experience has dropped from 25% to 17%.

Concentration

What is interesting, but perhaps not too surprising to those of us in the industry, is how concentrated production is.

This is from the article: “The top 1.5% of real estate agents last year accounted for 68% of all sales in America. That’s a shocking number,” Hale said. “If you go up to the top 2%, you’re at about 75%. If you go to the top 10%, you’re north of 90%.”

The article makes a case that inexperienced agents are not good for the industry because they rob commissions from good agents and reflect poorly on the industry.  The article also points out how all too many LOs waste time courting relationships with non-producing agents.

On the loan officer front, the concentration is similarly acute.

In the podcast I linked to above, Kleimann lists “7 Tiers” (if you include Tier 0) for LO production and the numbers are amazing.

7 Tiers for LO production

Top LOs Put Other People’s Loans in Their Names to Pad Numbers

Underneath the YouTube podcast, there was this interesting comment:

This is such a good point and I agree with, but I disagree with your data. It is very fouled. The top LOs who are in those big awards, are usually because they count all the people below them and they force their teams to close under the big dog name. Also, a lot of these big names are not profitable. You can take an LO who does a 1 million a month, and they are more profitable then the big number people at 30 million a month. On top of this, a lot of the big number people are part of Rocket, quickens, Movement, UWM. Where they pay 1000 times more in marketing, and pay a ungodly amount per year to have their team sit in Real Estate Offices. They are a one trick pony, because you have to spend a lot of money to get them all these deals so you are losing a lot per deal for these big producers. Plus, they are not professionals because they struggle with thinking outside the box, they can only do the QM type stuff, but when it comes to todays market you need to look a lot at NONQM and different products. This is why data is wrong for Realtors and LOs because they will claim numbers from everyone under them as well.”

SIDEBAR:  Given that JVM is one large team working directly together, my wife Heejin or I could very legitimately put all of the loans in one of our names and run around screaming: “I am #1!”  But, we don’t because it would be a bit dishonest, and also because our compliance attorney told us not to 😊.  According to our compliance attorney, those “mega producers” are taking serious risks with regulators because it is unlikely that they are able to interact with all of those borrowers in the way that their numbers might imply or that licensing rules may require.

Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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