There are more licensed real estate agents than you expect, but many aren’t that active.
There are ~2 million licensed agents in the United States. That said, only ~1.36 million agents are Realtors. It’s safe to say only active agents are going to pay a few hundred dollars in dues. It's an easy shortcut to use the 1.36 million figure to represent active agents. Other agents likely don't do many deals or view real estate as their primary job.
There were roughly 5.3 million existing homes sold in 2019. Each home sale has two sides - a buy and a sell, so there are roughly 10.6 million opportunities for real estate agents to capture a commission annually on existing home sales. The National Association of Realtors reports that 87% of buyers purchased their home through a real estate agent or broker. We can use this figure to apply to sellers as well and assume that 87% of the 10.6 million sides are supported by real estate agents. This means that ~9.2 million sides involve a real estate agent each year. Using the above figure of 1.36 million active real estate agents, we can estimate that the average active real estate agent helps buyers and/or sellers on roughly 7 homes a year.
The median home sales price on an existing home is around $265,000. We can again use existing home sales of ~5.3 million. This means that there is ~$1.4 trillion of existing residential homes sold each year. The average real estate commission is around 5.7%. Therefore, the total opportunity for real estate commissions is ~$80 billion. We can assume 87% of this opportunity involves an agent. So, ~$70 billion in commissions is paid to agents each year. Using the 1.36 million active real estate figure, we can determine the average active real estate agent generates $51,200 in annual commissions.
But remember: agents are usually independent contractors. This means they pay their own benefits and expenses. This includes splits to their brokerage. We can use an 85% average split for our math. This would mean the average agent takes home ~$43,500 after their brokerage split. Hurdlr estimates $6,500 in annual expenses. Therefore, the average agent generates ~$37,000 in pre-tax earnings.
Most of the agents we hear about are top performers. They show up in the REAL Trends and Wall Street Journal rankings. These agents generate well over $1M in gross commission income and $50M in sales volume. But this elite club is very small relative to the total agent population.
One consistent theme among the top performers is that they sell more expensive homes. Most volume from top agents comes from higher-end homes. For example, RE/MAX agents represent 18.4% of sides on the REAL Trends top agents list but only 7% of sales volume. This is because those agents are selling ~$175K homes on average. Yet only 10% of homes sell for $500K or more. The opportunity is large for agents who win in the high-end segment. But the number of sides is limited and competition is fierce.
Side, a real estate brokerage, notes under 100,000 agents each generate $10M in sales. Agents in this group generate over $270,000 in gross commission income each. But they are well under 10% of agents. That said, agents who stay in the industry do earn more. NAR surveys show Realtors with 16 years or more experience generate a median gross income of $71,000. Agents with under two years have a median income under $10,000.
