Alexandra Clough
Jeff Ostrowski
Linda Rawls
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Thursday, June 1, 2006
Realtors’ riches real?
Who got rich in the recent real estate boom? Some sellers, certainly, especially investors who got in and out of the market fast.
One group who didn’t will surprise you: real estate agents.
“How could that be?” you ask. With commissions of at least 5 percent, generally split between the seller’s and buyer’s agents, Realtors certainly made enough money to pay off those fancy cars most of them drive.
Right?
Well, some of them did make money — a lot of money. After all, 3 percent of $390,100 — the median-priced home in Palm Beach County last year — is $11,703. And that’s just one-half of one sale.
But if you thought that Realtors’ wallets were fattened all the way to the bank because a lot of homes sold for more than the median, you’d be wrong.
From 2002 to 2004 — the height of the hottest boom in recent real estate history — the annual median income of Realtors actually fell, to $49,300 from $52,200, according to the National Association of Realtors www.realtor.org.
Sure, some agents made a lot of money in the boom, just as some agents will make money if it comes to bust. That’s the nature of the beast.
But according to NAR figures, most agents earned less than the median income for Palm Beach County ($61,900).
That means real estate agents could sell the median-priced home in Palm Beach County, but they certainly couldn’t afford to buy it.
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Positive cash flow? What’s that?
Anybody remember positive cash flow? That was the quaint, circa-2000 concept that an investor could buy a house and rent it for a little more than he was paying in mortgage, property taxes, insurance and lawn maintenance.
But as home prices soared in recent years, rents barely budged. That means it costs more to own an investment property than you can rent it for — the “negative cash flow” investors hate.
The imbalance between rents and purchase prices is a big reason the housing market has ground to a halt. The speculators who were driving the market last year no longer see an upside.
The Post’s Barbara Marshall took a look at this phenomenon Sunday. One house on the market in Port St. Lucie would cost $3,315 a month to own, based on the sale price of $435,000. But the owner is offering to rent it for $2,200.
real estate
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