Real estate did not get its own sector in the North American Industry Classification System. Instead it is a sub-sector within a bigger sector entitled Real Estate and Rental and Leasing. Rental and leasing establishments rent or lease cars, trucks, RV’s, appliances, formal ware, costume ware, videos, health equipment, commercial machinery and equipment, or just about anything you can imagine.
It is the real estate sub-sector that interests us here with 1.44 million jobs in 2012. Real estate establishments sell, buy or rent real estate as brokers but also have all other establishments that rent, lease or manage real estate for others. A small part of asset leasing has establishments that lease patents, trade marks and franchise agreements, but it has only 24.2 thousand jobs.
Real estate establishments have 3 specialty occupations: property, real estate and community association managers, real estate agents and real estate brokers. Combined they have 287 thousand jobs in 2012. All real estate establishments have office work with jobs that reflect office needs such as bookkeeper, receptionist, office clerk and secretary.
A little over 4.1 percent of the non-managerial jobs in these sub-sectors use college degree training. College degree trained jobs at real estate firms are in finance and management but the Bureau of Labor Statistics defines real estate brokers and agents as sales occupations that do not need college degree skills. All states require brokers and agents to pass a written test and have a license that requires classroom training and some years of experience.
Real estate agents and brokers do not work for salary but typically work on sales commission. This practice causes some to draw hasty and inaccurate conclusions about broker and agent income. A $500,000 suburban house is not unusual in today’s economy and a 6 percent sales commission comes to $30,000. Who hasn’t noticed one of these houses selling after a single day on the market or one Sunday open house? Who hasn’t thought $30,000 for just one day’s work? Some definitely think, “I should get into real estate?”
The first mistake is to presume a $30,000 commission is income to the broker or agent. Brokers and agents typically pay half their commissions to their real estate company for office space and other necessary services like advertising. Since the real estate company gets half of commissions it is their interest to have many commissions and therefore many brokers and agents out selling, which increases competition among individual brokers and agents and decreases their chances of earning that sales commission.
A second mistake comes from the term’s buyers market and sellers market. People forget these terms do not apply to the real estate agent. In a buyers market there are more sellers than buyers. It is easier for an agent to get a house to list but buyers can do a lot of shopping and make many low bids. With buyers doing thorough shopping the weeks and months go by preparing offers and showing houses to bargain hunters, but no commission or income for all that work and time.
In a sellers market there are more buyers than sellers. It is harder to get a house to list so enterprising brokers and agents take up showing other agents listings to some of the many anxious buyers. To share in the commission they have to prepare separate offers and be the broker or agent with the highest bid. In hot suburban markets like metropolitan Washington, DC houses can draw 8, 10 and 12 offers with many offers above the listed asking price. Only one offer is the winning bid and so only one offer shares in the commission. With a sellers market, the weeks and months go by preparing offers and traipsing through houses, but no commission or income for all that work and time.
Annual wages for 2012 reported for brokers has a large range with the 10th percentile annual wage of $25,460 and the 90th percentile annual wage at $178,230. Seldom is the 90th percentile annual wage more than 6 times the 10th percentile amount as it is here.
In real estate offices annual incomes for agents and brokers depends on the selling skills and energy of individuals. The better someone can be at selling and the more time and energy they put into showing and marketing property the higher their income. Still, the high range of incomes reported by the Bureau of Labor Statistics does indicate risk. Only a few make high incomes in real estate and we have to suspect there are long and unpredictable hours doing so. For anyone considering a career in real estate, follow this advice. Develop a back up plan.
Real estate establishments are not just the offices of real estate agents and brokers, but also firms that act as lessors of residential and non-residential property. Also real estate property managers and offices of real estate appraisers go in this sub sector. Real estate assessor and appraisers have 43 percent of their jobs in the real estate sector, a 2012 real estate total of 25.4 thousand jobs out of a national total 59.5 thousand. Local governments employ the most real estate assessors and appraisers. The realty firms doing property management often hire many in building and grounds maintenance. Add the janitors, maids, and landscaping and grounds maintenance workers and it is more jobs than realtors and brokers.
Somewhat unnoticed in activities related to real estate is the rise of the mini warehouse and self-storage units, along with employment as lessors of mini warehouse and self-storage units. Employment growth as lessors in this sub sector increased at an annual rate of 5.24 percent from 1990 to 2012, a rate 4 times the employment growth for all of the real estate industry.
The general rule of storage unit leasing is to make sure those must-save-things are worth more than the monthly locker rental; an amount apparently in the $50 to $100 range depending on size and location. Check values of used furniture, clothes and kitchenware at the Salvation Army. Prices there are very attractive and it might be possible to fill a unit with less than $100.00 worth of used stuff. If you must go ahead, remember that employment is a requirement in America and you are helping to support wages and income for lessors of mini warehouse and self-storage units, an industry with 44.6 thousand jobs.
With a 115.3 million service jobs to divvy up, real estate services gives us 1.43 million jobs, but that is only 1.1 percent of establishment employment. Real estate services employment has been growing at 1.12 percent a year, which is faster than the rate for non-farm employment. We still have 59.7 million service jobs left to fill. They are still more sectors, but the share of professional jobs in the remaining sectors keeps going down.