Leaders of the real estate industry are asking the federal government to help them weather the market slowdown caused by the novel coronavirus pandemic.
On March 18, Compass founder and CEO Robert Reffkin sent a letter to Congressional leadership asking for specific consideration for real estate agents and other independent contractors in any coronavirus relief package. Reffkin, head of the Softbank-backed real estate firm, wrote that the roughly 2 million real estate agents in the United States, according to National Association of Realtors figures, make a gross median income of approximately $41,800 a year before taxes, and have seen business severely contract amid shelter-in-place policies and social distancing.
“When they can’t show a property, they can’t earn a living,” he says.
The letter claims that this industry is uniquely damaged by the economic fallout from this pandemic, and highlights how both the pandemic itself and a general slowdown in activity will likely impact homesellers and homebuyers for the foreseeable future. The industry is older, with 63 percent of agents over 50 years of age. The incentive structure of real estate sales also presents a challenge; agents will only earn commission after a sale. That means that even after the economy begins to resume normal operations once social distancing measures are deemed no longer necessary, agents will have to wait to make a sale before earning anything, extending their period of operating without an income.
Waiting until the market stabilizes, and for regular sales activity to return, could take extensive time, he adds.
Other Realtors and members of the real estate industry echo Reffkin’s concerns. On Wednesday, the National Association of Realtors (NAR) noted that they had reached out to lawmakers about stimulus options.
“A stimulus measure is also in the works that could bring targeted relief to the economy, to certain industries, and to the American people,” wrote Shannon McGahn, senior vice president of government affairs at NAR, in a letter to members. “We are in constant contact with Congressional leaders in support of our 1.4 million members.”
Today, the association released a survey that found 48 percent of agents agreeing that homebuying interest had declined due to the new coronavirus.
In Sacramento, Ryan Lundquist, a sole-proprietor and certified residential appraiser, says his income is taking a hit. He’s canceled all of his appraisal inspections this week, and feels uncertain about the weeks and months ahead. He says he’ll have to adapt.
“For now I’m not willing to physically meet people in their homes, though, as I’m taking social distancing very seriously,” he says. “If my community goes on lockdown, like some surrounding areas, than I’ll have no choice in the matter too. For now it’s been my choice to have my business do social distancing as it seems wise and best for the sake of the public. There is absolutely a cost here for my income, but hopefully it’s a very temporary thing.”
In New York City, Jonathan Miller, president and CEO of real estate consulting and appraisal firm Miller Samuel, has also slowly restricted the actions of his employees as the novel coronavirus threat has escalated and community guidelines have changed. Last week, appraisers were calling ahead to make sure nobody in the house was infected or showing symptoms before coming. As of this past Monday, his agents aren’t doing inspections.
He says that even with the rate cuts, the industry is grinding to a halt. Without the in-person appraisals and inspections many banks still require for financing, it’s difficult to sell. Homeowners are questioning whether they want a few dozen strangers walking through their home during an open house. Some real estate groups, such as the New York Residential Agent Continuum (NYRAC), have even asked the Multiple Listing Service (MLS) to suspend the days-on-market data on listings to reflect what’s happening due to the new coronavirus. The rate cut by the Fed has “fallen on deaf ears,” he says, because no parts of the real estate industry can handle the extra capacity.
Miller strongly agrees that independent contractors, and specifically Realtors, need more assistance.
“In many ways, Realtors are part of the original gig economy. They’re independent contractors used to feast and famine,” he says. “My assumption is that Washington is looking at giving everybody $1,000 twice. That’ll help, but for Realtors, the lost commissions are 100 percent of their income. They have the potential to make zero dollars for months.”