Abstract
Problem statement: This research explores the extent of market efficiency in the real estate labor market. Given a common commission rate, areas with high average home prices will generate higher agent income per home sold. If markets are efficient with few barriers to entry, additional agents per capita would be expected in high-priced areas, but each home sale would represent a larger portion of an agent’s annual income so a risk premium should be present. Approach: Agent earnings and the number of homes sold were examined in selected California counties. The data provides details on over 200,000 transactions, for nearly 47,000 different real estate agents and brokers, with usable data for 477 distinct zip codes. Results: Results show that regions with a higher median home price have a greater number of parttime real estate agents and an increased number of agents per capita. Conclusion: There are fewer average commission events per agent in areas with higher housing prices, but a higher level of total commission earnings per agent to compensate for the added income risk per completed transaction.
Highlights
Competitive market, where there are many sellers with small market shares, slightly differentiated products and Markets are said to perform efficiently when many buyers with low barriers to entry for both buyers sufficient information and competition exist
Applied to the real estate industry, efficient markets would imply that well-informed real estate agents, with full knowledge of is not always costless and information flow may be slower in real estate labor markets than in other settings, such as financial markets
This is consistent with a simple efficiency hypothesis that entry of new agents is Empirical evidence: Data obtained from the California Department of Real Estate (CA-DRE) showed 107,485 real estate agents and brokers with active licenses in 2004 in these nine counties
Summary
Competitive market, where there are many sellers with small market shares, slightly differentiated products and Markets are said to perform efficiently when many buyers with low barriers to entry for both buyers sufficient information and competition exist. The year used in this analysis was 6% of the sales price, To the extent that information is available and split evenly between the agents representing the buyer entry is not blocked, potential profits in the high-price and the seller This is consistent with the Hsieh and regions should attract new real estate agents. Since fewer sales per agent per year would be expected, on average, in high-price markets, each home sale in a information is available to participants and entry is unconstrained, potential earnings in the high-price regions should attract new real estate agents. The number of sales and commissions earned by individual agents was obtained from a commercial service that compiles residential sales information for all recorded home sales in several California counties Reports based on this database are typically sold to mortgage brokers, title companies and high-price region comprises a larger percentage of an other professionals in the real estate industry. Over 343,000 commission events are recorded in these nine counties
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