Steve Murray sometimes gets together with other old-timers in the real estate industry, shares some wine and inevitably gets around to remarking, “I sure would’ve thought it would’ve changed more by now.”
Murray, president of consulting firm Real Trends, has been tracking for 40 years how U.S. real estate agents do their jobs. And over the past decade, the Internet has disrupted almost every aspect of a transaction that sits at the core of the American Dream. Everyone now has free access to information that used to be impossible to find or required an agent’s help.
But as a new home-buying season kicks off, one thing remains mostly unchanged: the traditional 5-to-6-percent commission paid to real estate agents when a home sells.
While the Internet has pummeled the middlemen in many industries — decimating travel agents, stomping stock-trading fees, cracking open the heavily regulated taxi industry — the average commission paid to real estate agents has gone up slightly since 2005, according to Real Trends. In 2016, it stood at 5.12 percent.
“There’s not a shred of evidence that the Internet is having an impact,” Murray said, sounding like he almost can’t believe it himself.
The stickiness of the real estate commission is a source of fascination for economists and curiosity for consumers who are doing an increasing share of the home-buying legwork themselves online. It also offers potential lessons for workers in other industries worried about the Internet’s destructive powers. The Web has changed how agents hustle for a share of the estimated $60 billion paid each year in residential real estate commissions. But it hasn’t taken their jobs. In fact, the number of agents has grown 60 percent in the past two decades.
It wasn’t supposed to be like this.
Consider the title of a 1997 article in the Journal of Real Estate Portfolio Management: “The Coming Downsizing of Real Estate: The Implications of Technology.”
In the mid-2000s, the arrival of real estate tech start-ups like Zillow, Redfin and Trulia spurred a fresh dose of anticipation. “Realtors’ sacrosanct commission rates of 6 percent may be in danger,” warned “60 Minutes” in 2007. Jeff Jarvis, a City University of New York professor who examines the Internet’s effects, wrote a 2006 blog post predicting, “Real estate agents are next.”
Agents thought so, too.