A shakeout has begun to hit the local residential real estate sales industry.
As home sales have plummeted throughout the region, a host of local and national residential sales offices have closed recently amid a wave of branch consolidations.
The Business Journal has confirmed that in the last 60 days at least six residential brokerage branch offices have closed or are in the process of doing so, most on the Westside or in the San Fernando Valley. Hundreds of brokers have been consolidated to other offices, and some have left the industry.
Several said the consolidation wave has just begun.
"I'm seeing closings going on all over Southern California," said Syd Leibovitch, president and owner of Beverly Hills-based Rodeo Realty, an independent residential brokerage.
The main culprit: a precipitous drop in home sales as interest rates have gone up. In July alone, the number of home sales in Los Angeles County plunged 34 percent to 6,146 compared to last year, according to HomeData Corp., which compiles home sales data for the Business Journal.
July's drop follows six consecutive months of lower home sale volumes compared to last year's historic high levels. That has lengthened the average time a home stays on the market to 36 days from 22 days a year ago, according to the California Association of Realtors.
Home prices are still rising albeit at a much slower 7 percent annual clip instead of the 20 percent plus jumps of recent years sales volume is much more important than price for residential brokerages. With fewer homes changing hands each month, commissions and revenues are down at brokerage offices.
"If you're not making enough in the office, you have to close it down," Leibovitch said.
The situation has been compounded by an influx of newly minted agents hoping to make a quick buck in the recent overheated housing market.
In the last five years, the number of licensed Realtors in California has roughly doubled to 504,000, according to the California Association of Realtors. As a result, agents on average are handling five transactions each year from a high of 11 in 2000.
"Any time you get under six transaction sides represented in a year, a drop in our membership rolls soon follows," said Robert Kleinhenz, deputy chief economist with CAR, which now comprises over 200,000 members.
The actual number of branch closures is difficult to pin down, but several in the industry said it's clear that few if any offices are opening and several have closed or will close. Some believe the number of closings could be big.
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