Brokerage Commissions on the Rise

Commissions Reach Nine-Year Peak

Written by: Steve Cook   Sun, January 10, 2010

Market Activity, featured

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Home sellers getting ready to put their homes in a spring market stimulated by tax credits and lower interest rates should budget for some bad news when it comes to paying their real estate agency.
Real estate commissions have risen for four straight years and they are higher today than they have been since 2001.   The average commission in 2009 was 5.29 percent, up over six percent than last year but still below the mythical six percent customary in many markets.
Commissions fell with the onset of the housing boom at the turn of the decade as brokers made concessions to get listing and discount brokerages flourished to take advantage of the sellers’ marker.  With the collapse of housing markets in 2006, commissions began to rise again as it became more difficult for sellers to market their properties.
Higher commissions do not necessarily mean more money for brokerages, however. Price declines and greater activity at the lower end of the housing market as a result of the success of the first-time buyer credit last year combined to reduce income to brokerages despite a, increase it the  commission rate and increased sales volume.
Total commissions through November were $40.6 billion, according to calculations by Bloomberg News Service based on the average commission rates from Real Trends Inc. and on home price and sales data from the National Association of Realtors.
 The average national commission rate hasn’t seen six percent since 1992, when Real Trends pegged the average rate at 6.02 percent.  By 2005, the rate had fallen to 5.02 during the peak of the housing boom.