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This article was published on: 05/01/2004

COVER FEATURE: The Power of One Million

The Power of One Million

BY FREDERIK HELLER

It’s a great time to be in real estate. More than 290 million people live in the United States. The homeownership rate is 68.6 percent. The national median existing-home price is close to $170,000. And you’re part of an organization that’s bigger and more vibrant than ever—1 million strong.

“Today, the NATIONAL ASSOCIATION OF REALTORS® stands as the largest trade association in the nation and the most influential real estate organization in the world,” says NAR president Walt McDonald. “The growth in our membership underscores the tremendous value this association brings to its members.” NAR’s astounding growth—10 percent in the past year alone—is even more remarkable when you consider that less than a decade ago, pundits were predicting a big dropoff in real estate’s ranks. To understand how the industry reached this milestone and what it means for you, REALTOR® Magazine presents this special section on the power of 1 million.

“Hitting 1 million members is proof of the importance of real estate to the American economy,” says Terry McDermott, CEO and executive vice president of NAR. “To the communities we serve, it indicates the strength of the Voice for Real Estate® on critical legislative and regulatory issues that impact such areas as the growth of homeownership, minority homeownership participation, and private property rights. A million REALTORS® focused on improving the quality of life in the communities they serve is one of the greatest assets property owners have in the public policy arena.”

In this edition of REALTOR® Magazine, we look at the economic ramifications of the industry’s growth, the strength of a million voices on Capitol Hill, and the buying power enjoyed by the members of an organization 1 million strong. We introduce you to some of the newest members of NAR to learn why they joined. And we sample how screenwriters, novelists, and the media portray your profession and show how NAR’s public awareness campaign offers a positive message that counters these often distorted or stereotyped images.

But first, how did we get here?

In 1908, when 120 real estate brokers gathered in Chicago to found the National Association of Real Estate Exchanges (which changed its name to the National Association of Real Estate Boards in 1916 and to the NATIONAL ASSOCIATION OF REALTORS® in 1974), there were only 76 million people living in the United States. Most lived in rural areas, and homeowners were in the minority. The homeownership rate in 1900 was 46.7 percent. Most people didn’t own a car. A few major cities were just starting to pave roads and implement traffic laws to handle the new contraptions. There was no Internet, television, or radio.

The real estate profession itself was in its infancy. There were no licensing laws in 1908. No such thing as a condominium. No mortgage interest deduction, no capital gains tax, no 1031 exchanges—no federal income tax at all, for that matter. Written contracts were relatively rare.

There were no 30-year conventional mortgages. There was no Federal Reserve Board to help set interest rates, no U.S. Department of Housing and Urban Development, and no Federal Housing Administration. There were no MLSs, no seller disclosure or agency disclosure requirements, no real estate franchises—and no national organization to represent real estate professionals.

Real estate was full of good, professional, forward-thinking people back in 1908, but it was hobbled by unscrupulous, unethical characters as well. The newspapers of the day were rife with stories of people who’d been swindled and taken advantage of by real estate “sharks.” R. Bruce Douglas, president of the local Milwaukee board at the time, summed up the situation succinctly: “[It] is easier to become a real estate man and handle thousands of dollars’ worth of property and money than to become a barber charging ten cents for a shave. A barber must go before the investigating board, and if he is not a good barber they don’t give him a license. A real estate man has no preliminary examination to meet. He is not questioned as to his mental training, education, honor, or anything of the kind.”

The association’s founders had a huge undertaking before them when they assembled in Chicago’s YMCA Hall in May 1908: to create a unified, national voice for the real estate industry but also to give structure to the industry itself. They wanted to turn a vague, unregulated profession into something practitioners could be proud of and consumers could trust.

The work started right away. By 1912, the association was promoting such concepts as exclusive agency and written contracts to sell property. The multiple listing system was developed. In 1913, the Code of Ethics was adopted. And in 1916, the association began calling its members “REALTORS®,” giving the public a way to quickly identify real estate professionals who subscribed to the organization’s Code of Ethics (the term was trademarked in 1949). The association also began working with state legislatures to enact uniform real estate licensing laws and lobbied Congress for tax incentives to help promote homeownership.

The early steps worked. The founders had foreseen an ultimate membership of 4,500 to 5,000, but by 1916, shortly before the United States entered World War I, the association had 6,000 members.

Through subsequent years, the association worked with the Wilson, Harding, and Coolidge administrations to encourage homebuilding and establish the mortgage interest deduction. Homeownership grew and membership grew with it, surpassing 24,000 by 1926.

When the stock market crashed in October 1929 and the Great Depression began to take hold of the nation’s economy, real estate took an especially hard hit. Homeownership was at an all-time high at the end of the 1920s but by 1940 had fallen to levels not seen since 1890. The association’s membership shrank to less than 19,000 in 1930—and continued to drop throughout the decade.

Although the Great Depression brought hard times on real estate and the nation, it also proved a blessing in disguise. It was during this time that many of the things Americans take for granted about real estate ownership were put in place. Working closely with Congress and the Hoover and Roosevelt administrations, the association was influential in creating the modern mortgage loan system. Twenty- and 30-year loans were unheard of before the 1930s. Their existence today makes homeownership possible for millions of Americans. The Federal Home Loan Bank System, FHA, Fannie Mae (then known as the Federal National Mortgage Association), and other institutions and financial safeguards so familiar today were put in place in the 1930s.

The country’s population exploded after World War II, as thousands of servicemen came home and started families, sparking the baby boom. Families became homeowners in droves, and the association grew accordingly. From only 14,162 members in 1940, there were more than 43,000 REALTORS® by 1950.

As more people became homeowners and investors, the association grew. The 50,000 mark was reached in 1954, and by 1972, there were more than 100,000 REALTORS®. At the national convention in Hawaii that year, Barry Gillingwater, a property manager from Austin, Texas, was officially recognized as the 100,000th REALTOR®. “It was incredible,” says Gillingwater, still an active practitioner. The day the call came from the association, he had just returned from the hospital, where his son had been born. “It was such a special day, becoming a father and the 100,000th REALTOR® on the same day,” says Gillingwater, owner of Gillingwater Properties Inc. “Being a REALTOR® and what it has afforded me has been fantastic.”

In 1974, the NATIONAL ASSOCIATION OF REALTORS® opened its membership to real estate salespeople (it had previously been limited to brokers), and membership quadrupled almost instantly.

By the end of 1975, there were 435,485 REALTORS® and REALTOR-ASSOCIATES®. That same year, the first computerized MLS was created by the Long Island Board of REALTORS®. And 1975 was vital for another reason too: Although the Fair Housing Act had been passed in 1968, NAR and the real estate industry had been slow to respond to the growing needs of minorities. Arthur Leitch, the association’s president in 1975, put NAR’s affirmative marketing program in place that year, requiring every local board to support equal housing opportunity. The action ushered in a new era, bringing NAR policies in line with national policies and laws and helping assure that housing would be available to all Americans, regardless of race, color, religion, sex, or national origin. (Additional protected classes—families and the disabled—were added in 1988.)

It was during the 1970s that consumers really saw the value of homeownership as an investment. The price of a home increased 140 percent between 1970 and 1979, from $23,000 to over $55,000. So when the economy slowed during the 1980s, the real estate industry flourished. By 1989, NAR had more than 820,000 members.

The 1990s took the U.S. economy on a wild ride, from the recessionary years early in the decade through the late-’90s boom times. The stock craze made some Americans suddenly wealthy, and many put their newfound money into real estate. More immigrant households and others took the homeownership plunge in the 1990s, too, as interest rates fell to levels not seen since the 1970s. In 1996, existing-home sales exceeded 4 million for the first time, breaking all of the previous records. Three years later, in 1999, home sales broke past the 5 million mark.

During that wild ride, technology and other sectors began to take off. As a result of the strong labor market, many real estate professionals left the industry. Although homeownership and real estate investment grew during the 1990s, the association lost 100,000 members by 1997.

But the decline was short-lived. The sustained strength of the housing market—existing-home sales soared past 6 million in 2003—has brought many new people into the industry, 70,000 in 2002 and 100,000 in 2003 alone. Some are starting second careers; others are seeking refuge from the popping of the tech bubble in 2000. At the same time, practitioners are staying in the business, and in the association, longer. Membership has grown steadily since 1997, and in March, it officially hit 1 million, adding one more milestone for an industry that’s has, for nearly 100 years, been a cornerstone of the American dream.

REALTORS®’ service tradition

In some of the country’s darkest times, REALTORS® have come together to provide assistance and show their commitment to the nation. In one of the most devastating events in the country’s history, four planes were brought down by terrorists, killing thousands in New York City, Washington, D.C., and Pennsylvania on Sept. 11, 2001. Within 24 hours, NAR’s members had launched the massive REALTORS® Housing Relief Fund, ultimately raising and distributing more than $8 million to 1,223 families of victims over the course of three months.

The fund was part of a long REALTOR® tradition of providing skills and services when the nation is most in need. One month before the United States entered World War I in 1917, William May Garland, the association’s president, offered the services of its boards and members gratis for whatever purposes the government needed. The day after Pearl Harbor, the association again offered its services and that of its members to the government.
Throughout World War II, REALTORS® assisted the government in appraising and acquiring land and buildings for the war effort and in providing housing for the growing ranks of servicemen and their families. REALTORS® have also united locally and nationally throughout the century to provide funds and services to communities affected by floods, earthquakes, fires, and hurricanes.

Despite all that’s changed since NAR’s founding in 1908—the new laws and regulations, the uncertain impact of new technologies, depressions, recessions, boom times, wars, and peace—one thing has remained. To the communities and the nation they serve, REALTORS® are much more than just business professionals.

TIMELINE

1900 Homeownership rate is 46.7%.

1908 The National Association of Real Estate Exchanges (later NAR) is founded in Chicago on May 12.

1912 Titanic sinks on its maiden voyage from England to New York.

1913 First NAR Code of Ethics is adopted, and membership stands at 6,000.

1914 World War I begins.

1916 The association changes its name to the National Association of Real Estate Boards and adopts the term REALTOR® for its members.

1917 United States enters World War I; one year later, Germany surrenders.

1920 Homeownership rate is 45.6%, and NAREB has 10,077 members; Congress passes the mortgage interest deduction.

1923 NAREB adopts the REALTOR® “R” emblem.

1929 In October, the stock market crashes, marking the beginning of the Great Depression.

1930 Homeownership rate is 47.8%, and, NAREB has 18,918 members.

1933 Unemployment hits 25%.

1940 Homeownership rate dips to 43.6%, and NAREB membership falls to 14,162.

1941 Dec. 8, one day after Japan’s surprise attack on Pearl Harbor, the country enters into World War II.

1945 In May, Germany surrenders to the Allies; in September, Japan surrenders to the United States, ending World War II.

1949 The term REALTOR® is granted trademark status by the U.S. Patent Office under

Registration Number 515,200. The emblem is granted trademark status the following year.

1950 Homeownership rate is 55%, and NAREB has 43,503 members.

1960 Homeownership rate is 61.9% and NAREB has 68,818 members.

1962 Cuban Missile Crisis brings the United States and the Soviet Union to the brink of war.

1963 President John F. Kennedy is assassinated.

1964 Congress enacts the Civil Rights Act.

1968 Title VIII of the Civil Rights Act of 1968, better known as the Fair Housing Act, outlaws discrimination in housing; NAR begins tracking existing-home sales.

1969 Neil Armstrong walks on the moon; NAREB forms the Real Estate Political Action Committee (REPAC), which later becomes the REALTORS® Political Action Committee.

1970 Homeownership rate is 62.9% and NAREB has 94,625 members.

1973 The last U.S. troops pull out of Vietnam as a peace pact is signed in Paris.

1974 NAREB changes its name to NATIONAL ASSOCIATION OF REALTORS® (NAR) and opens membership to real estate salespeople. President Nixon resigns.

1980 Homeownership rate is 64.4%, and NAR has 761,391 members.

1988 Fair Housing Amendments Act adds handicap and familial status to the types of discrimination outlawed.

1989 Berlin Wall falls, marking the end of the Cold War; NAR adopts The Voice for Real Estate® as its theme. Membership peaks at 822,935, a level it won’t reach again until 2002.

1990 Homeownership rate is 64.9%, and NAR has 810,607 members.

1997 REALTOR.com is officially launched.

1998 NAR launches public awareness campaign.

2000 Homeownership rate is 67.4%, and NAR has 766,560 members.



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