What Are the Best Cities for Real Estate Agents?

What Are the Best Cities for Real Estate Agents?

by The CE Shop Team

Determine the Best and Worst Cities for Real Estate Agents 

While we’re here to talk the "best and worst cities for real estate agents", we should note that real estate touches the lives of people everywhere. Likewise, the benefits of a real estate career exist everywhere. There are, however, some places where it’s a touch easier to get a real estate business off the ground. In this guide, we’ll take a closer look at some well-known cities to see which areas are better for agents. 

Here are some things to consider when evaluating a city for to start your real estate business:

  • Cost of Living
  • Potential Average Commission
  • Real Estate Education Hour Requirements 
  • General Housing Market Health (including job market and unemployment rate according to the U.S. Bureau of Labor Statistics)
  • Overall Tax Burden

Like anything worth doing, starting a real estate business comes with a certain amount of financial risk. Not surprisingly, it takes time to start generating revenue, which is why new real estate agents can go months without an income. In areas where the cost of living is high, many new agents begin their real estate career while working another job, whereas less expensive places allow for new agents to drop everything and focus completely on home sales. We’ll break down the five costliest places to live in the U.S. along with the five least expensive places to live below. 

U.S. Cities With the Highest Cost of Living 

1. San Francisco, CA 
Average home value: $1,542,347
Median rent cost: $2,572
Overall state tax burden rank: 10
Cost of a gallon of milk: $4.79\
Median household income: $112,449
Population: 873,965

2. New York City, NY 
Average home value: $737,699
Median rent cost: $3,050
Overall state tax burden rank: 1
Cost of a gallon of milk: $4.56
Median household income: $63,998
Population: 8,550,405

3. Oakland, CA
Average home value: $953,536
Median rent cost: $2,100
Overall state tax burden rank: 10
Cost of a gallon of milk: $4.45
Median household income: $73,692
Population: 440,646

4. Honolulu, HI
Average home value: $822,357
Median rent cost: $1,700
Overall state tax burden rank: 2
Cost of a gallon of milk: $6.78
Median household income: $85,857
Population: 1,016,508

5. Washington, D.C., MD
Average home value: $693,655
Median rent cost: $2,222
Overall state tax burden rank: N/A
Cost of a gallon of milk: $3.50
Median household income: $86,420
Population: 689,545

U.S. Cities With the Lowest Cost of Living 

1. Memphis, TN
Average home value: $134,721
Median rent cost: $896
Overall state tax burden rank: 49
Cost of a gallon of milk: $3.11
Median household income: $41,228
Population: 633,104

2. Tulsa, OK
Average home value: $166,530
Median rent cost: $953
Overall state tax burden rank: 44
Cost of a gallon of milk: $3.59
Median household income: $47,650
Population: 413,066

3. Oklahoma City, OK
Average home value: $180,538
Median rent cost: $831
Overall state tax burden rank: 44
Cost of a gallon of milk: $3.74
Median household income: $55,557
Population: 681,054

4. St. Louis, MO
Average home value: $163,639
Median rent cost: $918
Overall state tax burden rank: 39
Cost of a gallon of milk: $2.95
Median household income: $43,896
Population: 301,578

5. San Antonio, TX
Average home value: $248,346
Median rent cost: $1,075
Overall state tax burden rank: 30
Cost of a gallon of milk: $3.08
Median household income: $52,455
Population: 1,434,625

Potential Real Estate Commissions vs. Median Home Price 

Commissions are calculated based on the sale price of the property, so markets with higher home values generally lead to higher commissions. On the flip side, the pool of buyers who can afford an $800,000 house is a lot smaller than the pool that can afford an $300,000 house, so there’s a lot more competition to win their business. Agents in less expensive markets aren’t necessarily at a disadvantage; they might just have to approach the business slightly differently.

While each brokerage does things differently, commissions generally consist of 5-6% of the sale price. That 6% is split between the listing agent and the buyer’s agent, meaning each agent gets 3% of the sale price. That 3% is then split between the agent and the brokerage firm for which they work. 
In some cases, agents keep 95% of that figure and the brokerage takes 5% (known as a 95/5 split). In other cases, agents keep 70% and the brokerage keeps 30% (known as a 70/30 split) — it just depends on the type of brokerage (some provide agents with more resources, support, and benefits than others but take a larger cut of the commission). 

Note: Agents, both new and experienced, should also recognize that metrics may be inflated due to the pandemic and that interest rates are on the rise. This could lead to more inventory and less demand, resulting in a slight cooling of the markets.

To get a better understanding of what agents in each respective market make per transaction, here is the standard commission split breakdown applied to each of the aforementioned markets:

Market:

Average Home Value in Market: 

3% Agent Commission Pre Tax: (After split 95/5)

3% Agent Commission Pre Tax: (After split 70/30)

San Francisco, CA

$1,545,059

$44,034.18

$32,446.24

New York, NY

$741,622

$21,136.23

$15,574.06

Oakland, CA

$961,248

$27,395.57

$20,186.21

Honolulu, HI

$824,605

$23,501.24

$17,316.71

Washington, D.C.

$692,376

$19,732.72

$14,539.90

Memphis, TN

$139,694

$3,981.28

$2,933.57

Tulsa, OK

$169,554

$4,832.29

$3,560.63

Oklahoma City, OK

$183,125

$5,219.06

$3,845.63

St. Louis, MO

$166,529

$4,746.08

$3,497.11

San Antonio, TX 

$276,049

$7,867.40

$5,797.03


The CE Shop’s Picks: Best and Worst Cities for Real Estate Agents 

As mentioned previously, agents in larger cities make more in commission, but there’s more competition and a smaller buyer pool. In markets where the cost of living is far above the national average, agents rely heavily on their networks to make deals come to fruition. In less expensive cities, agents still rely on their network but potential homebuyers can more easily be reached via marketing efforts simply because there are more qualified buyers out there. 

Now, it’s tempting to assume that the more expensive the market, the better it is for real estate agents — which is true for commissions — but that’s not necessarily the case overall. A great place to operate (especially if you’re just starting out) should be a nice balance between cost of living, growth potential, and market stability overall. With that said, here’s how we’d rank the markets in terms of best and worst overall markets for agents. 

(*These are purely The CE Shop’s general summations on the markets and in no way should discourage anyone from starting a career in real estate. It should also be noted that real estate markets are inherently complex and constantly evolving. It is our full belief that any agent, with enough hard work and determination, can make the most of any market regardless of its metrics). 

The Best Cities for Real Estate Agents 

1. Washington, D.C.

Why: While Washington, D.C. has a fairly high average home value of $693,655, it’s much less than cities like New York City, San Francisco, San Jose, Oakland, and even Los Angeles, meaning there’s room to grow. Couple that with a market that’s supported by lots of reliable, high-paying government jobs, as well as a thriving private-sector, and you’ve got fertile ground for a blossoming real estate career. Also, Washington, D.C. has grown in population by 14.6% since 2010 — nearly double the average rate — and it’s expected to continue. Plus, many D.C. agents also sell in Virginia and Maryland. 

Honorable mention: On the other side of the country, the Phoenix suburb of Buckeye City, Arizona, just earned the title of fastest growing city in the U.S. last year. 

2. San Antonio, TX

Why: Despite being one of the nation’s biggest metropolises, the average home value in San Antonio is only $248,346 — meaning commissions are good but the cost of living is still relatively low. Here, new real estate agents can focus completely on building their career while tapping into a large pool of potential homebuyers so they can eventually work their way up to selling prime lots in the Texas hill country or even nearby Austin. Along with a healthy private sector ripe with projected job growth, San Antonio also has a large military population adding a healthy dose of economic stability to the market. Not to mention, San Antonio remains one of the country’s fastest-growing cities. 

Honorable mentions: Houston and Dallas/Fort Worth also show promise in that they're both large economic drivers with business-friendly environments, yet the cost of single-family homes remains low, leaving them both poised for real estate growth. 

3. Oakland, CA

Why: Oakland offers roughly all of the same benefits as San Francisco (which you can sell as well), but at a much lower price point — albeit $953,536 is still quite high. New remote work attitudes, hybrid offices, and its proximity to the cradle of tech innovation make getting a foot in the door with up-and-coming entrepreneurs more likely in Oakland. Here you’ll likely find former San Francisco residents looking to get more bang for their buck, which is why Oakland continues to outgrow its housing needs. 

Honorable mentions: Seattle, Washington, isn't far behind Oakland in terms of average home value at $915,340 but offers a similarly robust, tech-heavy local economy. Behind that Denver, Colorado, rounds out the tech hub/outdoor lifestyle scene with average home values around $599,742. 

4. Oklahoma City, OK

Why: Oklahoma City offers a nice blend of irresistible affordability and potential growth. That’s great, both for agents looking to get their business off the ground and investors looking for long-term gains. Over the past decade, Oklahoma City has experienced and ultra-impressive 17.4% population growth with no sight of slowing down. 

Honorable mention: With a reasonable average home value of $399,108 (though much higher than OKC's $178,115), Las Vegas, Nevada, is experiencing slightly higher population growth to OKC at 18.7%. 

5. New York City, NY

Why: Operate within the right circles in New York City, and the possibilities are endless. From large international investors to young financial professionals, there are plenty of opportunities to sell in the Big Apple. Could you imagine selling this $169 million penthouse? With that said, competition is fierce, prices are high (but not as high as California), and the high cost of living makes going without pay difficult. But if agents can make it in NYC, America's largest city, they can make it just about anywhere in the world. Despite what you might have heard, it’s growing, too. 

Honorable mentions: While New York remains the country's largest financial center, Charlotte, North Carolina, actually holds the title of the country's second-largest banking hub. Meanwhile, Raleigh, North Carolina has one of the nation's best talent pools, attracting employers from all over the country. ​

The Worst Cities for Real Estate Agents 

5. Honolulu, HI

Why: In Honolulu, the high cost of living adds extra challenges when it comes to beginning your a real estate career. Limited inventory and high prices make finding clients and buyers ultra-competitive, which can deter some agents, but there is room for growth. The big sales are likely to come from outside the islands or from an international client, so the most successful agents must build networks both inside and outside the state.  

4. San Francisco, CA

Why: With an average home value of $1,542,347, San Francisco is definitely a playground for the affluent. Prudent financial ideology states that families should put 20% down on their house and spend no more than 28% of their gross income on their mortgage, meaning your average client should be able to throw down a cool $306,343 and make somewhere between $325-$350,000 per year (significantly more than the median HHI of $112,449). These clients aren’t impossible to find, but there are far fewer folks in that income bracket. 

3. Tulsa, OK

Why: Tulsa isn’t a bad market, nor is it a bad place to live. In fact, quite the opposite. The low average home value of $166,530 means real estate agents will have to focus on generating more leads and closing more transactions, which can be challenging in and of itself. 

2. St. Louis, MO

Why: St. Louis, like other Midwestern industrial hubs, has had its fair share of ups and downs. U.S. Census data shows that the city (and its metro area) isn’t really growing nor is it declining, but its low median income of $43,896 and a relatively high (compared to other U.S. cities) poverty rate of 21.8% might mean job opportunities are lackluster, therefore it’s tougher than usual to reach qualified buyers. 

Honorable mention: The state of Illinois is among only a few states to see an overall population decline. On the other hand, Chicago remained steady, but large tax burdens and corruption make other large cities better bets for growth. 

1. Memphis, TN

Why: Low average home values and high crime (sadly, Memphis was named America’s second most dangerous city), which can likely be deemed a residual effect of redlining practices predating the Fair Housing Act, are causing more affluent buyers to look in other parts of Tennessee (e.g., Nashville). That doesn’t mean Memphis isn’t a great place to live, but as the population declines, more inventory becomes available — and that drives down prices. Agents may get the perception that they’re swimming against the current and be left singing the real estate blues. 

Honorable mention: Montgomery, Alabama, as well as other parts of the state are also experiencing population decline similar to Memphis. 

Regardless of where you are in the country, with enough hard work and determination, you can build a successful career in real estate — even in rural Indiana or smaller cities along the coast of Florida. Like anything worth doing, starting a real estate career takes significant dedication, fine-tuning, and perseverance. The trick is to stick with it, reach out to mentors, and never forget that your goal is to help others with one of the best financial decisions of their lives. Once you’re up and running, there’s nothing in the world quite like a career in real estate.