Top challenges for RE firms? Affordability, inventory and new technology. One-office firms had median sales volume of $5.3M – 30% expect higher profits this year.
WASHINGTON – The National Association of Realtors® (NAR) released its study of real estate businesses this week. The 2023 Profile of Real Estate Firms found that housing affordability, sufficient inventory and new technology ranked among their biggest challenges as they plan for next two years.
The report measures characteristics of firms nationwide. It analyzes how they operate currently and how they see the future through a survey sent to broker members. The goal is to better understand firms’ demographics, composition and characteristics from the executive and manager perspective.
“With interest rates rising to more than 20-year highs, it is no surprise that the biggest current concern for real estate firms is housing affordability,” says Jessica Lautz, NAR deputy chief economist and vice president of research. “This surpassed the concern of maintaining sufficient inventory, which we saw in 2021.
Real estate firm characteristics
In 2022, four out of five (81%) real estate firms operated out of a single office and typically had three full-time real estate licensees. Almost nine out of 10 (86%) were independent and non-franchised.
Nearly a third of brokers of record (31%) were CEOs, COOs, presidents or owners of a multi-office firm, and almost two-thirds (65%) were managers or owners of a single-office firm.
Single-office firms had a median brokerage sales volume of $5.3 million and 15 real estate transaction sides last year – more income (up from $4.5 million year-to-year) yet fewer transaction sides (down from 19) compared to 2020.
Firms with four or more offices had a median brokerage sales volume of $154.6 million and 403 transaction sides in 2022, an increase from $146.2 million and a decrease from 571 transaction sides two years earlier.
The typical firm generated 48% of its sales volume from repeat business from past clients and 47% from past client referrals.
“Housing affordability has had an impact on real estate firms’ overall sales activity,” says Lautz. “There are fewer buyers who can purchase a home due to the rise in prices and interest rates, and fewer sellers are motivated to make a move. While sales are down, sales volume has increased as home prices have augmented because of limited inventory.”
Benefits provided to agents and staff
Almost half of real estate firms (43%) provide errors and omissions/liability insurance – the top benefit listed – to independent contractors, licensees and agents. E-signature, comparative market analysis, electronic contracts/forms and multiple listing were the most common tools provided or encouraged by firms. One in four (25%) offered a virtual office space for agents and staff, while 8% offered a virtual assistant.
Future outlook for real estate firms
Fewer firms (30%) expect profitability or net income from all real estate activities to increase this year, a drop from 58% in 2021.
When asked about generational impacts over the next two years, firms’ top concerns focused on young adults’ ability to buy a home (63%), but also on their view of homeownership overall (38%). One in four (27%) were concerned about the number of baby boomers retiring from real estate.
- 40% of firms were actively recruiting sales agents in 2023
- 38% expected competition to increase from virtual firms and 28% from nontraditional market participants
- 64% expected competition in 2023 to stay the same from traditional brick and mortar single office firms, and 62% expected competition to stay the same from larger traditional brick and mortar firms
- 40% of all firms said they had an exit plan for when they decide to retire or exit the real estate industry
© 2023 Florida Realtors®
Go to Source