Nearly 70% of Real Estate Firms See Higher Profits Next Year

The real estate industry expects to see greater competition as the housing market recovers, with 69% of firms expecting profitability over the next year, according to the National Association of Realtors (NAR).

“Two out of three real estate firms expect competition in the marketplace to increase, both among firms and nontraditional market participants,” said Paul Bishop, NAR vice president of research. “Because real estate is an entrepreneurial field, some experimentation in business models is likely when the market is in a recovery phase.”

Independent, non-franchised companies comprise 84% of real estate firms surveyed by NAR’s Profile of Real Estate Firms, while 13% are independent franchises—the rest are subsidiaries of a national or regional corporation. 

These independent firms are agencies that general have fewer agents and lower sales volumes, according to NAR.  

An estimated 80% of firms nationwide operate out of a single office and have an average of two licensees, whereas only 8% of firms have four or more offices, but have a median of 100 licensees. 

Larger firme were more likely to have increased staffing, notes NAR, as firms with four or more offices added, on average, 10 licensees during 2012. 

“Although conditions vary around the country, 45 percent of real estate firms are actively recruiting agents, largely due to growth in their primary business,” said NAR President Gary Thomas.

As for challenges over the next two years, Thomas adds that six in 10 firms cite profitability, while 44% identified local or regional economic conditions and 42% are concerned about both maintaining sufficient inventory and keeping up with technology.

The typical residential real estate firm handled a median of 25 transaction sides in 2012, representing a dollar volume of $4.4 million, NAR notes. 

The impact of technology varied among firms with more than one office.

About 10% of a firm’s median sales volume was generated by a website, but less than 1% came from social media. However, firms with three or more offices obtained 5% of their businesses through social media.

Aside from technology, the vast majority of sales were from prior relationships with clients and from referrals. 

Written by Jason Oliva

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