Real Estate

Real estate firms adopt conservative outlook for near future: NAR survey

Housing affordability is the main challenge looming over real estate companies in the near future

With the prolonged cooldown in the housing market amid ever-rising mortgage rates, real estate brokerage owners are adjusting their profitability expectations for the year.

In fact, just 30% of real estate firms think their net income will increase this year, down from 58% in 2021 during the housing boom, according to the 2023 Profile of Real Estate Firms by the National Association of Realtors.

Over the next two years, housing affordability, inventory and advances in real estate-related technology are the three biggest challenges weighing on real estate companies, the survey revealed.

“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,” said Jessica Lautz, NAR’s deputy chief economist and vice president of research. “This surpassed the concern of maintaining sufficient inventory, which we saw in 2021.”

Affordability is the most urgent issue impacting current buyer demand, said Chief Economist Danielle Hale.

“The lack of housing affordability is one of the big reasons that we’re seeing lower sales volumes in the housing market,” Hale said. “For real estate firms, entities that make a living on helping people make the biggest purchase of their life, lower sales mean fewer opportunities to add value and thus lower revenues.”

She added: “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.”

In spite of the housing slowdown, 40% of real estate companies reported that they were actively recruiting sales agents in 2023, up slightly from 38% in 2021.

NAR surveyed its broker members of record to collect data on their firms’ demographics, composition and characteristics from a leadership perspective. These insights help NAR evaluate how real estate firms operate and learn what issues they’re most concerned about in the near future.

Single-office firms, which represented the majority of companies (81%), had a median brokerage sales volume of $5.3 million and 15 real estate transaction sides in 2022, brokers of record reported. This was up from $4.5 million and down from 19 transaction sides, respectively, in 2020.

Larger firms with four or more offices posted a median brokerage sales volume of $154.6 million and 403 transaction sides in 2022, NAR found. Compared to 2020, it was an increase from $146.2 million and down from 571 transaction sides.

Additionally, nearly half (48%) of the sales volume was generated by past clients or at least past client referrals (47%). Those numbers improved from 2021 when only 30% of sales volume came from past clients.

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