Real Estate Firms Expect Profit, but Struggle With Disruptors, Supply

Ninety percent of real estate firms expect to boost or maintain profitability in the next year, but not without struggles from advancements in technology, “competition from non-traditional participants,” and low inventory, according to the National Association of REALTORS®’ (NAR) 2017 Profile of Real Estate Firms.

Sixty-two percent of residential firms and 60 percent of commercial firms see profits rising over the next year, even as sales volume has slightly tempered: $6.2 million for residential firms in 2016, down from $6.3 million the year prior, and $4.0 million for commercial firms in 2016, down from $4.5 million the year prior.

“Real estate firms continue to have a very positive outlook on the state of the industry,” says NAR President Bill Brown. “As the survey found, 90 percent of real estate firms expect net income to increase or remain the same over the next year, but for the second year in a row, low inventory and high prices have led to a slight decrease in real estate firms’ sales volume.”

Sales volume is largely tied to firm size, the Profile shows. Firms with one office had a median sales volume of $4.3 million in 2016, while firms with four or more offices had a median sales volume of $235.0 million.

Fifty percent of firms are concerned about contending with “virtual” firms—a challenge NAR plans to meet head-on, says CEO Bob Goldberg.

“There is no doubt that the real estate industry is rapidly changing, and with it comes growing competition,” Goldberg says. “To stay ahead of this evolution and succeed in a more competitive market, NAR is establishing a new Strategic Business and Technology group to focus on business and technology solutions that ensure the role of the REALTOR® is essential to the consumer.”

Fifty-two percent of firms, in addition, are uneasy about millennial homebuyers’ ability to purchase a home, while 34 percent and 32 percent, respectively, are wary of millennials’ views on homeownership and recruiting millennials and Gen Xers to their firms. Forty-nine percent of residential firms are recruiting sales agents, compared to 29 percent of commercial firms, with most recruitment efforts stemming from firms with four offices or more.

Referred and repeat clients continue to be the most common for firms, with each comprising 30 percent of inquiries, the Profile shows. Twenty percent of inquiries were from the firm’s website or social media; 1 percent were from open houses.

Eighty percent of firms (82 percent of residential firms and 79 percent of commercial firms) are also emphasizing the importance of community involvement, encouraging their agents to volunteer in their community. Forty-three percent are focused on motivating their agents to volunteer with their local REALTOR® Association, 25 percent with their state REALTOR® Association, and 18 percent with NAR.

NAR’s 2017 Profile of Real Estate Firms is based on an online survey sent in July 2017 to a national sample of 165,598 real estate firm executives who are members of NAR.

For more information, please visit www.nar.realtor.

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