by Brianna Crandall — October 17, 2014—Real estate firms are confident about the future growth and profitably of their industry in both the residential and commercial markets, according to the 2014 National Association of Realtors Profile of Real Estate Firms.
“The real estate industry is competitive, and Realtors know that to be successful they must have a strong entrepreneurial spirit and the know-how to make a business thrive, even in a difficult market,” said NAR President Steve Brown, broker/owner of Irongate, Inc. Realtors in Dayton, Ohio. “Despite continued challenges, real estate firms expect market growth in tandem with the ongoing recovery.”
Most residential firms have a positive view of the future, with 66% of firms expecting to see profit from all their activities to increase in the next year. Lawrence Yun, NAR’s chief economist, says that commercial firms also have a confident outlook for the coming year. “Commercial real estate firms are even more optimistic, with 71% expecting profitability to improve,” said Yun.
According to the survey, 81% of firms specialize in residential brokerage, with commercial brokerages and residential property management as the most popular secondary functions. A full 84% of firms are independent, non-franchised firms, while 14% are independent, franchised firms. The remainders are subsidiaries of a national or regional corporation.
The typical residential real estate firm’s brokerage sales volume was $4.7 million in 2013, while the typical commercial real estate firm’s brokerage sales volume was $4.3 million. Firms reported that 35% of their sales volume typically comes from past client referrals, 30% from repeat business from past clients, 10% from their Web site and 5% through social media.
The average residential firm has been in business for 12 years, and the average commercial firm has been operating for 17 years, found the report. The majority (81%) of all brokerages have one office and two full-time real estate licensees, while 7% have four or more offices with 92 full-time real estate licensees.
The most common concern cited by firms (59%) was Millennials’ ability to buy a home due to stagnant wage growth, a slow job market, and their debt-to-income ratios. Profitability, keeping up with technology, maintaining sufficient inventory, and local or regional economic conditions are the next-most-reported concerns firms see themselves facing in the next two years.
The survey found that despite those concerns, firm growth has not slowed. Nearly half (45%) of firms reported they are currently recruiting sales agents, with 87% of those firms reporting business growth as their primary reason for recruiting.
Firms also expect industry competition to increase in the next year. Half (48%) predict this will come from non-traditional market participants, 41% predict it will come from virtual firms, and 16% expect competition from traditional brick-and-mortar firms.
A full 81% of firms offer errors and omissions/liability insurance to independent contractors, licensees and agents, making it the most common benefit firms offer their employees. However, many firms share the cost of the insurance with their employees. Only 21% of firms offer their independent contractors, licensees and agents health insurance, and in most cases the employee pays for the benefit.
The 2014 NAR Profile of Real Estate Firms was based on a questionnaire mailed in August to a national sample of 134,108 executives at real estate firms. This generated 7,081 usable responses, with a response rate of 5.8%. The study is free for NAR members, and costs $149.95 for non-members.
The National Association of Realtors, “The Voice for Real Estate,” is said to be America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
