Markets & Economy

NAR survey: Profitability biggest challenge facing real estate firms

Millennial homebuyers a concern of more than half of survey respondents

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Takeaways:

  • 69 percent of residential real estate firms expect an increase in net income next year.
  • 45 percent of firms expect increased competition from nontraditional participants.
  • The millennial generation’s inability/ability to buy a home in the next two years was a concern among 54 percent of respondents.

Nearly all — 95 percent — of all real estate firms are expecting their net income to either increase or stay the same in the next year despite increased competition and market concerns, according to the 2015 National Association of Realtors Profile of Real Estate Firms.

Residential real estate firms are the least optimistic, with 69 percent expecting an increase in their net income next year. Roughly 25 percent expect income to remain the same, with 6 percent anticipating a decrease.

The findings are based on an online survey that received 4,555 executive responses. Of those responses, 82 percent specialize in residential brokerage, with 7 percent focusing on residential property management.

2015-profile-of-real-estate-firms-infographic-08-06-2015

More than half of firms surveyed — 51 percent — cited profitability as the biggest challenge facing their firms in the next two years. At 46 percent, the second most common response was keeping up with technology and maintaining sufficient property inventory.

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Forty-five percent of firms expect to see increased competition from “nontraditional market participants” in the next 12 months. Another 41 percent expect to see increased competition from virtual firms. Only 16 percent expect increased competition from traditional brick-and-mortar firms.

The millennial generation’s inability/ability to buy a home in the next two years was a concern among 54 percent of respondents, who pointed to stagnant wage growth, a slow job market and millennials’ debt-to-income ratios.

The size of a residential firm has a direct correlation to its sales volume. NAR’s findings show that firms with only one office had a median brokerage sales volume of $4.1 million in 2014. Those with four or more offices had a median brokerage sales volume of $250 million.

Correspondingly, those with one office had a total of 18 real estate transaction “sides” in 2014, while those with four or more offices had 900 real estate transaction sides.

Email Erik Pisor.