Affordability Surpasses Inventory as Top Housing Industry Concern

Housing affordability, maintaining housing inventory, and keeping pace with tech advances were among the biggest challenges cited by firms in the next two years, according to the 2023 Profile of Real Estate Firms by the National Association of Realtors (NAR).

The report measures characteristics of firms nationwide to determine how they operate and assess what lies ahead. NAR surveyed its broker members of record to better understand firms’ demographics, composition and characteristics from the executive and manager perspective.

“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 Deputy Chief Economist and VP of Research. “This surpassed the concern of maintaining sufficient inventory, which we saw in 2021.”

In terms of business operations, the report found that 81% of real estate firms operated from a single office and typically had three full-time real estate licensees. Roughly nine out of 10 firms (86%) were independent and non-franchised.

Nearly one-third of brokers of record (31%) were CEOs, COOs, presidents, or owners of a multi-office firm, while 65% were managers or owners of a single-office firm.

Single-office firms had a median brokerage sales volume of $5.3 million and 15 real estate transaction sides last year, up from $4.5 million and down from 19 transaction sides, respectively, in 2020. Firms with four or more offices had a median brokerage sales volume of $154.6 million and 403 transaction sides in 2022, an increase from $146.2 million and a decrease from 571 transaction sides two years ago.

The typical firm generated 48% of its sales volume from repeat business from past clients and 47% from past client referrals.

“Housing affordability has had an impact on real estate firms’ overall sales activity,” noted Lautz. “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.”

Errors and omissions/liability insurance was cited as the most common benefit as 43% of the firms polled offered it to independent contractors, licensees, and agents. E-signature, comparative market analysis, electronic contracts/forms and multiple listing were the most common tools provided or encouraged by firms. A quarter (25%) of all firms offered a virtual office space for agents and staff, while 8% offered a virtual assistant.

Thirty percent of the firms polled expect profitability or net income from all real estate activities to increase this year, down from 58% in 2021.

When asked about generational effects on the real estate industry in the next two years, the top concerns for firms were young adults’ ability to buy a home (63%), young adults’ view of homeownership (38%), and baby boomers retiring from real estate (27%).

“Due to tight inventory, the outlook among real estate firms is more conservative since the pandemic-induced housing boom,” Lautz said. “Only 30% of real estate firms believe there will be an increase in profitability from all real estate activities, compared to 58% two years ago.”

For the report, in July 2023, NAR invited a random sample of 176,291 Realtors who were executives and senior management at real estate firms to fill out an online survey. NAR received 5,889 usable responses for an overall response rate of 3.3%. The confidence interval at a 95% level of confidence was +/-1.27% based on the share of real estate executives at real estate firms.

Click here for more information or to view a copy of the 2023 Profile of Real Estate Firms by the National Association of Realtors (NAR).