Growth Forecast for REALTOR® Firms

Let’s take a snap shot into the minds of REALTOR® firms and their projection for business in the near-term from the 2016 Profile of Real Estate Firms. First, we know that roughly half (47 percent) of all firms are actively recruiting agents in 2016, up from 44 percent in 2015. Hiring is always an indicator of industry health. At the peak, 88 percent of large firms with four or more offices are actively recruiting. Firms cited that their main reason for recruitment (at 86 percent) is that they are experiencing growth in their primary business area. Another reason for recruitment, at roughly two-thirds (64 percent), could be that firms have the expectation of profitability to increase in the next year—from mid-2016 to mid-2017—which is consistent across residential and commercial firms and grows to 72 percent for larger firms with multiple offices.

Firms’ view of their competition is always fascinating. By and large, firms expect the level of competition to stay the same from all angles, meaning traditional brick and mortar firms, virtual firms, and non-traditional market participants. Forty-six percent of firms cited that competition was expected to increase from virtual firms and 43 percent expected an increase from non-traditional market participants, which is not a surprise and is consistent with 2015.

The biggest challenges firms face are profitability, keeping up with technology, and maintaining sufficient inventory. New challenges that emerged were TRID or TILA-RESPA Integrated Disclosure (17 percent) and wire fraud (12 percent). However, competition from traditional brick and mortar firms, virtual firms, and non-traditional market participants all moved down a few percentage points in 2016 compared to last year. The recruitment of younger agents, agent retention, and local or regional economic conditions all moved up by a few points as expected challenges in the next two years.

For the first time on the 2016 survey, we asked if firms had an exit plan in place, as in if they have a backup strategy in case they want to change industries due to economic shifts, or simply if they plan to retire and want to pass the torch. Thirty-eight percent of firms said they did in fact have an exit strategy while 43 percent said they did not plan on retiring or leaving the business.