Keeping up with technology, maintaining sufficient inventory, competition from nontraditional participants and profitability are among the biggest challenges for real estate firms, according to the National Association of Realtors 2017 survey titled 2017 Profile of Real Estate Firms.
Conversely, for a third year in a row, the survey found the vast majority of firms have an optimistic outlook for the future of the industry’s growth. Although expectations have slightly decreased from last year’s survey, firms remain confident and expect profitability from all real estate activities to increase or stay the same over the next year.
“Real estate firms continue to have a very positive outlook on the state of the industry. As the survey found, 90 percent of real estate firms expect net income to increase or remain the same over the next year,” says NAR president William E. Brown, a second-generation realtor from Alamo, California and founder of Investment Properties. “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.”
The report is based on a survey of firm executives who are members of the National Association of Realtors and provides insight into the business characteristics and activity of firms, benefits and education provided to agents and outlook for the future.
Real estate firms are sensing strengthened competition this year, as 50 percent of firms expect competition to increase in the next year from non-traditional market participants, up from 43 percent in 2016. Half of firms expect competition during the same period to increase from virtual firms (up from 47 percent in 2016), while only 15 percent expect competition will increase from traditional brick-and-mortar firms.
“There is no doubt that the real estate industry is rapidly changing, and with it comes growing competition,” said NAR CEO Bob Goldberg. “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.”
According to the survey, 60 percent of commercial firms expect profitability from all real estate activities to increase in the next year, compared to 64 percent in 2016. Residential real estate firms are more optimistic compared to commercial firms; 62 percent of firms expect profitability to improve, compared to 65 percent in 2016.
The typical residential real estate firm’s brokerage sales volume was $6.2 million in 2016 (down from $6.3 in 2015), while the typical commercial real estate firm’s brokerage sales volume was $4.0 million in 2016 (down from $4.5 in 2015).