In a year that went from highs to lows, Power Brokers maneuvered through an economic decline—along with the ramifications of the Federal Reserve’s ensuing response—to persevere as best as possible, but not without feeling the impact.
In this exclusive release of the Top 1,000 Power Brokers, Premier subscribers can now see who landed where in the ranking along with five years of statistics for each firm.
The Top 1,000 Power Brokers
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The results of RISMedia’s 35th Annual Power Broker Report reveal that the Top 1,000 firms experienced a more than $220B decrease in collective sales volume over 2021, based on over 670,000 fewer transactions.
These significant decreases in overall sales volume and transactions reflect the rollercoaster ride that was the 2022 residential real estate market. Competition intensified among the industry’s largest players in a year that started out strong, thanks to the remnants of the pandemic boom, then dropped off at year end as the Fed focused on reeling in inflation with interest-rate hikes beginning in March.
“The Fed’s efforts to slow the economy, unfortunately, brought the real estate market to a grinding halt, negatively impacting the market as much or more than any other consumer-facing industry,” says Michael Lattmann, broker/owner of Kienlen Lattmann Sotheby’s International Realty. “The impact is still being felt today; inventory remains at or near all-time lows as homeowners have declining motivation to sell—no place to go and no desire to trade in their 3% mortgage rate for a 6.25% mortgage rate. Lenders, Fannie Mae and the government need to work together and be creative to enable portable mortgages that homeowners can take from property to property.”
Amidst this tumultuous economic environment, the industry’s largest brokerage operators took measures to steady the ship and stay afloat.
“There isn’t a company in the housing industry that didn’t feel the effects of the pace of change in the market in 2022,” says Anywhere Brands President & CEO Sue Yannaccone. “But for Anywhere, we were already in the midst of executing our strategy to make the transaction simpler while rearchitecting our business for the future in a way that better leverages our scale. So, when we started to see the rapid shift to a tougher market, we chose to see it as an opportunity to accelerate our efforts to structure our company for the changing needs of agents and consumers.”
Crisis for some, opportunity for others
As the market fluctuated, residential brokerage firms turned to an array of cost-cutting measures. Some also seized the opportunity to acquire and increase agent count as real estate professionals jumped ship for firms that might sustain them through the downturn. This resulted in eXp Realty surpassing longstanding leaders HomeServices of America and Anywhere Advisors (formerly Realogy) to grab the No. 1 spot in transactions. eXp’s agent-centric model led to an increase of more than 10,000 agents for the firm in 2022 versus 2021, which helped fuel its rise to the top of the transaction ranking.
“We continue to focus on creating a very agent-centric real estate brokerage model,” says eXp Realty CEO Glenn Sanford. “We did cut some costs last year because the market was slowing down quite a bit, and outside of that, it was really about continuing to figure out what agents were looking for.”
Meanwhile, Compass once again took the No. 1 spot in sales volume. During a February 28 earnings call, company CEO Robert Reffkin attributed the company’s performance in 2022 to expense management.
“We took decisive steps throughout 2022 to reduce expenses and drive operating efficiencies in the business, with a very specific goal to become free cash flow positive for 2023,” Reffkin said during the call. “We are prepared to move swiftly to implement additional cost cuts if the market turns out to be worse than expected.”
Lingering signs of the pandemic boom
While losses mounted virtually across the board, the Top 500 Power Brokers continued to witness some of the effects of 2021’s pandemic boom, such as scores of new entrants to the residential real estate field. While collective sales volume and transactions declined in 2022, agent count continued to rise, with a total increase of more than 40,000 agents among the Top 1,000 brokerage firms.
Another pandemic-era phenomenon also continued to make its mark in 2022: rising home prices. The average home price among the Top 1,000 firms increased to $518,043 over the cohort’s 2021 average home price of $492,836.
A slowdown in this rampant price appreciation is evident in 2023 so far, according to Power Brokers. “The real estate market of 2023 is a bit of a hangover,” says Kyle Estrada, production manager at CENTURY 21 Allstars. “As inventory levels remain low, pricing has not been as negatively affected as expected by rising interest rates—meaning we are still living in a hybrid seller’s market. Sellers are benefiting from the still-high sales prices, but buyers have the opportunity of patience because of increased days on market. I see 2023 as a positive as we head into selling season.”
What a difference a year makes
While at this time last year the highest percentage of the Top 1,000 Power Brokers reported their market conditions as “Booming” (39%), things are not nearly as rosy this year, with many respondents (36%) describing their market as “Challenged” followed by “Slowing” (29%). While these troubling descriptors took the top two spots, they were closely followed by the more encouraging “Balanced” (23%).
While maintaining the dubious honor as the No. 1 challenge to business for the sixth year in a row, the percentage of Power Brokers who report “Lack of Inventory” as the biggest obstacle to business did decrease, from 79% last year to 46% this year, reflecting the gradual uptick in listings over the past few months. Rising on the list of challenges this year are, unsurprisingly, interest rates, economic uncertainty and affordability.
“The sudden increase in interest rates left buyers and sellers uncertain about what the future would look like for home values,” says Anna Reiswig, CFO of Keller Williams Realty Heritage. “The market does not respond well to uncertainty, and slowed as a result. Due to the Q1 trend of interest rates dropping, the market has started to reinvigorate, and we are cautiously optimistic for the remainder of 2023.”
According to ERA Legacy Living CEO Jemila Winsey, these issues will continue to have a “significant impact on business.”
“The severity of the impact, either positive or negative, is one that we need to be prepared for,” she explains. “For us, we are bracing for the worst and preparing our business, as every business should. We are focused on streamlining our operations and cutting expenses that derive little to no ROI. We are also investing in recruiting quality agents with entrepreneurial mindsets and hearts of service instead of stacking in quantity. We are rethinking our physical spaces to ensure we are expandable, scalable and efficient.”
Turning the focus inward
As unpredictability remains the flavor of the day, Power Brokers like Winsey are turning their focus inward, stepping up resources and strategies to support agents and help them succeed in spite of national economic developments and their impact on local market conditions.
“We expect to lose a significant number of agents that will be leaving the industry,” says Shelly Vincent, managing broker of HomeSmart Realty in Greenwood Village, Colorado. “Our platform benefits agents in a down market, though, so we hope to leverage that to grow agent count during this time in spite of the attrition.”
“We believe this is where the more seasoned agent who puts in the daily work will succeed,” says Ryan Farrell, vice president of operations at J.P. Weigand & Sons. “With our ongoing training and agent support, we think this could actually be a positive, and attract other talent.”
According to Edward Tull, COO of JBGoodwin REALTORS®, temperamental market conditions trigger understandable hesitancy among buyers, many of whom are opting to wait for rates to come down again. This calls for agents who are well-prepared to educate clients on the realities of the market.
“We are coaching our agents on how to help their clients overcome challenges they are facing in this market,” he states. “Our team has committed themselves to helping our agent partners ‘get back to the basics of real estate’ to generate more business from their spheres.”
North&Co. Brand Director Andrea Larson concurs. “Over the last year, the real estate industry faced immense change and disruption; through it all, our brokerage found success in getting laser-focused on supporting our agents’ business plans, sales strategies and overall confidence,” she explains. “Our core focus on our people and professionals has been the constant force propelling us to greatness, and it gives us a hopeful outlook in 2023.”
Where will growth come from?
Given the still-dicey market conditions of 2023 so far, Power Brokers will need to vary their strategies for growth. As Jolene Weinstein, COO of Realty Austin says, “Everyone is rethinking their business and their brokerage. 2023 is the battle of the brokerages.”
While Power Brokers hold out hope for first-time homebuyers/millennials to drive the market, according to the largest percentage of respondents (27%), many plan to increase marketshare by taking it, pointing to mergers, acquisitions and roll-ins, and recruiting (and retaining) new agents as their best bet for increasing business.
“Now will be the time to grow our agency and increase production through mergers and acquisitions in the 9-10 states we currently serve or are beginning to serve,” says James D’Amico, CEO of CENTURY 21 North East.
Power Brokers are also betting on business returning as we progress through the year.
“I believe the market will pick up just after the first quarter of 2023 as the buyer will have acclimated to the new rates and realize that this is our new market,” says Leo Betancourt, broker/owner of RE/MAX Terrasol. “It’s now just the end of January (at press time), and an increase can already be seen in production.”
What the future holds
If ever we needed a crystal ball, it would be now. As economic and geopolitical conditions remain unsettled, a market bounce-back hangs in the balance and mostly hinges on interest rates, according to Power Brokers.
“In 2023, several factors are expected to prevent the housing market from making a rapid return to the level of the previous two years,” says Jenni Bonura, CEO of Harry Norman REALTORS®. “With interest rates remaining high, and inflation putting upward pressure on the cost of living for an extended period, more people will feel financially squeezed. As consumer spending reflects this, companies will continue to adjust staffing levels, and this broader economic uncertainty is likely to create hesitancy in the housing market.”
“We are most concerned in the short term about interest rates/inflation,” says Dave Sansom, CFO of Carolina One Real Estate Services. “If 30-year rates manage to creep back down into a range where the rate starts with a 5, then I think the housing market will be strong, with the real tipping point being 5.5% or below. If inflation persists and rate hikes push mortgage rates consistently into the 7%-plus range, then things will be difficult. Government spending and the national debt have to be reigned in by our estimation.”
According to Kevin Walsh, CFO of CENTURY 21 New Millennium, 2023 is likely to be a “tale of two halves,” with an upswing expected in the second quarter.
“Q2 results will help the industry navigate to the new norm as mortgage rates settle,” says Walsh. “The larger question remains inventory levels and the market’s ability to provide the necessary supply for a healthy national market. We expect 2023 to remain a challenged market with existing-home sales on an annualized basis to level off at 5 million units, up from where 2022 ended but below an appropriate level for a balanced market.”
While the economy will continue to dish out more than its fair share of trials, other lurking issues stand to shape the future for Power Brokers as well. “I think the most interesting unknown factor this year will be the outcome of the class action antitrust suits,” says Andrew Lohmiller, CEO of Lohmiller Real Estate. “Every brokerage should be preparing for different possible outcomes, as we are.”
To see the complete list of the Top 1,000 firms, ranked by both sales volume and transactions, along with five years of statistics for each firm, please visit RISMedia’s Power Broker Directory at https://www.rismedia.com/power-broker-survey-results-2023.
RISMedia’s 2023 Power Broker Report is sponsored by: