Most real estate professionals are very optimistic about their brokerage’s business model. But more are beginning to question that, based on a review of the latest Inman Intel Index results.
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Say what you will about real estate agency models: They are nothing if not flexible.
When the market declines, both agents and broker owners share the financial pain. And, of course, there’s cost cutting. But those cuts are typically limited to categories such as technology and staffing that support the deal.
These are flexible models that can weather many storms—even if profit margins are hard-earned throughout.
Agents and brokers continue to express confidence in themselves in this depressed market, according to the latest results from the Inman Intel Index survey.
- Agents and decision makers alike are interested in their Confidence in the brokerage business model just above a 4 points out of 5 points on average in the latest survey.
- Still, confidence had been slipping in the weeks leading up to that, especially as agents became increasingly Unlikely to report full confidence in their company’s business model.
Those results were collected in late February and early March, ahead of news of a major settlement between the National Association of Realtors and Compass in their ongoing commission litigation.
The results paint a clear picture of continued confidence in current business models (irrespective of the business environment) since the launch of the Intel Index last year.
What’s less clear is how this time-tested model will play out if these settlements succeed in changing how and how much brokerage firms make money, especially on the buy-side of transactions.
This core question remains unanswered. Intel sent a series of early questions to the Inman community in March as part of the ongoing survey and will report these insights to subscribers in the coming weeks.
Take the March Intel Index Survey Now
But even in the days leading up to these latest shifts, the typically unwavering faith in the brokerage business model was showing signs of strain among agents and creating increasingly divisive thinking among brokerage leaders.
Read their insights in the full report below.
when suspicion spreads
Agents are likely to give their brokerage model an average rating of 4 out of 5, but their outlook has worsened in recent months.
- This is the first time since the launch of the Inman Intel Index in September that Less than half of agents rated their confidence in their brokerage business model 5 points (out of 5 points).
- Percentage of agents who rate their business model confidence as a 3 out of 5 or worse rise in 19% January to near 26% In February.
The results during this period are best explained as a reaction to market conditions and perhaps to general sentiment about the litigation before the NAR settlement became public knowledge.
In other words, while business model confidence was largely dominant before the settlement, it may have been eroded even before the agreement was formed.
This erosion of confidence is consistent with the outlook for agents Other key indicators This month is tracked by the Intel Index. For example, hopes for the customer pipeline in the coming year remain largely optimistic. But this enthusiasm is always tempered with caution. And it’s slowing down further.
The settlement’s short-term impact on this line of thinking will remain unknown until the investigation concludes in March. The long-term effects will take months or even years to track. These issues are among the ones Intel will track most closely in its investigations and reporting.
different prospects
Unlike brokers, brokerage leaders have had a less clear trajectory in recent months.
Brokerage owners and executives — who keep a closer eye on the books than the typical broker — have been more conservatively optimistic.
If anything, the events of recent months may have pushed policymakers to two extremes.
- Brokerage leaders were more likely to express moderate confidence in January, with 66% Assess their confidence in the company’s business model 3 or 4 out of 5.For comparison, only 42% of agents chose the same option.
- As of February, the proportion of leading brokerage firms with the same moderate positive confidence level dropped to 57%.
- Brokerage leaders are being pushed in two different directions: Increasingly optimists are pushing “5 points (out of 5 points)” response selection from 30% January to 35% in February; meanwhile, a separate, rising wave of pessimism drove 1 or 2 out of 5 Reply Share from 4% January to 8% In February.
Ultimately, the numbers reflect the sentiment of an industry whose hopes for this year have been dashed as the Federal Reserve delays rate cuts, mortgage rates remain high and sellers remain reluctant to list.
They may just be preparing themselves for the bigger changes to come.
Methodological Notes: Inman of the Month Intel index poll Taking place from February 20 to March 3, 2024.Invite the entire Inman reader community to participate, and Intel 811 replies received.Respondents to this poll They were directed to the SurveyMonkey platform where they self-identified their profile in the residential real estate market. Respondents were limited to one response per device, but there was no limit on IP address. Once a profile is selected (residential real estate agent, mortgage broker/banker, business executive/investor/proptech or other), respondents answer a unique set of questions for that specific profile.because poll There is no requirement for demographic information such as age, gender, or geographic location, and there is no weighting of the data.this poll Will be conducted monthly, with recurring questions and unique questions for each profile type.
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