All brokerages are entering the winter of real estate: Mike DelPrete

New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here.

Q3 results are in for the large, publicly listed brokerages and revenues are down across the board — but that’s only part of the story.

Why it matters: The velocity of decline between brokerages varies, providing early insight into which companies may be at higher risk than others in a cooling market.

Dig deeper: Compared to the previous quarter, all brokerages experienced a drop in revenue — which is expected from a seasonal perspective.

• Douglas Elliman and Compass experienced the largest decline, a likely combination of concentration in more upscale markets (NYC and California) that are cooling faster than others.

Behind the numbers: Driving the revenue decline is a drop in overall market transactions compared to the previous quarter.

• Notably, Compass closed 18 percent fewer transactions than the previous quarter, which is double the 9 percent decline in transactions for the entire residential real estate market as reported by NAR.
• Astute observers will note Douglas Elliman’s 7 percent decline in transactions compared to a 25 percent decline in revenue; this is driven by a 13 percent drop in average sale price.

Yes, but: In Q2, Compass outperformed the market with a 41 percent quarterly increase in transactions compared to an overall market increase of 28 percent.

Compared to last year, most brokerages experienced a significant revenue decline in Q3 (remember, 2021 was an outlier).

• The exception is eXp, which is benefiting from tremendous growth in agent count, transaction volume and market share.
• eXp’s year-over-year growth stands in notable contrast to industry heavyweights Anywhere and Compass, which both experienced year-over-year declines in revenue.

What to watch: It’s exceedingly likely that revenue will continue to decline for the next two quarters, which is absolutely normal from a historical and seasonal perspective.

• The key metric to watch is the velocity of decline and how it varies between peers and compares to the overall market.

The bottom line: All brokerages are entering the literal and figurative winter of real estate.

• The next two quarters are always the slowest in the industry, and coupled with a cooling market, are going to be especially challenging.
• Fewer transactions and lower revenue will put pressure on all brokerages, with some affected more severely than others.