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Say what you want about real estate brokerage models: They’re nothing if not nimble.
When the market goes south, agents and broker-owners alike share in the financial pain. There’s cost-cutting, to be sure. But these cuts are often limited to categories like technology and staffing that support the transaction.
These are flexible models that can weather many storms — even if the margins are hard-won the whole way through.
And they’re models that agents and brokers alike continue to express confidence in through this down market, according to the most recent available results from the Inman Intel Index survey.
- Agents and decision-makers alike rated their confidence in their brokerage’s business model at just above a 4 out of 5 on average in the latest survey.
- Still, faith had been slipping in the weeks leading up to that point, with agents in particular becoming less likely to report total confidence in their firm’s business model.
These results, gathered in the closing days of February and the early days of March, predated the news of major settlements by the National Association of Realtors and Compass in the ongoing commission lawsuits.
The results paint a clear picture of sustained confidence in the present business models — independent of the business climate — that had prevailed since the Intel Index launched last year.
What’s less clear is how this time-tested model will fare if these settlements succeed in upending how — and how much — brokerages can make, particularly on the buyer side of the transaction.
This central question remains unanswered for now. Intel has sent an early series of questions to the Inman community in its ongoing March survey, and will report back to subscribers with these insights in the coming weeks.
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But even in the days before these latest shifts, a typically stalwart confidence in the brokerage business model was showing signs of strain in the minds of agents, and producing increasingly divided thought among brokerage leaders.
Read their insights in the full report below.
When doubt creeps in
Agents may rate their brokerage model a 4 out of 5 on average, but their outlook has soured a bit in recent months.
- For the first time since the launch of the Inman Intel Index in September, fewer than half of agents rated their confidence in their brokerage’s business model a 5 out of 5.
- The share of agents who rated their business model confidence a 3 out of 5 or worse rose from 19 percent in January to nearly 26 percent in February.
The results from this period are best interpreted as a response to market conditions and, perhaps, general sentiment toward the lawsuits as it was before the NAR settlement became public knowledge.
In other words, while business-model confidence largely prevailed prior to the settlement, it may have already been eroding even before the agreement took shape.
This erosion in confidence coincides with agent outlook on other key indicators tracked this month by the Intel Index. Hopes for client pipelines in the year to come, for example, remain largely positive. But that enthusiasm was always of a cautious variety. And it’s moderating further.
The settlement’s short-term impact on this line of thinking will remain unknown until the current March survey closes. Its long-term effect will take months and possibly years to track. These questions are among those that Intel will be tracking most closely in its surveys and coverage.
A diverging outlook
Unlike agents, brokerage leaders have followed a less clear trajectory in recent months.
Broker-owners and executives — who keep closer tabs on the books than the typical agent — have consistently been more reserved in their optimism.
And if anything, the events of recent months may have nudged decision-makers nearer to both extremes.
- Brokerage leaders in January were more likely to report a moderate degree of confidence, with 66 percent rating their confidence in their firm’s business model at a 3 or 4 out of 5. For comparison, only 42 percent of agents chose those same options.
- By February, the share of brokerage leaders with the same moderately positive confidence level dropped to 57 percent.
- Brokerage leaders were driven in two distinct directions: A growing group of optimists boosted the “5 out of 5” response choice from 30 percent in January to 35 percent in February; while a separate, rising tide of pessimism pushed the 1 or 2 out of 5 response share from 4 percent in January to 8 percent in February.
Ultimately, these numbers reflect the sentiment of an industry whose hopes for the year were set back somewhat as the Fed delayed rate cuts, mortgage rates remained stubbornly high, and sellers continued to be reluctant to list.
And they may have only set the table for the bigger changes to come.
Methodology notes: This month’s Inman Intel Index survey was conducted Feb. 20-March 3, 2024. The entire Inman reader community was invited to participate, and Intel received 811 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.
