Do real estate brokerage firms have any intrinsic value?

Upstairs Realty

Well-known member
I'm so confused by this. The justice pulls a case between real estate firms A and B in 2019; in 2021 he hires, instead of one of the many other firms in New York, one of those two specifc firms to sell his property, but doesn't recuse himself then, and no one catches it then?

And then the property sells at some kind of warp speed, going into contract two months after it's listed... and he's... mad? Did he decide, as buyers often do, that if the listing agent sold the property quickly that he had underpriced it?
 

David Goldsmith

All Powerful Moderator
Staff member

Expansion teams: Residential brokerages take on new frontiers​

As buyers fan out across the nation, firms take their growth strategies on the road​

In February, Douglas Elliman signaled its arrival in Vero Beach, a small Florida city about 75 miles up the coast from Palm Beach, by scooping up Daley and Company, a local brokerage that it said had closed more than $232 million in sales since 2020.
Founder Sally Daley said that her firm has always made an effort to target buyers from the city’s feeder markets, including Connecticut, Michigan and Canada, but operating as an independent brokerage had stifled its efforts.
Joining a larger operation like Elliman’s is “a way to strengthen our outreach and get exposure in front of brokers and clients when they’re up in, say, Connecticut, and they’re thinking about coming to Florida,” she said.
Elliman’s expansion to the area is part of a larger push into what chairman Howard Lorber described in March as “low-cost states,” including Florida, Arizona and Nevada, as the pandemic has driven more of its clients to seek homes in different parts of the country.
“We always go where our clients go,” said Scott Durkin, CEO of Douglas Elliman Real Estate, who noted that the firm has opened offices in Austin and Dallas and plans to expand to Scottsdale, Las Vegas and Nashville while bolstering its presence in markets closer to its core, including Fairfield County, Nantucket and the Hudson Valley.
Beyond the need to follow buyers, another factor encouraging brokerages’ forays into new markets is reduced overhead costs in a largely work-from-home world.
“Agents are out in the field much more,” Durkin said. “As long as you’re licensed within a state, you can sell real estate anywhere. It’s all mobile, and you really never have to go into a brick-and-mortar space ever again if you don’t want to.”
“It’s much more economical now to expand,” he added.

New frontiers​

Elliman is not alone. As markets like Texas emerge as destinations for buyers with newfound freedom to work remotely, brokerages that have historically focused on larger, more established markets are hoping to capitalize.

Compass, which said it entered 25 new markets last year, further expanded to Richmond, Virginia, and Chapel Hill, North Carolina, in March and opened its first permanent office in Sacramento. In both Richmond and Chapel Hill, the brokerage launched its presence by bringing on established local teams totaling at least 30 agents.
Los Angeles-based luxury specialist The Agency, which launched 11 additional franchises last year, recently announced a new division that focuses on selling single-family homes in the suburbs. The operation will start by catering to homebuilders on the West Coast before expanding nationally.
“I don’t think there’s any big secrets on the list of luxury markets around the globe in terms of what’s hot,” The Agency’s founder and CEO, Mauricio Umansky, said. “But it’s about making a sustainable business and not just following the hot new thing.”
When it comes to recruitment, brokerages can plow ahead by luring individual agents or teams or “acqui-hiring” — buying independent brokerages or scooping up franchises wholesale.
Late last year, Chicago-based @properties acquired the brand assets of Christie’s International Real Estate, a deal that saw approximately 900 Christie’s-affiliated offices around the world transferred to @properties.
“The Christie’s brand was the body of a Ferrari, a beautiful frame body of a car, and we have the best motor and best engine, which was our technology, marketing, training and coaching,” said Thad Wong, co-CEO of @properties. “So by combining the two, we thought we’d have the best value proposition to help independent brokers grow.”
To keep and attract talent, Keller Williams launched the KW Expansion Network, which standardizes compensation plans for agent teams that want to grow beyond their local markets and connects them with resources at its franchise locations across the country. The arrangement means that as its top agents expand, Keller Williams does too.
“We’re literally trying to offer a way to have your cake and eat it too,” said Cody Gibson, director of expansion and growth at Keller Williams.
Luring new agents can be more difficult.
“The majority of strong top producers aren’t going to leave a company for just a couple more bucks,” Wong said.
Wong referenced the “Compass effect,” whereby the venture-funded brokerage rapidly gained market share by attracting top brokers with generous incentive packages, including stock options.
“Nobody joined Compass for their culture or anything,” Wong said. “They really joined because they were given more money.”
When a firm establishes a culture based on signing bonuses and high commission splits, Wong said, it’s difficult to “shift that to something more meaningful.”
Still, there’s no denying Compass’ continued success in increasing its market share, even if those efforts contributed to its nearly $500 million net loss last year. The brokerage, which declined to comment for this story, reported that its agent count had swelled to more than 26,000 by the end of last year. In its full-year earnings report, Compass claimed that most who joined in the fourth quarter “took a less favorable split than at their previous brokerage.”
Umansky said The Agency looks to recruit agents that will fit well with its organizational culture rather than simply targeting brokers with top sales totals.
“We do not have recruiting managers that are just out there dialing for dollars to see who they can get,” he said. “We don’t count how many agents we have. We count our market share.”
 

David Goldsmith

All Powerful Moderator
Staff member
Ironically

Douglas Elliman profits plunge more than 50%​

CEO Howard Lorber says brokerage will consolidate offices to save money​

In its second earnings report after being spun off from a tobacco company, Douglas Elliman came to grips with a harsh reality: It’s difficult to run a profitable brokerage.
Net income fell by more than 50 percent to $6.5 million in the first quarter, down from $14 million the year prior.

Consolidated operating income was $7.9 million, compared with $14.2 million a year ago. Just a quarter earlier, it was $20.1 million.
In part, the first quarter earnings were down due to costs associated with going public. Public company expenses were $6.662 million.

But not all of Elliman’s numbers were down. Consolidated revenues rose to $308.9 million, an increase of 13 percent or $36.1 million from the prior year period. That was thanks in part to Elliman’s real estate brokerage segment achieving a gross transaction value of approximately $11.7 billion, up from $10.1 billion for the first quarter of 2021.

In the past year, the average home price in sales handled by the firm was $1.62 million, indicative of the expensive housing markets in which it operates.

New York City remains Elliman’s largest market with $17.3 billion in gross transaction value in the past 12 months. South Florida was not far behind at $14.7 billion.
The housing market has been hot for most of the pandemic, thanks to low inventory and mortgage rates, accelerated moving plans, a quest for more space and second homes, among other factors.

However, there are signs that rising mortgage rates and more home listings will put an end to the real estate gold rush. Active listings were down 12.2 percent year-over-year in April, but that was the smallest such decline since December 2019, according to Realtor.com.
Chairman and CEO Howard Lorber, though, said the prospect of more expensive mortgages will further motivate Americans to buy homes.

“What I’ve seen in the past over the years is that as rates start going up, that brings people into the market quicker, because they don’t want to be priced out of the market,” Lorber said in a call with investors.
The brokerage continues to branch out into new markets, such as Dallas, where it recently hired 60 agents. Still, when asked about office space, Lorber had an answer that likely would not amuse his commercial counterparts.

“When leases start coming due, we’re going to consolidate and save some substantial money on rent over the next few years,” Lorber said.
 

David Goldsmith

All Powerful Moderator
Staff member


Top resi execs talk brand building, tech and politics at TRD NYC event​

BHS CEO Bess Freedman, Serhant founder Ryan Serhant and Douglas Elliman CEO Scott Durkin kicked off industry discussions​

Brown Harris Stevens CEO Bess Freedman is no fan of the wave of real estate reality TV shows that made Ryan Serhant, founder of the eponymous brokerage, famous – and she let him know as much during a panel discussion for The Real Deal’s New York City Showcase + Forum.

“I do think reality TV is very deflating to what we do because I think it makes it look effortless,” Freedman said, pointing to Netflix’s recent hit “Selling Sunset” as a misleading look at the industry. “It makes the consumer think all you have to do is look cute, have a fancy car and boom — you can do a deal.”

A wide-ranging discussion between Serhant, Freedman and Douglas Elliman CEO Scott Durkin at times turned into a showdown between the industry’s old guard and the new wave.

Durkin and Freedman emphasized the value of legacy firms, which they say provide infrastructure and a transfer of knowledge crucial to developing less experienced brokers, as opposed to a brand-centric approach.

“It’s a relationship business,” Freedman said. “You need technology, that’s a given, but you also need to understand the buildings and the process.”

Serhant, who built his firm around harnessing the power of his reality TV stardom, touted his firm’s in-house production team, studios and public relations team.

“To give those agents the resources to build their own brands so they can generate leads in their sleep … I wanted to create a platform where they could do that,” he said.

The panelists’ conversation came back to relationships as they weighed Compass’ growth in recent years, which has largely taken shape by wooing and poaching agents with generous sign-on offers. Durkin cast doubt on the company’s future, which has looked rocky in recent months after the stock plummeted in the wake of its IPO before rebounding to over $5 since its last earnings report.

“If you don’t have the structure we have at our companies here, a lot of people went to the other side and they realized there isn’t much there,” Durkin said. “I’ve never been one for fixed marriages and, as Bess said, a lot of people are turning around and coming back.”

The three panelists did find common ground on the city’s politics and the future of the residential real estate market, which they said would be buoyed by tight inventory.

All three voiced optimism for New York City Mayor Eric Adams’ nascent administration, but Durkin aired a few specific requests for the new mayor.

“Clean up the damn city, it’s kind of dirty and filthy and full of garbage, get rid of those exterior restaurant sheds, they’re really awful,” Durkin said.

Freedman and Serhant voiced support for pro-business policies and policies that keep rich residents in the city.

“You have to be pro-New York, you have to be pro-industry, you have to be pro-business,” Serhant said. “It’s trickle down.”
 

David Goldsmith

All Powerful Moderator
Staff member
Mike DelPrete


Brokerage Slowdown Begins​

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All real estate brokerages experience a seasonal decline in revenue during the first three months of the year -- but the amount varies between brokerage.

Why it matters: The degree of revenue decline highlights which companies are under- and over-performing "the market" -- a possible leading indicator of who may be in more or less trouble during a turbulent year ahead.
  • Quarterly revenue has declined the most at Redfin and Realogy, the least at eXp and Douglas Elliman, and Compass sits right in the middle.
  • Consequently, Compass and Realogy are in the midst of a steep, seasonal revenue drop while eXp slowly makes it way closer to the top.
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The market is slowingand real estate agents are doing fewer transactions.
  • For example, the number of transactions per agent at Compass is at record lows, lower than Q1 last year and on par with the early days of the pandemic.
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The bottom line: The market is softening. Less transactions mean less brokerage revenue.
 

David Goldsmith

All Powerful Moderator
Staff member
Redfin was taking at almost 97 on February 19. It closed at 11.06.

Is it last call for America’s housing boom?​

Buyers are chasing deals as mortgage rates rise and the market slow​

For months, Compass agent Diana Sutherlin has been running like a bartender at last call. Catering to a diverse clientele looking for a new residence on New Jersey’s Gold Coast — condos and waterfront homes in Hoboken, Jersey City and Weehawken — Sutherlin’s life has been dominated by cash offers and bidding wars as determined buyers, including those relocating from New York City, race to close a deal before interest rates and prices rise further.
Now, Sutherlin says, the market is slowing. She’s advising clients to buy for the long haul.

“It can’t continue at this rate,” she said. “The demand from desperate buyers — that’s a renewable resource today. People are paying more than they might have paid before. But I tell people to buy a place a little larger than they need, so they can stay there longer, build up equity, and ride this market out.”
At the high end, housing continues to reach previously unthinkable prices as buyers fight for limited inventory. It’s a national phenomenon, not just in pricy coastal enclaves; year-over-year home values increased in 99 percent of metro areas across the United States, according to recent research from the Terwilliger Center for Housing Policy.
Between the stratospheric price gains and rising mortgage rates, buyers eyeing a larger home or a fancier address would be paying an increasing amount for the same place. This is the emerging trade-up gap. That renewable resource of desperate buyers with the will and the means to compete for a dwindling number of homes is shrinking; homeowners with low rates locked in are more reluctant to sell, knowing they’ll pay more to borrow for their next purchase; first-time buyers are increasingly getting priced out of the market.
As the supply of move-up buyers dwindles, the market’s machinery will slow, possibly drastically.
“Is the party over? Depends on who the party guest is,” said Brad Hunter, founder of Hunter Housing Economics. “Those who already own a home feel pretty good. The trouble comes with a 30-year-old couple with a kid on the way that wants a suburban home with a yard. It’s not just the monthly payment, or the trouble coming up with a down payment.”

Trickle-up economics​

At the low end, 9 million potential buyers have already been priced out by rising mortgage costs, while higher rents are stymying first-time buyers’ ability to save for a down payment to get them onto the housing ladder. As the market cools from last year’s red-hot pace, the loss of those entry-level buyers means move-up buyers have no one to sell to as the effect ripples to the top.
Roughly 80 percent of mortgages right now are locked in at 5 percent or lower, said Rick Palacios, Jr., director of research at John Burns Real Estate Consulting. If that rate rises significantly, it will likely limit buying potential and suppress inventory on the resale side. Plus, he said, there’s significant capital being deployed in the build-to-rent market, and giant rental landlords waiting to scoop up any additional inventory.
Brad-Hunter-quote.jpg
“I think you can say the gears are slowing, but not totally stopping,” Palacios said. “Housing is the Fed’s sacrificial lamb. When your backdrop is chaos, and that’s what we’re in now, the only thing the Fed can control is rates. It’s immediate; when the Fed moved rates to 5 percent, the housing market immediately slowed down.”
“If the market slows, which it definitely is from our vantage point, every company that touches the housing food chain will feel the impact.”

Taken aback​

Realogy, now renamed Anywhere, has almost 200,000 agents and a constellation of real estate brands including Century 21, Coldwell Banker and Sotheby’s International Realty. CFO Charlotte Simonelli said earlier this year that the company’s “continued momentum reflects the strength of our core business,” highlighting $1.6 billion in first-quarter revenue and a 10 percent year-over-year increase in closed transactions. eXp, a rapidly growing brokerage aiming to have more than 100,000 agents by the end of the year, saw global sales blossom, with $1 billion in revenue and 55 percent more agents. Even so, with 88 percent of the company’s agents in the U.S., the firm’s executives see the domestic market slowing.
Redfin, one of the nation’s top brokerages, performed better than expected, adding market share and increasing online search volume, and Compass saw revenue jump 25 percent year-over-year, reducing losses and attracting more agents, and becoming the top brokerage by sales volume.
Most of that record-setting quarterly performance happened before rates started to rise, inflation got worse, and a sentiment shift truly took hold.
By late May, amid growing concerns about falling home sales, Redfin’s stock had fallen 73 percent over the last 6 months, and Compass was down about 40 percent.
Now, agents across the country are seeing signs of a slowdown, especially outside of the Sun Belt; a second-quarter RealTrends survey found 42 percent of brokers expecting sales to be down over the next three months. The Real Estate Board of New York’s most recent Broker Confidence Index score, in a third-straight quarter of declining optimism, found residential agent sentiment sinking, even compared with office brokers hawking desolate central business districts.
Ryan Schneider, Anywhere’s CEO, told CNBC in early May that rising rates are a “headwind” for the industry, but people are still buying; during a May 12 interview for the firm’s Investor Day event, he went into more detail, noting that any slowdown will affect the firm “across the board,” and that the sector most impacted is sub-$500,000 homes, with first-time buyers struggling and listings declining.
“If Millennials don’t have the down payment savings — and our survey data shows most of them don’t, the median amount saved is zero — with rents increasing it gets harder and harder to save that money,” said Chris Salviati, an economist at Apartment List. The rent increase nationally has been 17 percent, and in some markets, has topped out around 30 percent.
Carrie McCormick, whose firm specializes in luxury Chicago real estate, said the shift happened seemingly overnight. Buyer fatigue was obvious: homes going under contract haven’t had as many multiple offers, the offers aren’t nearly as aggressive, and the lines and excitement at open houses weren’t there anymore.
“I have clients who say they don’t want to look around anymore, their buying power is way down,” said Colin Stok, a Denver agent. His boss Kelly Moye, who has seen showings for houses on the market shrink after Easter weekend, said she expects a very different second half of the year, telling writers of a local real estate report that, “they say you only know when the downturn comes right after it happened.”
The slowdown means brokerages will be faced with falling sales at a time when their workforces have been inflated. The National Association of Realtors hit a record of nearly 1.6 million members in 2021, up from 1.4 million at the end of 2019. McCormick believes this will lead to a weeding out of brokers later this year because “a lot of people jumped in thinking the market was always hot and easy.”
Stok said he’s planning to ride it out. “I’m leaning more on the leasing side of the real estate now,’’ he said. “Lots of people just aren’t wanting to buy.”
Rick-Palacios-quote.jpg

The brokerage industry has adopted a wait-and-see attitude, says Adam Ducker, CEO of consultancy RCLCO. “It’s almost surprising that it’s not worse,” he said. “The sentiment is, ‘let’s be careful, let’s keep our fingers on the pulse. If we need to pivot our strategy, don’t do it now, it’s too uncertain.’”
The wild pricing gains that fueled so much broker revenue came after decades of underbuilding and the largest generation in history, the millennials, entering prime homebuying ages without the resources to compete.
The nation is short 5.8 million homes, said Realtor.com Chief Economist Danielle Hale; that’s more than five years of building at a fast pace, without the natural attrition of units over time. Experts surveyed by Zillow agreed that even with a slight boost in inventory in March, it would take until fall 2024 for depleted inventory to hit pre-pandemic levels.

Sitting on capital​

That shortage has been pushing prices higher as buyers with the cash or access to cheap mortgages compete for a dwindling inventory, especially at the high end. Home sales have decreased every month this year, according to the Census Bureau.
One factor keeping housing inventory low, and prices high, is the single-family rental industry that was born out of the 2008 housing crash. Across the country, when homes become available, investors buy them and turn them into rentals. Even builders are getting in on the act, producing homes built to rent.
“Groups of investors small and large are sitting on mountains of capital to build their rental portfolios,” Palacios said ($40 billion, according to some estimates). “These groups didn’t exist in the last downturn, which helps put a floor on the market.”
Higher borrowing costs don’t just drive up prices for potential buyers; they also make homeowners with locked-in low interest rates much less inclined to move, said Hunter, the housing economist. He predicts that after a short-term increase in sales to beat the mortgage rate increase will come a downward shift in sales volume. Even with that predicted decline, he sees home values going up, albeit at a less “unsustainable” pace: 8.5 percent in 2022, and just 4.35 percent in 2023.

A different calculus​

Buyer sentiment suggests bad vibes. A recent Fannie Mae survey found “only 24 percent of consumers believe it’s a good time to buy a home, with similar levels of pessimism expressed by nearly all of the demographic groups surveyed.” It’s pretty much the definition of a market failure if three of four buyers of any product feel bad about their choice, yet it’s still the only product they can buy.
Therein lies the trickle-up problem. For a home that sold at the national average price in March 2022 of $523,900, with 10 percent down, a mortgage rate shift of 3 to 5 percent means an extra $500 due every month.
Next, as the market cools, for-sale homes get pulled, since they aren’t getting the prices buyers want (likely a big problem in the immediate future, with home values at or near historic highs).
Jodi Hall, president of the Nationwide Mortgage Bankers, told her members in early May that she’s expecting a recession in the latter half of the year, and declining home values. That expectation may keep recent homebuyers from selling, since a sinking market might price their homes below recent record-high valuations, and they certainly don’t want to make less than the neighbor who sold six months ago.
Then comes the next knock-on effect, which starts touching mid-level homes and even cooling off luxury sales.
With prices still rising double digit percentages, the lock-in effect for existing owners becomes more pronounced; it’s harder to trade up in a nearby neighborhood, especially if a home with a bloated price tag is accompanied with a sky-high mortgage rate. Why not just stay put, or add on?
Remodeling data from Harvard’s Joint Center for Housing Studies suggests that’s happening.
American spending on upgrading homes has exploded during the pandemic, said Abbe Will, a research associate at Harvard, and is forecast to jump almost 20 percent quarter-over-quarter in the third quarter of this year.
When people assume they’ll be in their current homes for a while, and see prices and equity rise, that “gives them a lot of confidence to invest in a major way,” said Will. Moving for the last several years has been more and more out of want and need, so those on the market are making a move out of necessity. “It’s a different calculus,” Will said.
Realtor.com hasn’t revised its forecast just yet, but Hale says we will likely see slower sales volume later this year. If sales stay within the 5.5 to 5.8 million range, that will bode well for the health of the housing market. High prices have offset the impact lower supply has had. But dip to 5 million or lower, and firms that work on volume business will have to look closely at their sales models. There are a lot of markets at or very close to the horizon of what people can afford without having wealth to draw on, she said.
“The percentage of Americans participating in the housing market is shrinking,” said RCLCO’s Ducker. “Now we’re just dealing with the upper third [of Americans], whereas back 10 years, much of the middle third were trying to get into the housing market, and wagering their discretionary income to do so.”
 

David Goldsmith

All Powerful Moderator
Staff member
The Agency acquires Triplemint for NYC debut

The Agency has acquired New York City-based Triplemint in an all-equity transaction.

Under the deal, the Los Angeles-based firm will adopt Triplemint’s proprietary technology, while Triplemint will adopt the Agency’s brand. Going forward, the companies will jointly operate as The Agency.

Triplemint co-founders David Walker and Philip Lang will serve as the chief strategic officer and chief business officer at the Agency, respectively. Triplemint’s staff of over 75 software engineers, data scientists, marketers and strategists, as well as their nearly 250 agents, will join The Agency’s existing in-house creative, public relations and tech specialists and over 1,000 agents.

The purchase price was not disclosed. Walker, Lang and other Triplemint shareholders each received equity stakes in the Agency, and employees will be able to participate in a stock option program.
Read more

Speculation of the deal emerged in recent months after The Agency’s CEO and founder Mauricio Umansky had lunch with Walker and Lang in New York City before touring an office space.

Umansky batted down speculation in the winter, months before The Agency posted hints of a New York expansion on social media. Now, it’s announced that the firm will be opening an East Coast corporate headquarters in New York City later this year.

The Agency was on an expansion tear in 2021, launching 11 offices and another six in the first quarter of 2022. To date, the Agency has closed more than $41 billion in real estate transactions since its inception and has more than 50 offices in the U.S., Canada, Mexico, the Caribbean and Europe.

Triplemint has seen a growth spurt of its own in recent years, opening three new offices in the tri-state area last year on the heels of expansions to New Jersey, Westchester County and the Hamptons.

In tandem with the acquisition, the Agency has jointly raised $35 million in growth capital from strategic investors, giving it a valuation of about $350 million.
 

David Goldsmith

All Powerful Moderator
Staff member
Ranking Brooklyn’s top resi brokerages of 2021

Top 10 firms notched $8.9B in sales, more than doubling 2020’s $4.3B​

Brooklyn’s residential market soared past pre-pandemic heights and into a new league last year.
The borough held on to its scorching momentum from late 2020, when Manhattanites began to flee crowded highrises and tiny condos for townhouses and backyard space across the East River. Add in historically low interest rates and a rush of buyers returning to the city, and the result was Brooklyn’s ascent from longtime affordable Manhattan alternative to a primary market in its own right.

“Covid was a big push for people reevaluating their lifestyles,” said Itzy Garay, Senior Executive Vice President at Brown Harris Stevens. “Brooklyn was a place that a lot of people looked to, to get more light and air and more space.”
To identify the top performing brokerages in the borough, The Real Deal analyzed thousands of Brooklyn residential listings recorded in 2021 from real estate data firm LavaMap and cross-referenced the data with brokerages, public records and third-party sources. Any off-market transactions were excluded from the study.



The industry’s power players found themselves in a familiar place as Compass took the No. 1 spot in Brooklyn after recording $2.7 billion in sell-side transactions across 2,060 deals.
Corcoran came in at second with $2.69 billion in closed sale volume across 1,940 deals after the Realogy-owned brokerage took the top spot in Manhattan sales.
Altogether, the top 10 brokerages combined for $8.88 billion in sales, more than doubling the $4.28 billion in sales recorded for 2020. Brokers across the industry agreed the townhouse market was particularly hot last year, especially in Brownstone Brooklyn, the area stretching from Brooklyn Heights to Stuyvesant Heights and from Bed-Stuy to Park Slope. Leslie J. Garfield, a brokerage that specializes in townhouses, finished with over $100 million in sales volume — despite just 18 transactions.

“There's been tremendous growth in Brooklyn over the last 10 years, but we're starting to see a second wave where we're seeing a price-per-square-foot that resembles the West Village,” said Ravi Kantha, a founding member of Garfield’s LK Team. “I’m seeing more $10 million buyers than ever before.”
Ryan Serhant, whose brokerage finished seventh in TRD’s rankings, said Downtown Brooklyn and the surrounding areas have been in such high demand because they offer a quicker commute to Lower Manhattan than some parts of Manhattan.
“When I moved to Brooklyn, I was looking at townhouses in the Upper West Side, Upper East Side and Brownstone Brooklyn and it was a quicker commute into our headquarters in Soho than it would have been if I lived uptown,” he said.

Brooklyn’s townhouse market has since completely taken off, Serhant said, as “probably the fastest appreciating market due to Covid, in part because it was undervalued before.”
Blackburn, a top Compass agent in Brooklyn and founding member of The Barak | Blackburn Team with Lior Barak, said she noticed demand spreading beyond commuting neighborhoods.
“Subway transportation became far less critical,” she said. “Greenpoint was always a hot neighborhood, nipping at the heels of Williamsburg, but connecting from the G train to the L train became much less of a consideration for someone working primarily from home.”
Brooklyn sales rebounded in 2020 and kept going: The record-high median price had been broken for three consecutive quarters by the second quarter of 2021. While inventory rose from 2020 levels as sellers responded to the spike in prices, it couldn’t keep pace with the blistering pace of contracts.

Christine Blackburn said she had a network of clients who held off on selling in weaker markets prior to and during the pandemic. As soon as she felt the market shift, she started making calls.
“There was such an inventory shortage and such a huge demand and a lot of money in the market — if buyers needed a mortgage contingency it was definitely a frustrating couple of years,” she said.
Pam Liebman, CEO of Corcoran Group, said low interest rates fanned the sale surge flames.
“Last year saw a lot of wealth creation in the stock market and an incredibly low interest rate,” Liebman said. “There was a level of affordability that opened the door for many people who in the past might not have been able to jump into the market.”

Richard Ferrari, president and CEO of New York City and the Northeast region at Douglas Elliman, credited his firm’s finish in close third to the ratio of managers and brokers the firm maintains in Brooklyn.
“We have four professional managers in Brooklyn, and each manager probably has about 60 agents, which is a very low ratio compared to Manhattan,” he said. “It’s almost as if it’s one-on-one training.”
Ferrari forecasted a slowdown in the next six months, but said he doesn’t envision the Brooklyn market reverting to the secondary market it once was.
“Brooklyn is here to stay,” he said. “It always has been but it's even more here today than it was yesterday.”
 

David Goldsmith

All Powerful Moderator
Staff member
Mike DelPrete
to me

eXp's Business Model Advantage
eXp has an exponentially more efficient cost structure than any of its brokerage peers
.

Why it matters: In the highly uncertain market of 2022, with transaction volumes falling and brokerages responding by cutting costs, financial efficiency is more important than ever.

During my previous research on Compass' Cash Burn Problem and the Coming Brokerage Slowdown, I stumbled across a fascinating metric: operating expenses per transaction.

This metric measures the amount of company overhead -- support staff, office expense, technology, etc -- per closed transaction.

While its publicly-listed peers are all in the same ballpark, eXp has a remarkable advantage when it comes to operating expenses -- 10x more efficient than its peers.

And with over 110,000 transactions in Q1 2022, eXp is leveraging this advantage at scale.

The bottom line: The real estate industry is entering a period of heightened uncertainty with rising interest rates and falling transaction volumes, leading to a shrinking commission pool.

With a limited ability to affect revenue, brokerages will be forced to cut costs -- and in this environment, brokerages like eXp have a distinct advantage.
 

David Goldsmith

All Powerful Moderator
Staff member

Redfin’s losses swell to $78M in Q2​

Brokerage faces double whammy with mortgage rate jump, lower inventory​

Redfin is among the brokerages feeling the burn in recent months as mortgage rates increased, inventory shrunk and prices increased to push homebuyers out of the market.
“The housing market took a turn for the worse in the second quarter,” said Redfin CEO Glenn Kelman in an earnings call with investors Thursday, citing the diminished conditions for the company’s poor second quarter performance.

“Even as the housing market weakened our results, Redfin has gotten stronger,” Kelman said, pointing to things like expanding the platform to include 91 percent of the homes in America to 94 percent, with 52 new MLSs.
The company reported a net loss of $78.1 million, compared to a net loss of $27.9 million in the second quarter of 2021. Second quarter revenue was $606.9 million, an increase of 29 percent compared to the second quarter of 2021 and up from $597 in the first quarter.

Gross profit was $118.0 million, a decrease of 6 percent year-over-year.
“That won’t be enough to sink our battleship,” Kelman said. “Our forecast assumes home prices keep declining moderately through the rest of 2022. But we still expect our properties division to earn a significant gross profit for the full year.”

Kelman said there was more to blame the balance sheet on than just the homebuyer’s economy.
In the second quarter, Redfin closed on a deal to acquire Bay Equity Home Loans, a national, full-service mortgage lender. The purchase price was estimated to be $135 million in cash and stock.

The quarter’s results are a far cry from the Redfin’s ride atop the hot housing market. Alongside announcing a 14 percent boost to revenue in 2020, the brokerage said in February 2021 it was racing to expand its agent count, hiring “faster than ever.”
That hot streak appeared to have cooled into reversal by this summer. Redfin in June announced it was laying off around 470 employees, or approximately 8 percent of its total employees.
Kelman called the layoffs a “setback,” but said there would be no changes to how agents — who are salaried — will be paid.
 

David Goldsmith

All Powerful Moderator
Staff member
"The pandemic has taken its toll in other ways on Douglas Elliman. On the call, Lorber mentioned that “unless something changes drastically,” the firm expects to consolidate its office space and will not renew some of its leases. Elliman has aggressively moved into new markets in recent years, including Texas, where the brokerage added 125 agents in the first half of 2022."
 

David Goldsmith

All Powerful Moderator
Staff member

Anywhere Real Estate slashes staff​

Affected headcount, departments in rebranded brokerage’s cuts unclear​

Anywhere Real Estate has joined the slew of firms making cuts to weather an uncertain market.
The company formerly known Realogy didn’t disclose which departments were affected or how many people lost their jobs, Inman reported. Employees of the company’s franchisor group Anywhere Brands and brokerage group Anywhere Advisors were spared.
“Part of our ongoing cost management includes evaluating business initiatives, finding simplification and efficiencies, and right-sizing the enterprise to be in line with demand,” a company spokesperson told the outlet.

Layoffs were not mentioned in a July earnings call, where Anywhere CFO Charlotte Simonelli noted the company was targeting $70 million in savings after deploying cost-cutting moves in the first two quarters.
The company, which owns major brokerages such as Corcoran, Coldwell Banker, Century 21 and Sotheby’s, rebranded in May.

Anywhere was coming off a high when it debuted its new name, riding 2021’s hot housing market to one of the best first quarters in company history, despite a 30 percent year-over-year decline in profits attributed to the “unseasonably high” previous year.

Second quarter earnings, however, weren’t as favorable as the company coped with rising mortgage rates, inflation and a shifting housing market. Earnings declined 6 percent year over year to $2.1 billion, according to Inman, but the company remained profitable.

The company could look virtually anywhere and find other companies making similar staff reductions.
Keller Williams Realty cut 4.6 percent of jobs at the company’s Austin headquarters last week in its fourth round of layoffs in 10 months.
Residential giant Compass is executing a $320 million plan to cut costs, laying off approximately 450 employees in June. More layoffs at the firm are expected to come by the end of next month, on top of the company letting go of chief technology officer Joseph Sirosh and laying off a “small” number of employees and recruiters on the tech team.
 

David Goldsmith

All Powerful Moderator
Staff member

CBRE plans layoffs, $400M in cost reductions​

Commercial brokerage “hit harder and faster” than expected by rate hikes​

Staffers at CBRE could soon be the brokerage world’s latest victims of rising interest rates.
The commercial brokerage giant outlined a $400 million cost-reduction plan on Thursday as it adjusts to macroeconomic realities, and indicated that a large portion of those cuts will be achieved through layoffs.

On its third-quarter earnings call, CBRE said the cost reductions will be implemented over the next six months, and $300 million of the cuts will be permanent — with the vast majority coming from headcount reductions. The remaining $100 million of cost-cutting efforts are expected to be temporary until the business stabilizes.
In response to questions from The Real Deal, a CBRE spokesperson didn’t specify which types of employees will be affected or how much the company’s performance would have to improve to reverse course.

“We are working with the affected employees on an equitable transition,” the spokesperson said. CoStar News first reported the planned cuts.
While the Dallas-based brokerage handled a solid volume of transactions in July and August, it cited a significant post-Labor Day pause in both property sales and loan originations. The company’s Americas Capital Markets revenue, which includes sales and debt origination, was flat in July and August on a year-over-year basis, then plummeted 43 percent in September.
“We are getting hit harder and faster than we were expecting 90 days ago, and we’re expecting the recession to impact our business for longer than we did 90 days ago,” the company’s CFO and CIO Emma Giamartino said.

The slowdown coincided with the Federal Reserve’s latest interest rate hikes intended to slow the flow of cash across the economy as regulators aim to reel in inflation. The cuts will be made in addition to walking back discretionary bonuses, incentive compensation, profit sharing and commissions, the company said.
The decline in business was more rapid than the brokerage expected during the second quarter, when it was preparing for a more challenging market but not to the degree it’s experienced so far.
With the $400 million target for spending cuts, CBRE has identified $175 million in reductions by the end of the year, and a significant majority of the remainder to be completed by the end of the first quarter of 2023.

Deal volume is expected to ramp back up toward the end of next year, Giamartino said. And leasing volume was a bright spot in the quarter, up 14 percent from last year, with a positive near-term outlook, CEO Bob Sulentic said.
“In contrast with sales and financing, leasing performed very well. Revenue was up across all property types, led by office,” he said.
The announcements of staffing reductions and downward revisions for earnings could be a harbinger for the weeks to come in the commercial brokerage industry as CBRE rivals JLL, Cushman & Wakefield and Newmark report their earnings.
 

David Goldsmith

All Powerful Moderator
Staff member

Elliman posts $4M loss as rates strain inventory​

CEO Howard Lorber lauded recruiting, Florida’s new dev market​

Residential brokerages are repeating the same refrain to entice buyers as mortgage rates reach 20-year highs: “Marry the price and date the rate.”
As high rates deter sellers and buyers alike, they’re keeping listings off the market and constraining sales, Douglas Elliman chairman Howard Lorber said in the company’s third-quarter earnings call.

As luxury inventory remains strained, Elliman posted a slight net loss of $4 million in the third quarter. Consolidated revenues were $272.6 million, down from $364.4 million in the second quarter and a roughly 33 percent drop from $354 million the previous year.
The firm’s real estate brokerage business finished the quarter with $11 billion in gross transaction volume, down from $13.4 billion in 2021. Its adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — was $124,000 for the quarter, down from $27.8 million in the prior year period.

The company, which spun off last year from parent company Vector Group, has grown its agent headcount by 336 so far this year, said Lorber, who pledged the firm won’t reduce agent-facing expenses.
“That we want to leave alone because that’s one of the reasons we are bringing in new agents and agents are staying with us,” he said.

Lorber said comparing metrics to 2021 levels “doesn’t seem to make much sense,” because last year’s market “was something I don’t think anyone really understands what happened, how it happened so quickly.”

The chief executive touted the company’s expansion earlier this year into Nantucket, Massachusetts, New Canaan, Connecticut and Las Vegas, as well as new offices in its existing markets of Newport Beach, California and Basalt, Colorado. Those luxury markets, he said, are less impacted by rising rates.
The brokerage starts small in new markets with local brokers to “not spend a lot of money in opening or buying offices,” Lorber said.
“We’re opening in markets in a slightly different way than those that just go out and buy other companies,” Lorber said.
Despite the struggling luxury market, Lorber said Elliman is poised to have a big year in new development in Florida.

“The most robust new development market for us is Florida, where we have a very big schedule of new projects coming on the market in the next 18 months, in the billions,” he said. “We’re going to be opening more, probably every month.”
 

David Goldsmith

All Powerful Moderator
Staff member

Keller Williams’ numbers down in US, up internationally​

Brokerage launches training programs to help agents weather a slowing market​

It seems no residential brokerage is immune to the slowing market.
Keller Williams’ numbers in the U.S. and Canada fell across the board, the firm revealed Thursday. Sales fell to $381 billion, a 3 percent decline from this time last year, and transactions fell to 884,500, a nearly 13 percent drop.

Written contract volume was down nearly 5 percent to $415 billion and the number of contracts fell 14 percent, to 962,000, over the same period.
The frenzied days when a broker could list a home, hold an open house, preside over a bidding war and get a contract signed within days are an increasingly distant memory. Listings are down and mortgage rates are up, so agents have to work harder to snag customers and close sales.
“We have moved from a speed-based market to a skill-based market,” said Keller Williams President Marc King.
The brokerage said it launched three training programs — on wealth management, lead generation and home staging — in August to help agents weather the storm. Keller Williams has nearly 180,000 agents in North America.
“As we face increasing macroeconomic headwinds, we are preparing for what we expect to be a slower growth period,” said Keller Williams COO Sajag Patel.

The brokerage did enjoy growth internationally. It has increased its agent count abroad by 21 percent this year to more than 17,000 and closed $11 billion in sales, up nearly 30 percent over the same period last year.
Keller Williams is far from the only real estate company to see declines following last year’s record market. Anywhere Real Estate, the conglomerate formerly known as Realogy, whose flagship brands include Corcoran, Sotheby’s and Coldwell Banker, saw its third-quarter profits halved.
Zillow, the proptech giant, just posted a quarterly loss for the first time this year, but lost less money than it did during the same time last year, when its iBuying program was bleeding red ink.
Opendoor announces its third quarter earnings at 5 p.m. today and Douglas Elliman will release its figures tomorrow at 8 a.m.
 

David Goldsmith

All Powerful Moderator
Staff member

Resi brokerages enter wartime mode​

The party's over and the hangover has hit hard. How are firms getting to "default alive?"​

Gary Keller is the closest you can get to an elder statesman of residential brokerage. The founder of Keller Williams has guided his firm through four decades of market fluctuations and played a Rooseveltian role in the industry when things have gotten tough, optimistic even in the toughest of times.
So when Keller says that today’s outlook reminds him of the Great Recession, the industry pays attention.

“The second year of the Great Recession, we had the largest drop in one year in recorded history,” Keller said last month at an Inman virtual conference, adding that “1.5 million transactions were taken off the book.”

A combination of rising mortgage rates and home prices that are out of reach for most Americans will mean this year will see deals decline by about 1.3 million, he predicted.
After a bonanza period of record transaction volume, prices and profit-making, the residential industry is contending with a market that changed brutally fast. Average U.S. mortgage rates are around 7.2 percent in for a 30-year fixed loan, the highest since 2001. Lawrence Yun, the chief economist at the National Association of Realtors, predicted they could surge all the way to 8.5 percent.
view

Wartime-mode-chart-705x530.jpg
Applications for home purchase loans are down over 40 percent compared to last year. From June to August, luxury home sales declined 28.1 percent year-over-year, the largest fall on record, according to Redfin.

These shifts means that many firms, and their leaders, are now in wartime mode — forced to rapidly cut costs, scale back on investments and focus on survival. For executives who were anointed during the good times, it’s a major transition.
Meanwhile, residential-focused startups that raised gobs of capital and were in hypergrowth mode have had to pivot. They’re now chasing a position that renowned venture capitalist Paul Graham terms “default alive” — if their expenses stay constant and their revenue growth continues on the same trajectory, will they be able to keep the lights on without raising more funds?

The answer, for many, has been a hard no. Several startups have laid off large chunks of their workforce, and others are scrambling to raise money at valuations far lower than a year ago. For some, it’s a matter of time before they’re out of business.
This month, The Real Deal took a look at some of the wartime decisions taking place across the industry, and dove into the conditions causing them.
 

nicolebeauchamp

Well-known member

Resi brokerages enter wartime mode​

The party's over and the hangover has hit hard. How are firms getting to "default alive?"​

Gary Keller is the closest you can get to an elder statesman of residential brokerage. The founder of Keller Williams has guided his firm through four decades of market fluctuations and played a Rooseveltian role in the industry when things have gotten tough, optimistic even in the toughest of times.
So when Keller says that today’s outlook reminds him of the Great Recession, the industry pays attention.

“The second year of the Great Recession, we had the largest drop in one year in recorded history,” Keller said last month at an Inman virtual conference, adding that “1.5 million transactions were taken off the book.”

A combination of rising mortgage rates and home prices that are out of reach for most Americans will mean this year will see deals decline by about 1.3 million, he predicted.
After a bonanza period of record transaction volume, prices and profit-making, the residential industry is contending with a market that changed brutally fast. Average U.S. mortgage rates are around 7.2 percent in for a 30-year fixed loan, the highest since 2001. Lawrence Yun, the chief economist at the National Association of Realtors, predicted they could surge all the way to 8.5 percent.
view

Wartime-mode-chart-705x530.jpg
Applications for home purchase loans are down over 40 percent compared to last year. From June to August, luxury home sales declined 28.1 percent year-over-year, the largest fall on record, according to Redfin.

These shifts means that many firms, and their leaders, are now in wartime mode — forced to rapidly cut costs, scale back on investments and focus on survival. For executives who were anointed during the good times, it’s a major transition.
Meanwhile, residential-focused startups that raised gobs of capital and were in hypergrowth mode have had to pivot. They’re now chasing a position that renowned venture capitalist Paul Graham terms “default alive” — if their expenses stay constant and their revenue growth continues on the same trajectory, will they be able to keep the lights on without raising more funds?

The answer, for many, has been a hard no. Several startups have laid off large chunks of their workforce, and others are scrambling to raise money at valuations far lower than a year ago. For some, it’s a matter of time before they’re out of business.
This month, The Real Deal took a look at some of the wartime decisions taking place across the industry, and dove into the conditions causing them.
I find this very interesting, and I particularly find things like this interesting for firms with high splits/caps etc. It is going to be interesting to see what happens over the next few quarters....
 

David Goldsmith

All Powerful Moderator
Staff member
I find this very interesting, and I particularly find things like this interesting for firms with high splits/caps etc. It is going to be interesting to see what happens over the next few quarters....
I have been saying for a while that I foresee big firms cutting commission splits.
 
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