The 2021 real estate market was one for the ages: record low interest rates and housing inventory gave way to record high home prices and sales. Capitalizing on these market factors, brokerage firms in the 2022 RealTrends 500 brokerage rankings broke records in market share, closed transaction sides (there must be inventory somewhere!) and sales volume.
The top four — Realogy Brokerage Group (RBG), HomeServices of America, Compass and eXp Realty — now have 20% market share in the U.S. “These four brokerage companies did just over $20 billion in residential gross commission revenue,” said RealTrends Senior Advisor Steve Murray. “In the 2021 rankings (based on 2020 data), these same firms closed just over $14 billion, so the increase was 43% in one year among just these four firms.”
Some of this growth was due to the increase in the value of the homes sold, but, according to Murray, “A large part was growth through both acquisitions and organic means. I don’t recall seeing this kind of one-year growth ever.”
A shake up at the top
RealTrends released its 2022 RealTrends 500 (RT500) brokerage rankings and for the first time since the late 1990s, Realogy Brokerage Group or HomeServices of America were not in the top spot by sales volume. Relative newcomer Compass snuck by Realogy to claim No. 1.
All firms in the 2022 RT500 did approximately 40.6% of all brokerage-controlled sales in the country, up from 38% in the 2021 rankings, with 35.9% of all Realtors. Agents with RT500 firms had an average of 7.9 transactions per agent. The average number of agents per RT500 firm was 1,138, up from 1,025 last year.
RealTrends has been the undisputed leader in the ranking of real estate brokerage firms, agents and teams. Third-party verification is mandatory to confirm the validity of transaction sides and sales volume submitted by the firms.
Due to RealTrends and RTC Consulting’s large valuation and M&A practice, “we have access to hundreds of brokerage financial statements every year,” said Murray. “Because of those financial statements, we are at an advantage to determine the accuracy of the numbers submitted to us, which serves as an additional layer of verification in the process we use.”
Leaderboard by transaction sides
Since 2018, Berkshire Hathaway behemoth HomeServices of America has taken the No. 1 by transaction sides with more than 388,000 sides. Each real estate transaction has two sides: a buying side and a selling side. Before 2018, NRT, now Realogy Brokerage Group, maintained that top spot. Now, Realogy Brokerage Group, composed of company-owned offices of Coldwell Banker, Corcoran and Sotheby’s International firms, is No. 2 with more than 376,000 transaction sides.
Neither of these numbers takes into account the many franchises of either brand. Cloud-based brokerage eXp Realty continued its meteoric rise in the No. 3 spot by transaction sides with more than 355,000 transaction sides. Led by founder and CEO Glenn Sanford, the company hopes to add former Keller Williams CEO Mark Willis to its leadership team pending litigation with Keller Williams.
Willis played a key role in the massive growth of Keller Williams between 2005-2014, when the company grew from 700 agents to 140,000 agents worldwide. Compass took the No. 4 spot by transaction sides.
Shake up in sales volume leader
Perhaps the biggest news of all is that 10-year-old, self-proclaimed real estate technology brokerage Compass snuck past Realogy Brokerage Group to take the No. 1 spot by sales volume with $251 billion in sales in 2021, ending an almost 20-year run of RBG in that spot. Realogy was a close second with $246 billion.
Compass rose quickly to the top by acquiring agents and teams rather than brokerage firms, which was the primary way to grow quickly for many firms. “When today’s Realogy Brokerage Group (formerly NRT) bought Coldwell Banker in 1996, they soon rose to No. 1 for many years. They got there largely through that major acquisition,” said Murray. “Compass got there largely through key acquisitions of top-producing real estate agents and teams, which was a different way to grow.” Compass also had a few key brokerage acquisitions, including Pacific Union International Realty in 2018.
While still focused on recruiting, Compass CEO Robert Reffkin suggested in his February 2021 earnings call that Compass is not giving agents the compensation packages it has in the past, stating 62% of agents who recently came to Compass are receiving a less favorable split compared to their brokerage.
Also, fewer agents are “getting equity,” Reffkin said. Instead, Reffkin will be focused on innovation to improve per-agent productivity. The third-largest firm by sales volume is HomeServices of America, with $199 billion, followed by eXp Realty at $132 billion.
Low-fee or low-cost brokerage firms gaining traction
Of the top 25 RealTrends 500 brokerage firms by transaction sides, eight firms, or 32% of the top 25 firms, are considered low-fee or low-cost firms. Low-cost or low-fee firms charge a flat fee to the agents, or have higher splits to the agents, than traditional firms. By far the biggest of these is eXp Realty at No. 3 by transaction sides, followed by Redfin (6), HomeSmart (7), United Real Estate (8), Fathom Realty (10), West USA Realty (17), My Home Group (24) and Samson Properties (25).
The new Billionaire’s Club players The Billionaire’s Club consists of the top U.S. real estate brokerage firms that closed at least one billion dollars’ worth of real estate in 2021, according to data from the 2022 RealTrends 500 brokerage rankings. Not only does this rarified group include more firms than ever before — 435, versus 347 last year — but this year’s rankings also feature many firms on the list for the first time.
Among the 88 new firms with the highest representation on The Billionaire’s Club, 46 are Keller Williams companies, 13 are with RE/MAX, six Coldwell Banker and three HomeSmart. Steven Barks, president and COO, Worth Clark Realty, a 100% commission model based in Missouri and in The Billionaire’s Club for the first time, said, “Last year was a stress test in expansion.” Both his firm’s transaction and agent count grew by 39%. “We learned a lot about the expansion process by entering two new states and opening nine new major markets last year,” he reveals.
Looking ahead, Barks predicts that inventory and closed sales will continue to trend down or stay relatively flat this year, making agent productivity a key metric to watch. Mauricio Umansky, CEO, The Agency, a Beverly Hills-based brokerage that submitted to the RealTrends 500 rankings for the first time, explains how his company expanded its global network while still maintaining its boutique, luxury approach.
The Agency expanded to more than 50 offices (including 11 new franchises opening in 2021), with just over 1,000 agents total. “My dream is to create a global company that still operates as a boutique,” he explains.
“Probably the single biggest factor behind this jump [in Billionaire’s Club members] is the price increase in housing,” says Murray. “The median price of a home jumped 22-25% in two years. We’ve never seen that before.” Beyond the strong market, Murray describes a wave of consolidation that began two years ago. “Suddenly, the larger firms — and those striving to be larger — got larger faster than ever before,” he says.
He attributes this primarily to the major brokerages being more tech-savvy, using Zoom and Microsoft Teams to communicate with their agents to keep relationships personal and strong. These bigger firms also used their more advanced technology suites to rapidly complete virtual transactions, and — in the case of Keller Williams — recruit and train agents. Basically, “the brokerages with the better tech platforms performed better,” he explains.
While the larger firms got stronger, the middle of the market shrank. “More agents are gravitating toward firms that are either big and very strong or have a niche specialty,” summarizes Murray. Interestingly, some of the firms new to the list are in smaller markets.
For instance, “from 2019 through the end of 2021, business increased by about 230% for Four Seasons Sotheby’s in Vermont and New Hampshire,” notes Murray. Brokers in the Poconos in Pennsylvania and in Portland, Maine also saw record sales. “People have been coming out of big cities with money to buy a second home or they just packed up and moved,” he says.
Find the 2022 RealTrends 500 brokerage rankings and more analysis of insights from the report at RealTrends.com.
This article was first featured in the June HousingWire Magazine issue. To read the full issue, go here.