More expensive deals mean bigger commissions for brokers/agents. Commission revenue expected to jump in 2021.
Broker/Agent Revenue Rising with Home Prices
The higher home prices climb, the higher broker/agent commissions climb. Based on the latest S&P CoreLogic Case-Shiller Index indicating home prices jumped +14% in April and smashed a 30-year record high, it is possible, according to a new report by Knock, that brokers/agents could generate a collective total of +$104B in commission revenue during 2021, up from the collectively earned $90.5B earned in 2020.
Increased Commission Revenue Expected Despite Conflicting Realities
Knock believes that some 7.1M homes will be sold in 2021.
Such expectations for increased commission revenue come at a time when brokers/agents are charging just 4.94% for an average commission rate. This average commission rate is lower than last year’s commission rate plus it is -20 basis points less than it was 20 years ago.
Likewise, such expectations for increased commission revenue come at a time when there are more agents/brokers than there are homes for sale. It makes sense to think that some agents/brokers will earn increased commission revenue this year but certainly not all.
Another glitch in these expectations also comes at a time when the US Department of Justice recently reneged on a proposed antitrust settlement with the National Association of REALTORS® regarding broker/agent commissions. Clearly, the Biden administration’s new head of the Federal Trade Commission (FTC) is attuned to being more “antitrust” than the former FTC head appointed by the Trump administration.
Will Such Expectations for Increased Broker/Agent Commission Revenue Become Reality in 2021?
Though Knock’s reasoning on increased revenue commissions for agents and brokers jives with increased home prices, the timing of such a reality coming to fruition is questionable.
And even if the timing were just right, not every broker/agent across the board would see such increases in commission revenue during 2021. Just as only the top 1% have become wealthier during the pandemic, just the top 1% of the highest producing agents/brokers would experience substantial increases in commission revenue regardless how high home prices climb during 2021.
Thanks to Knock, Inman and therealdeal.