All real estate brokerages experience a seasonal drop in revenue during the first quarter of every year. This year, however, eXp Realty is seeing less revenue drop-off than other top brokerage firms.
Variable Brokerage Revenue Declines in Q1 2022
It’s not surprising that most brokerages experience revenue declines during the first months of every year. After all, many homebuyers bought their “new” homes during 2021 and are simply enjoying them.
This year, however, brokerage revenue declines are more pronounced due to economic uncertainty, inflationary concerns and rising interest rates. Potential homebuyers are being squeezed like never before by eye-popping home price acceleration and estimated increases of 35% – 40% (depending upon which outfit is doing the estimating) in housing costs.
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The result? Some brokerages are experiencing different levels of revenue decline.
Quarterly Revenue Comparisons
According to Mike delPrete, real estate tech entrepreneur and global business advisor, the brokerage revenue slowdown has begun as the housing market cools and real estate agents do fewer deals.
Take a look at brokerage revenue decline comparisons from Q4 2021 – Q1 2022:
- Redfin – -21%
- Realogy – -17.5%
- Compass – -14%
- Douglass Elliman – -7.5%
- eXp Realty – -6%
As you see, quarterly revenue has declined the most at Redfin and Realogy. Brokerage firms experiencing the least declines are Douglass Ellimann and eXp Realty.
Degree of Revenue Declines Matters
According to Mike delPrete writing for Inman about this topic, the degree of revenue decline points to which companies are under- and/or over-performing the real estate market. The degree of revenue decline may also indicate which brokerage firms could have a more difficult time adapting to what many industry experts anticipate a “turbulent” year in the real estate industry in 2022.
Obviously, brokerage firms, such as Compass, with high fixed costs and cash burn problems will have more challenges than brokerage firms without those challenges. Compass’ latest financial results indicated that the company burned through $142M in cash during Q1 2022, leaving only $476M in the bank. (Cash fuels all businesses.)
Likewise, brokerage firms that have salaried agents, such as Redfin,have a more difficult time making ends meet during times of reduced agent transactions. (Again, cash fuels all businesses.)
Quarterly Brokerage Revenue
Take a look at comparisons in quarterly brokerage revenue:
- Realogy – Q4 2021 $1,6M – Q1 2022 $1,55M
- Compass – Q4 2021 $1,35M- Q1 2022 $1,21M
- eXp Realty – Q4 2021 $990,000 – Q1 2022 $985,000
- Redfin – Q4 2021 $300,000- Q1 2022 $250,000
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Thanks to Mike delPrete and Inman.