Industry Competition: Talking Points

The real estate industry has few barriers to entry. The number of agents and firms in the industry has increased steadily in recent years.

• There are approximately 2.6 million real estate licensees as of June 2006, up from 2.1 million in 2000 (24 percent increase). (Source: ARELLO)


• There are approximately 1.3 million REALTORS® as of year-end 2005 compared with 767,000 at year-end 2000 (69 percent increase). (Source: NAR)


• There are 93,920 offices of real estate brokerage firms in 2004, compared with 65,098 in 2000 (44 percent increase). (Source 2004 County Business Patterns, U.S. Census)


• There are 42,421 real estate property management firms as of 2004 compared with 36,053 in 2000 (18 percent increase). (Source 2004 County Business Patterns, U.S. Census)


• Among all REALTORS®, 15 percent have been in the real estate business for 1 year or less. Thirty-two percent have been in the business for 3 years or less. (Source: 2005 NAR Member Profile)


• Twenty-one percent of REALTOR®-sales agents report that they have been in the business 1 year or less. Forty-three percent have been in the business for 3 years or less. (Source: 2005 NAR Member Profile)

By every measure, the residential real estate industry is not concentrated, especially when compared to many other industries such as banking. Even the largest real estate firms account for a small percentage of all real estate brokerage transactions.

• The top 10 firms in the real estate industry accounted for approximately 8 percent of residential real estate transaction sides in 2005. (Source: Real Trends 500 and NAR Calculations).


• By comparison, the top 10 Commercial Banks and Savings Institutions accounted for 36 percent of FDIC-insured deposits as of June 30, 2006. The top institution accounted for 9.7 percent of deposits. (Source: FDIC Summary of Deposits)

Real estate markets are essentially local and competition within local markets is fierce, including competition among agents associated within the same firm.

• The real estate industry is highly competitive and entrepreneurial. Locally firms and agents fiercely compete with each other for listings and sales. They compete for clients on the basis of service, reputation and price.


• Today consumers can choose from 1.3 million Realtors and a variety of different kinds of companies and business models, including discount brokerages and fee for service brokers.


• Reputation and past performance are the two most important factors that home buyers and sellers look for when working with an agent. Forty-four percent of recent home buyers chose their real estate agent based on a referral from a friend or relative. Forty-one percent of buyers report that their agent's reputation was the most important factor in their selection of an agent. (Source: 2005 NAR Profile of Home Buyers and Sellers)

A large number of firms, competing in every local market, and a growing number of largely independent contractor agents mean that the real estate industry is fiercely competitive. Firms and agents compete at the neighborhood level with each other for listings and sales. Agents also compete with home sellers who choose to sell their property without the assistance of an agent.

• Ninety-two percent of REALTORS® are independent contractors, meaning that they work for themselves as small business owners. (Source: 2005 NAR Member Profile)


• The typical REALTOR® who engages in real estate brokerage completed 12 transaction sides in 2004. Twenty percent completed 1 to 5 transaction sides (Source: 2005 NAR Member Profile).


• Home sellers can always choose to sell their home without the assistance of an agent. In 2005, 13 percent of recent sellers chose to sell their home without the assistance of a real estate agent. (Source: 2005 NAR Profile of Home Buyers and Sellers)


• The median income of all REALTORS® was $49,300 in 2004. Thirty-one percent earned less than $25,000. The typical sales agent earned $38,300 in 2004. Thirty-eight percent earned less than $25,000. (Source: 2005 NAR Member Profile)

While most home buyers and sellers who use a real estate agent depend on that agent to provide information about the buying and selling process, there are many sources of information readily available online. Consequently most home buyers start the process by searching online for home listings as well as information about mortgages and related real estate services.

• In the most recent NAR survey of homebuyers, 77 percent reported that they used the Internet to search for homes. A powerful tool for distributing critical market information, the Internet was rarely used by the general public as recently as ten years ago. (Source: 2005 NAR Profile of Home Buyers and Sellers)


• Among recent home buyers, 24 percent reported that they first found their home on the Internet. This source was virtually nonexistent ten years ago. (Source: 2005 NAR Profile of Home Buyers and Sellers)