The dual shocks of the 2022–2024 housing market downturn and the outcomes of significant litigation are now in the rearview mirror. In response, many brokerage firms have adapted their business models to navigate these challenges. While these adjustments have allowed firms to achieve profitability at current sales levels and comply with the changes to MLS policies resulting from the settlement, it does not necessarily signal a return to the heights previously seen in the industry.
Agent competition is fiercer than ever
Competition for agents remains as intense as ever. Agents now have more choices than at any other time, including low-cost options. Consequently, the average gross margin for U.S. brokerage firms continues to decline, sitting near 10% by the end of 2024. Several national real estate entities now operate with gross margins below this threshold.
We anticipate that these economic pressures will accelerate industry consolidation, with mergers and acquisitions occurring at a faster pace than in previous years. Additionally, segmentation among brokerage firms is likely to increase, driven by differences in cost structures and technology adoption. While artificial intelligence may play a role, we suspect focus will remain on more effective deployment of foundational tools such as transaction management systems, sales management platforms, and robust CRM systems.
Despite the industry investing tens of billions of dollars in technology over the past three decades, the tangible benefits in terms of productivity or profitability remain limited. This suggests that other factors are at play. It has become increasingly clear that a strong culture centered on relationships between brokerage leaders and agents remains the cornerstone of a successful brokerage firm.
Brokerage M&A landscape is shifting
Over the past 45 years, the real estate industry has experienced two distinct waves of mergers and acquisitions. The first wave, which…