III. Industry Analysis
Last year, according to IBISworld.com, U.S. real estate sale and brokerage agencies brought in revenues of $137 billion and employed 1,085,000 people. There were 859,000 businesses in this market, for an average of $160,000 per business. Many agents work part-time, leading to an average wage per employee in the industry of only $13,000. This wage per employee is further lowered by the market situation at the time of this report.
As the American real estate industry and its health is considered a driver for the American economy as a whole, key statistics such as new home sales, homes on the market, and average home prices are tracked constantly by news and reporting agencies.
Major revenue streams of the industry include: Brokerage fees and commissions on residential property sales and rentals, brokerage fees and commissions on nonresidential property sales and rentals, brokerage fees and commissions on land sales, fees charged to real estate agents for the use of office space and firm services, property management fees, and real estate consulting fees, property appraisal fees.
A recent study in the Journal of Real Estate Finance and Economics found that:
Except for very large firms, modest economies of scale persist throughout almost the entire range of output… while average firm size is increasing, many real estate firms are too small to take full advantage of the cost reductions possible with a larger scale of operation. Equally important, large firms do not command a competitive advantage over smaller firms, as far as unit costs are concerned.
This bodes well for a small firm starting out with experienced leadership.
Key players in the American residential real estate industry include Realogy (parent ofBetter Homes and Gardens Real Estate, CENTURY 21, Cold well Banker, the Corcoran Group, Sotheby’s International Realty, and more), Equity Residential (which focuses on apartment living), AIMCO (owner of 160,00 apartment units in the US), HomeServices, and RE/MAX. Both Realogy and RE/MAX work primarily through a franchise network of independently owned brokerages.