Brokerage compensation structure under intense scrutiny + the future of MLS
In addition to the articles, here are a few items we are reading from across the internet.
Christie’s International Real Estate, the luxury real estate brand owned by At World that became an official franchisor this year, has added a new affiliate in Southern California, Aaron Kirman Group (AKG). AKG had become a mega team with Compass before becoming a brokerage and signing with Christie’s. The move shows reveals how the newer luxury franchisor is looking to spread its wings and expand within the US.
Opendoor reported a net loss of $928 million in the third quarter, which presents some serious questions for one of the last iBuyers standing at scale. The company still has cash reserves on hand, and responded quickly to the changing market, but net losses approaching a $1 billion in a quarter while Redfin shuts its iBuying operation down, leaves questions about the sustainability of its core model. The company will cut 550 staff, an 18 percent reduction, as it looks to weather the storm and keeps up the hunt for the scale its model requires to succeed. All eyes will be on its next several quarters.
Redfin reported a $90.2 million third quarter loss, a significant increase from the $18.9 million loss one year earlier. In addition citing elevated risk, the company also announced the closure of RedfinNow, its iBuying operation, resulting in staff cuts of 862. Since April, the number of Redfin employees has been reduced by 27 percent. The company is facing significant scrutiny after an Oppenheimer analyst downgraded its stock, saying the company’s model of employee agents was fundamentally flawed. Its stock is currently trading near an all-time low. Regardless, the company has a strong national brand and leading tech, so after adjusting with the market, it could rebound.
With a third quarter loss of $154.1 million, Compass faces a continued profit challenge. It has lost $443.5 million in 2022 through September. Like many other real estate firms looking to weather a slowing market, the company has reduced its workforce and is restructuring to adjust to a changing market and to pursue profitability. Compass cut 10 percent of its staff earlier this year and announced a second round of cuts in September that were heavily focused on the tech area. The company is still standing but staggered. CEO Robert Reffkin says he’s focused on trimming costs and focused on profitability, as the fastest-growing real estate firm in real estate history looks to stabilize its operations.
EXp World Holdings, parent company of eXp Realty, reported a 12 percent increase in revenue, to $1.2 billion, in the third quarter. Net income of $4.4 million was down from $23.8 million a year earlier, as the company adjusted to a cooler market. Agent count rose to just under 85,000 in the third quarter of 2022. EXp’s innovative model has remained profitable as the market shifts. The next few quarters will reveal just how resilient it may be.
Anywhere reported third quarter revenue of $1.8 billion, down 17 percent from one year earlier. Net income, at $55 million, represents a drop of 51.7 percent from the third quarter of 2021. The company attributed the drop in revenue and net income to lower home sales and forecast that sales will decline by 25 percent in the fourth quarter compared with the year-earlier level. The company indicated that it will reduce costs by $140 million by year-end, as it looks to adapt to the changing market.
Park City, Utah’s City Council approved a measure that would restrict where Pacaso, a fractional ownership company that buys luxury homes in popular vacation markets, can purchase homes. While the company is not prevented from operating in the city, the restrictions block the company from buying homes in the most desirable areas. The council left open the possibility of expanding restrictions to other areas. Pacaso is being challenged in other communities as well. The battles in Park City and elsewhere are part of a larger confrontation with opponents of short-term rental and fractional ownership companies who want to prevent or sharply restrict where these companies can operate in their communities.
The S&P CoreLogic Case-Shiller home price index rose 13 percent in August compared with one year earlier. The increase was slower than the previous month's 15.6 percent rise. Each of the 20 cities tracked reported lower home price gains in August compared with July. The deceleration is consistent with other home prices indices that show prices have softened as the housing market adjusts to a higher interest rate environment and lower demand from homebuyers.
First-time home buyers, who have struggled to purchase homes as prices rose during the past two years, are now faced with the additional hurdle of higher mortgage rates which has priced some would-be buyers out of the market. Data from NAR's annual survey of homebuyers shows that share of first-time buyers, usually around 40 percent, was just 26 percent, lower than at any time since at least 1981.
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