This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.

As the real estate industry digested an unfavorable Sitzer verdict, its leaders had more pressing concerns.

Margins were being squeezed. Hopes of much-needed interest rate cuts were fading. And recruiting had reached a fever pitch.

But the National Association of Realtors sent a jolt through the industry when it announced its settlement in late March, replacing some of those concerns with questions of how brokerages can make money in the first place, according to the Inman Intel Index survey of more than 1,000 real estate professionals.

• The share of brokerage owners or executives who told Intel that regulatory issues will be the most challenging part of the business environment over the next 12 months nearly doubled to 30 percent in late March.
• That shift means regulation is, for the first time since the Intel Index launched in September, the No. 1 challenge brokerage leaders say they face over the next 12 months. 

This category’s rise came at the expense of anxieties over interest rates, which have moved to the background even as mortgage rates continue to climb and the Federal Reserve signals it may have to delay rate cuts.

Chart by Daniel Houston

The results, collected a little over a week after the settlement details became public last month, represent a mere snapshot in time. Attitudes since then may have shifted.

Even now, Intel is surveying real estate professionals a second time since the settlement to track how persistent this shift is. Take the April survey today, and look out for the results in the weeks to come.

TAKE THE APRIL INTEL INDEX SURVEY 

In the meantime, dive into the full breakdown below to learn how NAR’s big news immediately weighed on the thinking of decision-makers at numerous brokerages.

Tomorrow’s problem, today

In one important way, the dynamics have yet to shift.

Brokerage leaders still think that regulatory headaches will be a bigger deal 12 months from now than they are today.

• 17 percent of brokerage leaders told Intel in late March that regulation was the most challenging part of the business environment today, compared to the 30 percent who said it would be the biggest issue a year from now.

Still, even this represents a large shift.

• Between the Sitzer verdict in October and the NAR settlement news in March, the share of brokerage leaders who said regulation was today’s biggest housing challenge had yet to eclipse 8 percent.

That means the latest results — if they hold — show a doubling of the share of leaders who see changes to industry compensation as the No. 1 challenge they face today.

The news also shoved one key brokerage concern a bit further away from the foreground: the risk that interest rates might remain higher for longer.

• • Prior to NAR’s settlement announcement, approximately 30 percent of broker-owners and executives said interest rates were today’s top concern.
• But in the first Intel survey after the terms of the deal became public, that same share of brokerage leaders dropped suddenly to 20 percent. 

As disruptive as brokerage leaders now expect these changes to be, the gap becomes even more pronounced when they’re asked to look ahead at the work ahead over the next 12 months.

A shift in outlook

As a future threat, the lawsuits have been on the minds of real estate leaders for months.

These leaders took seriously its potential to shake up the industry, even as they debated among themselves just how big an impact the litigation was likely to have on their business models and revenues.

Still, for many months, it was just one of a host of issues weighing on their outlooks on their businesses.

Now, regulation has emerged as the single biggest impending challenge brokers say they face.

How the perceived No. 1 challenge for the year ahead has shifted

Average of November-February surveys → March results

• Interest rates: 18% → 10%
• Regulation: 17% → 30%
• Recruiting/retaining talent: 22% → 19%
• Margin compression: 22% → 19%
• Other: 21% → 22%

Above, we can see just how much — and how quickly — regulation has jumped to the forefront of decision-makers’ anxieties.

It’s primarily replaced interest rates, but may also be increasingly top of mind for leaders who have been likely to worry about margin compression or recruiting.

Changes this dramatic require multiple months to assess, which is why Intel will continue to seek insights every month from both the agents at brokerages and the decision-makers who lead them. Take the Intel Index survey for April to lend your expertise to the Inman community.

Methodology notes: This month’s Inman Intel Index survey was conducted March 20-April 1, 2024. The entire Inman reader community was invited to participate, and Intel received 1,009 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.

Email Daniel Houston

This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.

Potential homebuyers who are aware of the National Association of Realtors $418 million settlement believe it’s a step forward for consumers, many of whom relish the prospect of negotiating compensation with their real estate agent.

This is just one of dozens of key insights gleaned from the Inman-Dig Insights consumer survey of 3,000 adult U.S. residents who are active in the workforce. 

The latest version of this survey, conducted in early April, was designed to be statistically representative of the broader population of working adults. It reflects their attitudes toward a host of real estate topics — including the commission lawsuits that have haunted brokerages and trade groups for years.

The survey findings include:

• About 1 in 4 working U.S. adults say they would not accept a rate of 2 percent of the final sales price if they were responsible for paying their agent directly. 
• 1 in 3 say they favor a flat-fee model for agent pay that is popular with consumers — nearly six times as large as the group that supported an hourly rate model.

But for most U.S. consumers, the value an agent provides is clear, and they’re willing to pay a traditional percentage of the transaction price to secure it — even if they would ultimately be on the hook for their agent’s buyer-side commission.

Read the full breakdown below.

Getting a better deal

When asked whether they were aware of the NAR settlement, 23 percent said yes.

Of those who said they knew of the settlement, a large majority — 65 percent — said they believed the settlement would benefit consumers. This group was, however, split on whether the changes were also good for the real estate industry.

On the other hand, very few consumers believe the deal would be bad for both consumers and industry professionals.

Question: You said you were aware of the settlement involving the National Association of Realtors. How do you feel about the potential outcome?

• 38.2% — Good for consumers
• 21.8% — Good for the real estate industry
• 27.1% — Good for both
• 11.4% — Good for neither
• 1.6% — Other

Why are these consumers so bullish on the deal?

For one thing, they’re generally comfortable negotiating terms, especially when it’s their own money on the line. 

And when negotiations aren’t a realistic option, consumers are often more comfortable with a flat-fee approach, as opposed to a fixed percentage of the sale price set by another party to the deal.

Question: Which of the following real estate agent fee structures would you accept if offered?

• 24.6% — A set commission percentage based on the home’s sale price
• 34.6% — A negotiated commission based on the home’s sale price
• 33.9% — A flat fee
• 6.2% — Hourly rate
• 0.6% — Other

It’s noteworthy that so few consumers are open to experimenting with an hourly rate. Those who are open to a non-traditional compensation model strongly favor the flat fee over an hourly approach.

Still, a majority of potential clients are open to a traditional commission structure based on the home’s sale price. Intel further explored what that might look like in a world where more buyers feel empowered to negotiate the fee up front.

A different paradigm

As real estate enters a new era later this year, consumers report they won’t feel intimidated about negotiating with a brokerage.

• Only 17 percent of working U.S. adults said they would feel uncomfortable negotiating a buyer’s agent fee, according to the Inman-Dig Insights survey. 

That’s essentially the same comfort level that consumers express for negotiating fees for other major purchases, such as cars or home maintenance.

How comfortable would you feel negotiating the fee of the agent who helps you buy your home?

• 22.8% — Very comfortable
• 33.6% — Somewhat comfortable
• 26.8% — Neither comfortable nor uncomfortable
• 11.7% — Somewhat uncomfortable
• 5.1% — Very uncomfortable

But just because consumers welcome a greater say in what they pay doesn’t mean all of them are looking to go cheap with the agent they work with.

If new ruIes required buyers to pay buyer’s agents directly, as opposed to having a seller pay them out of the proceeds of the sale, what is the highest fee you would pay?

• 26.2% — Below 2% of the purchase price
• 56.2% — The traditional 2% to 3% range
• 15.4% — Greater than 3%
• 2.3% — Other

Of course, these survey results reflect the attitudes of potential clients without regard for the other side of negotiations — the brokers and agents who will be loath to accept compensation rates below the traditional range. 

The changes from the NAR settlement put downward pressure on commission rates in the long run. But for now, at least, most consumers appear open to paying roughly normal rates for their buyer-side services.

Stay tuned for more insights from this broad-ranging consumer survey in the weeks to come.

About the Inman-Dig Insights Consumer Survey

The Inman-Dig Insights consumer survey was conducted from April 3 to April 5 to gauge the opinions and behaviors of Americans related to homebuying. 

The survey sampled a diverse group of 3,000 American adults, ranging in age from 24 to 65 and employed either full-time or part-time. The participants were selected based on a set of criteria that included age, gender and regional distribution.

Statistical rigor was maintained throughout the study, and the results should be largely representative of attitudes held by U.S. adults with full- or part-time jobs. Both Inman and Dig Insights are majority-owned by Toronto-based Beringer Capital.

Email Daniel Houston

This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.

When the Federal Reserve flirted with the idea of cutting rates in March, the real estate industry largely felt that the worst part of this transaction downturn was in the rearview mirror.

Today, their feelings are a bit more complicated.

A growing number of brokerage leaders in late March reported a worsening outlook on capital markets — an element of the economy to which real estate is doubly exposed.

This key insight — explored at length in the full report below — is the first finding from the March edition of the Inman Intel Index, a survey of more than 1,000 real estate professionals that closed on Monday.

In the weeks ahead, Intel will explore a host of findings from the latest results of the survey, which was the first conducted in the wake of the commission-lawsuit settlements by the National Association of Realtors and Compass.

The survey also delved deeply into an issue that brokerage leaders say is already becoming one of their top challenges, and may only become more difficult in the coming year: recruiting and retaining high-performing agents. Intel’s deeply reported series on the 2024 recruiting wars drops next week.

But first, learn more about what brokerage leaders think will happen in the capital markets — and why that question remains a high-stakes proposition for the entire industry.

Two steps forward, one step back

Not all brokerage leaders feel like they need access to capital in a pinch.

If you’re not in the process of opening a new office or acquiring another brokerage, the notion of taking out a loan might not feel like the most pressing concern.

Still, many brokerage leaders keep tabs on capital markets. If nothing else, they’re linked to the same financial system that determines mortgage rates, and therefore influences transaction volume.

Here’s what Intel learned from the hundreds of brokerage leaders who have replied to the publication’s monthly sentiment survey since the start of the year.

• Considering cost and accessibility, 42 percent of brokerage leaders in March felt better about raising capital than they did at the same time last year, compared to 53 percent who said the same in January.
• Brokerage leaders who felt worse about the prospect of raising capital made up 49 percent of this group in March, up from 38 percent.
• The remaining share of brokerage leaders selected the “other” response choice, with most of these clarifying that the question was not applicable to their respective businesses.

In short, brokerage leaders have flipped on this question. Where a majority in January felt the capital situation was improving, that share dipped substantially over the ensuing months.

What gives?

For clues, we can look to the Federal Reserve’s shifting timeline for a potential rate cut.

In January, many observers expected the Fed to begin lowering interest rates as early as its March meeting — lowering the cost of taking out many types of debt in the process. 

But those earliest rate cuts haven’t yet materialized. And this delay has affected not only the present capital-raising environment, but also the outlook of business leaders for the year ahead.

A Fed ‘decoupling’?

To better understand the factors weighing on brokerage leader decisions, Intel sought feedback on their assumptions about capital markets in the months ahead.

These leaders remained generally optimistic that capital markets would improve.

But as Intel has documented in a number of key areas of real estate, optimism in capital markets has only weakened since the start of the year.

• Of the brokerage leaders Intel surveyed in March, 50 percent leaned toward the idea that capital would be easier or cheaper to acquire 12 months from now than it is today.
• As recently as January, however, 61 percent of the brokerage leaders surveyed had shared this optimistic outlook.

For many industries, the prospect of economic growth appears to be increasingly decoupled from the Fed’s actions. 

Even as rate cuts were pushed out months into the future, stock in the nation’s 500 largest publicly traded companies has risen by more than 9 percent since the beginning of the year.

But for real estate companies, rate cuts are about much more than simple access to cheaper capital. Their bread-and-butter revenue source — home listings and transactions — hinge largely on clients finding the prevailing mortgage rates attractive enough to wade into the market.

Perhaps for this reason, brokerage leaders have barely budged since the start of the year in their insistence on the importance of rate cuts.

• The share of brokerage leaders who told Intel that the housing market’s recovery relied at least “a good deal” on multiple interest-rate cuts this year was 65 percent in March.
• That’s a decline of only 3 percentage points from January’s response share, and well within the range of normal fluctuations from month to month.

In other words, if the real estate industry is “decoupling” from the actions of the Fed like much of the rest of the economy, the effect may be only slight or nonexistent.

Intel will continue to track these sentiments in the months to come.

Methodology notes: This month’s Inman Intel Index survey was conducted March 19-April 1, 2024. The entire Inman reader community was invited to participate, and Intel received 1,009 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.

Email Daniel Houston