BrokerageHousing MarketReal Estate

The Real Brokerage is pleased with its growth in 2022

The firm saw its transaction count rise 181% year over year last year

Like other brokerage executives, Tamir Poleg, the chairman and CEO of The Real Brokerage, was quick to acknowledge the challenges the real estate industry faced last year.

“2022 was a challenging year for the housing market with Q4 as the weakest quarter,” Poleg told investors and analysts listening to the firm’s fourth-quarter earnings call Thursday morning. “For the industry, a key driver was the policy implemented by the Federal Reserve in response to the persistent inflationary pressures, which resulted in seven increases to the interest rate during the year, pushing the average 30-year mortgage rate to above 6% for the first time since 2008.”

Based on his firm’s performance so far in 2023, however, Poleg is optimistic that Q4 2022 was the bottom of the market.

And, despite the challenges the industry faced, Poleg was pleased with his firm’s overall performance in 2022. Even with the headwinds, the firm’s annual revenue rose 214% year over year to $318.8 million, while net loss rose to $20.6 million from $11.7 million in 2021.

However, this loss could have been worse, but Poleg said Real managed to cut its operating expenses as a percentage of revenue to 13.5% compared to 18.4% in 2021.

Looking forward, Poleg said Real aims to be adjusted EBITDA positive in the second half of 2023. It’s a goal he is confident the firm will be able to meet, thanks to rising agent and transaction counts.

At the end of 2022, Real’s agent count was over 8,200 agents, up 113% year over year. As of early February 2023, the firm had over 9,000 agents. In addition, despite the number of existing home sales falling 18% year over year in 2022, Real’s transaction count was up 181% compared to a year ago to 37,500 agents, for a total sales volume of $14.4 billion, which represents a 226% yearly increase.

When the market experienced its largest contraction in the fourth quarter of 2022, the transaction count was up 85% year over year to 9,745. However, at least some of this increase can be attributed to the rising agent count, as the average number of transactions per agent in Q4 fell from 3.4 in 2021 to 2.8 in 2022.

“Our agent churn fell to 4.4% in Q4 from 7.3% in Q3,” Poleg said. “The lower churn helped drive our highest agent addition in company history, with nearly 1,500 net new agents joining in Q4. We believe that if you build value, that people will be attracted to this value, and this is what we have been focused on since day one of the company. We are now starting to see the signs of agents actually joining because of the value we offer. We think there is a long runway for us as a company and we are very confident that we will get to tens of thousands of agents within a couple of years.”

While brokerage executives are pleased with these results and are confident that they will meet their financial goals, they have changed some fee structures in order to maintain their financial position in a continually challenging market.

Some of these fee changes include a new $30 fee per transaction for broker review, as well as a $100 increase in the brokerage joining fee and a $250 increase in the annual brokerage fee. For new agents, these fee changes went into place on February 1, and they will start for existing agents in on April 1.

“We expect these changes in aggregate to contribute over $5 million directly to our bottom line, with an even more significant full-year effect in 2024,” Michelle Ressler, the firm’s CFO, said. “These changes are important, as it helps put the company on a clear path to profitability, and we believe these changes will yield an even greater effect in the years to come as we continue to scale. “

Despite financial system struggles and continued mortgage rate volatility, Real executives remain optimistic when looking further into 2023.

“We are seeing a lot of conflicting trends right now in the market, but we are very optimistic about housing,” Poleg said. “At the beginning of this year, we have seen the same type of phenomenon that we had seen in the first half of 2022, meaning bidding wars and people getting over asking on homes — and we are hearing our agents reporting a lot of activity with buyers.”