The Real Brokerage is happy with its growth in 2022
Tamir Poleg, chairman and CEO at The Real Brokerage was quick to recognize the challenges faced by the real estate industry last year.
Poleg stated that 2022 was a difficult year for the housing industry, with Q4 being the weakest quarter. Poleg spoke to analysts and investors listening to the firm’s fourth-quarter earnings conference on Thursday morning. “The Federal Reserve’s response to persistent inflationary pressures was a key driver for the industry. It implemented seven interest rate increases during the year, pushing average 30-year mortgage rates to over 6% for the first-time since 2008.
Poleg believes that Q4 2022 will be the bottom market based on the performance of his company so far in 2023.
Poleg was happy with the overall performance of his company in 2022, despite all the industry challenges. Despite the headwinds, annual revenue rose 214% to $318.8million, while net loss rose from $11.7 million to $20.6million in 2021.
Poleg stated that Real was able to reduce its operating expenses as a percentage revenue to 13.5%, compared to 18.4% in 2021.
Poleg stated that Real hopes to achieve adjusted EBITDA positivity in the second half 2023. He is confident that the firm can achieve this goal due to increasing transaction and agent counts.
Real’s agent count had increased 113% year-over-year to over 8,200 agents at the end 2022. The firm had more than 9,000 agents as of February 2023. Real’s transaction count increased 181% to 37,500 agents in 2022 despite existing home sales declining 18% annually. This represents a 226% annual increase.
The fourth quarter of 2022 saw the largest market contraction. However, the transaction count grew by 85% to 9,745. The rising agent count may have contributed to some of the increase, as the average number per agent fell from 3.4 to 2.8 in 2021 to 2.82 in 2022.
Poleg stated that “our agent churn dropped to 4.4% in Q4 after 7.3% in Q3.” Poleg stated that the company’s highest agent addition was achieved due to the lower churn. In Q4, nearly 1,500 new agents joined. We believe that value is what attracts people. This belief has been our focus since the beginning of the company. We are starting to see agents joining us because of the value that we offer. We believe we have a long runway and are confident that we can reach tens of thousands within a few years.
Although brokerage executives are happy with these results, and are confident they will reach their financial goals in the future, they have modified some fee structures to ensure they are financially stable in a constantly challenging market.
These fee changes include a $30 transaction fee for broker review, a $100 increase to the brokerage joining fee, and a $250 increase to the annual brokerage fee. These fee changes were implemented for new agents on February 1st, and will be effective for existing agents on April 1st.
Michelle Ressler, CFO of the firm, stated that these changes will contribute more than $5 million to our bottom line in aggregate. She also expects a larger full-year effect in 2024. These changes are crucial as they help put the company on a path to profitability. We believe these changes will have an even greater impact in the years ahead as we scale. “
Real executives are optimistic despite financial system woes and mortgage rate volatility.
Poleg stated that “we are seeing a lot more conflicting trends right now on the market, but are very optimistic about housing.” “At the start of this year, we have witnessed the same phenomenon as we saw in the first half 2022. This means bidding wars and people asking for homes. We are also hearing from agents that there is a lot of activity among buyers.