Semonin Realtors

Woods Bros. Realty

“They have additional resources to bring to the table. They can provide resources and tools to the consumer and the agents that I can’t, even as big as we are,” he said.

Helms’ view echoes that of HomeServices CEO Ron Peltier, who has positioned the corporation’s individual units to provide a full range of realty-related services. Title, mortgage, escrow and homeowner insurance businesses are at the core of HomeServices operations, he said earlier this year during an Inman News audio conference.

Yet neither NRT’s huge size nor HomeServices’ appetite for acquisitions should create the false impression that real estate is a shrinking economic sector. The National Association of Realtors last week predicted home sales will set another record this year, and the association itself now has a record 1 million members.

Consolidation of existing companies and growth of the industry through the addition of more salespeople can occur simultaneously, Helms suggested. And small firms certainly aren’t extinct.

“Numbers tend to indicate (real estate) is still a mom-and-pop-type business. There are an awful lot of small offices operating,” noted Jack Harris, a research economist with Texas A&M University’s Real Estate Center.

Consolidation and growth result both from a pressing need to create economies of scale and turn them into the sophisticated listings-rich Web sites and one-stop shops of services that home buyers and sellers want.

“Technology is one reason why you don’t see many small companies. There will always be some niche companies, but as a generalist brokerage, a full-service company, you need to have the volume to be profitable. Technology is a cost factor on the (profit-and-loss statement) and you have to have the volume to justify it. Technology is a wonderful improvement, but it’s also expensive. The consumer wants the technology, so you are going to have to give them the technology,” Helms said.

Brokerage company mergers have been win-win arrangements, Pruitt said. Companies that have acquired others have been able to expand their market presence much faster than they would have been able to do through recruitment alone, while companies that have been acquired have been able to invest substantially more capital in their own growth and long-term success, she said.

The jury is out on whether consolidation has had or will have a beneficial or detrimental effect on home buyers and sellers. Pruitt said she hasn’t noticed that consolidation has had impact on them, and Harris said so far it’s been largely “irrelevant” from their perspective.

The pros and cons of consolidation for consumers present “a dilemma of economics,” Harris explained. Larger companies can offer more services and achieve economies of scale that generate costs savings that can be passed along to customers. But there is a risk—albeit a tiny one—that consolidation ultimately could result in a monopoly and consequently higher prices.

Helms said consolidation benefits consumers because it enables brokers to provide more services in one place.

“(Consumers) have said in focus groups that they like doing business with a real estate company that can provide full service. All the services, not just one,” he said.

Either way, these experts agree that consolidation is likely to continue. Indeed, academics who’ve studied the real estate sectors are “a little puzzled,” Harris said, as to why there hasn’t already been even more consolidation among brokerages to capture the available economies of scale.

Peltier, Pruitt and Helms all anticipate that HomeServices and its local-market units will consummate more acquisitions.

“As long as the real estate market continues to be the shining star of the American economy, consolidation will be a great vehicle for successful companies to grow even larger and more successful,” Pruitt said.

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