Orange County’s residential real estate market continues to surge, and few businesses are reaping as much of the rewards as most of the local brokerage companies. But for how long remains to be seen, as the OC residential market finally began to show signs of cooling, according to a recent report by Dataquick Information Systems.
Despite higher interest rates, the 25 largest OC residential brokerage firms saw business jump 24% as they sold $8.5 billion worth of properties for the 12 months ended June 30, according to Dynamic Marketing Resources Inc., a Fullerton-based company that tracks such activity and provided the data for this year’s Business Journal list. This year’s 25 firms also outperformed the 25 largest residential brokerage companies on last year’s Business Journal list, generating $1.2 billion (or 16%) more in sales.
On a per-unit basis, local sales activity among the largest 25 OC firms increased 7% as they reported 22,929 units sold in the 12-month period, according to Dynamic Marketing Resources. That total also was 4% higher than the total posted by last year’s largest 25 firms.
Companies on the list were ranked according to total dollar volume, and by that measurement Coldwell Banker Residential Real Estate out of Mission Viejo was No. 1, with $1.7 billion, a 72% jump from the same period last year. However, on a unit basis, Costa Mesa-based First Team Real Estate registered the most sales, 3,715, up 1%. (In dollar volume, First Team was No. 3, with $1.3 billion in sales for the 12 months ended June 30, a 15% jump from the previous 12-month period).
Jon Cook, senior vice president with Coldwell Banker, attributed his company’s strong growth to the surging market as well as acquisitions. In separate transactions over the past year, Coldwell Banker acquired Coast Newport Properties, McGarvey Clark Realtors and American Family Realty, all for undisclosed sums. Coast Newport and McGarvey Clark both made last year’s list of the 25 biggest OC brokerage firms.
The moves are part of an ongoing consolidation trend that is sweeping the industry, thanks mostly to greater pressure from Internet-related companies, Cook said.
“It’s an opportune time for the entrepreneurs who have been in business for years to get out,” he said. “Things are awfully good at this point in time with residential real estate and who knows what the future holds?”
One of those smaller operators who so far has not decided to sell is Neil Barker, whose Barker & Associates is No. 20 on the list with $73.8 million in volume, a 1% dip from the previous 12-month period, according to Dynamic Marketing Resources. Barker and Associates also experienced a 12% dip in units sold.
Barker acknowledged a decline in units sold, but disputed the decline in sales volume. According to him, his firm’s sales continue to be strong.
But more of those sales are being generated by referral services and Internet search firms, a classic response among the smaller firms to the ongoing consolidation and increasing marketing muscle of the bigger players.
“Our agents have aligned with several Internet companies for referrals, and when you have referrals you have to give up a portion of your commission,” Barker said. “There’s definitely pressure (from the bigger companies), but we’ve been in business for 20 years and there’s been pressure from day one.”
One of the ways Barker & Associates has managed to survive has been by becoming a niche player, focusing predominantly on business from the 1,400-unit Nellie Gail Ranch area of Laguna Hills.
“We are a niche company and luckily we found a good niche,” Barker said. “Most of our agents don’t need a franchise name. Between the Internet companies and the relocation companies, we feel we are competitive with the franchised companies.”
Seventeen firms on this year’s list posted increases in dollar volume, while seven reportedly saw business dip. (Comparison figures for No. 22 Prudential California Donofrio were not available.) On a unit basis, 11 firms saw an increase in activity, while 13 experienced a dip, a reflection of the increasing competition for properties as demand continues to outstrip supply. The continuing high demand also pushed up the average selling price of homes brokered by the 25 companies on this year’s list. That figure jumped 12% to $315,088.
Prudential California Realty/Pickford, last year’s No. 1 company, fell to No. 2 even though its $1.3 billion in sales volume was a 15% increase. Companies moving into the top 10 on the list included Century 21 Superstars out of Yorba Linda, up from the No. 12 spot last year to No. 8 on this year’s list, thanks to a 52% jump in sales volume to $275.2 million. The jump is a result of the greater number of brokers in the field, as the company added 59 agents.
Four companies made the list for the first time: No. 21 Century 21 Discovery, No. 22 Prudential California Donofrio, No. 24 Re/Max Metro and No. 25 Century 21 Automated. Four companies dropped off the list: Coast Newport Properties and McGarvey Clark, which were ranked Nos. 5 and 21, respectively, on last year’s list, were acquired by Coldwell Banker Residential. Also dropping off the list were last year’s No. 23, BHG Professional Real Estate, and last year’s No. 24, Harbour Homes & Investments, which saw activity slip.
Some of the firms posting declines attributed the dip to a lack of available homes to sell, which may be more reflective of their particular niche or submarket than the overall market. Associated Realtors, No. 14, which saw the number of units sold decline 11% and the dollar volume of its transactions dip 4% to $116.7 million, is one of those firms.
“I think the greatest thing that has happened this past year has been a dearth of properties,” said Helene Chaban, owner of Associated Realtors. “We just didn’t have enough product to sell. In Orange County and in South County in particular, for every home that came on the market there were a half dozen buyers ready and waiting. I think that in itself caused many people not to put their homes on the market because they (would be) in the same position if they were trying to purchase something else.”
Charles Costello, president of No. 10 Regency Real Estate, is another broker who is feeling a tightness in the number of homes put up for sale. Regency Real Estate recorded $264.6 million in volume and 868 units sold, declines of 1% and 7%, respectively, from year-ago numbers.
Costello said the 7% figure is a reflection of the difficulty independents are having in listing new properties, but noted that the homes his firm is listing and selling are more expensive, which accounted for the more manageable 1% decline in sales volume.
“We are down in the number of houses sold, but we are very close to the amount of income we had at this time last year,” he said. “What’s happened is that the price of homes have gone up so much that that covers our income.”
Still, Costello does see some cooling of the market.
“Overall, the market doesn’t seem to be quite as hot for us here as it has been in the last year,” he said.
The tightening of the market may be accelerating. For July, the month after the end of the list reporting period, DataQuick last week reported unit sales of 3,823 in OC, down a sizeable 21% from July 1999. n
