2020 Housing Boom: Exponential Opportunity for the Real Estate Industry

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2020 was indisputably a year for the history books. The onset of a global pandemic in January resulted in a year of stops and starts, resulting in a world crisis and a complete paradigm shift in how we conduct our personal and professional lives. Together, we have navigated through a pandemic, witnessed social and cultural movements that restructured societies, conducted business virtually, adjusted to online learning for our kids, and experienced a highly controversial U.S. presidential election. It’s fair to say that 2020 did not unfold how anyone expected, yet our perseverance and resilience during history-making events will remind us that there is always a path to recovery. Take the U.S. housing market for example. It was red-hot throughout the year, with annual price growth and existing home sales reaching record highs. The U.S. job market, on the other hand, did not fare as well, with the number of unemployed Americans swelling to record highs by mid-year. Yet, many companies and industries navigated, evolved, took steps back, persisted and rebounded. Those that quickly adapted their business models during the pandemic experienced growth, particularly those rooted in healthcare and social assistance, professional and business services, and transportation and warehousing. The resiliency of the real estate industry was one of the biggest surprises of the year and deserves a closer look. The housing market had a strong pre-pandemic run with historically low interest rates and continued to remain robust, even thriving during the pandemic-driven recession as millions of consumers purchased their first home. With the large scale shift to employees working from home, many used the pandemic to reflect and make a lifestyle switch, purchasing homes in locations that were not dependent on commuting. Families sought out more spacious properties to achieve a better work-life balance, and some even secured a second home. The pandemic also provided a significant opportunity for the real estate industry, in particular, to adapt to a new environment, position themselves as thought leaders and persevere — all while continuing to prepare for the new future of home buying.

2020 Made History in More Ways Than One

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A Closer Look at the Surprise 2020 Housing Market Boom

COVID-19 panic buying had consumers stocking up on toilet paper, hand sanitizer and cleaning wipes, but another very popular pandemic purchase in 2020 was a house, especially during the fall and winter months, which typically generate lower buyer interest. Despite the spread of a global pandemic, housing prices surged to record highs driven by buyer demand — largely from millennials — and a shrinking supply as more Americans took advantage of rock-bottom interest rates. The National Association of Realtors® reported that millennials made up the largest share of home buyers at 38%, followed by Gen Xers at 23%, young baby boomers at 18%, older baby boomers at 15%, and the silent generation at 6%.1

In 2020, the home became a hub for much more than a place where people hang their hats at the end of the day. It transformed into an office, a classroom and a gym virtually overnight as families spent most of their time at home. Remote work became the new norm and continued much longer than expected. Companies announced long-term and permanent transitions to a work-from-home environment, with some vowing never to return to brick-and-mortar offices. School districts started the academic year online, and gyms closed across the country making at-home workouts a necessity for Americans to maintain their physical health and mental sanity. These simultaneous lifestyle changes caused families to crave extra space and re-evaluate their needs, whether it was time for them to upsize in square footage, relocate or invest in a second home. These collisions of work, school and life coming together for almost everyone across the country created quite literally, a home migration movement.

At a macro level, according to National Association of Realtors data, existing home sales grew for five consecutive months in 2020 from May through October to a seasonally-adjusted annual rate of 6.86 million at the peak in October. Home sales dipped slightly to 6.69 million in November, but were up 25.8% overall from 2019.2 In comparison, 2019 and 2018 existing home sales both totaled 5.34 million, and 2017 existing home sales totaled 5.51 million as illustrated in Figure 1 below.2

The nation’s rising year-over-year home sales and a surprising surge in 2020 kept eXp Realty agents busy and helped boost the brokerage’s closed transaction sides, which achieved explosive growth from 2017 through 2020 (Figure 2). According to the 2019 Real Trends 500 report, eXp Realty finished 2017 with 24,655 closed transaction sides.3 In addition, the 2020 Real Trends 500 report showed that eXp Realty achieved 73,458 closed transaction sides in 2018 and strongly surpassed that figure in 2019 with a total of 130,627 closed transaction sides.4 The final closed transaction sides for 2020 totaled 237,049 nearly doubling the 2019 closed transaction side volume.

Year

Source: National Association of Realtors®

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5.51 5.34 5.34

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Figure 1: U.S. Existing Home Sales 2017-2020

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The sales price of existing homes also trended upward throughout 2020 according to National Association of Realtors data. Figure 3 below illustrates the monthly sales price of existing homes in 2020, with the average sales price in January at $266,200, which climbed to $310,800 in November and peaked at $313,100 in October.2 For comparison, the sales price of homes in 2019 averaged $271,900, averaged $259,300 in 2018 and averaged slightly lower at $247,200 in 2017.2 Early forecasts for 2021 are predicting that the housing market will remain strong, with continued buyer demand and a shrinking inventory of homes.

As we looked back at the year, we saw that the U.S. housing market sustained and played a significant role in the nation’s economic recovery. The initial impact from the pandemic and subsequent lockdown gradually changed direction as the economy reopened and resembled a U-shaped recovery. And, with mortgage rates expected to remain near 3% as we enter 2021, lower rates are predicted to keep home buyers afloat amid continued price gains.

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Jan. Feb. Mar Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec.

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s Pr

ice

2020 2019 2018 2017

$271,900$259,300$247,200

Source: National Association of Realtors®

Figure 3: Sales Price of Existing Homes in 2020

Closed Transaction Sides (in Thousands)

Year

Source: The Real Trends 500 Report, 2020 & 2019 and eXp Realty

Figure 2: eXp Realty Closed Transaction Sides (2017 - 2020) 2017 2018 2019 2020

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Unemployment Trends in 2020: Reminiscent of the Great Depression

Unemployment was one of the most critical economic issues that faced the country in 2020 as we balanced reopening safely just months into the pandemic, and then constricted again by implementing stay-at-home orders in several regions across the nation in November and December. After governments formally shut down the economy in April, the U.S. unemployment rate spiked to 14.8% according to the U.S. Bureau of Labor Statistics.5 In fact, the rise in the number of unemployed workers in 2020 due to COVID-19 was significantly greater than the increase during the Great Recession and was more comparable to unemployment rates experienced during the Great Depression when unemployment soared to 25% in 1933.6 The unemployment rate hovered between 3.5% and 4.4% in the first quarter of 2020 before the April peak and then gradually improved from May through November before stabilizing at 6.7% in December as shown below in Figure 4.5

In January 2021, the U.S. Bureau of Labor Statistics reported that both the unemployment rate at 6.7% and the number of employed people in the U.S., which totaled 10.7 million, was unchanged from November to December.7 Although both measures were significantly lower than their April highs, they were nearly twice their pre-pandemic levels in February.7

At the state level, Hawaii had the highest unemployment rate in December at 9.3%, followed by Nevada at 9.2% and California at 9.0%. South Dakota and Nebraska had the lowest unemployment rates out of all 50 states, both at 3.0%.8 Figure 5 below shows the top 10 states with the highest unemployment rates in the U.S as of December 2020.8

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Source: U.S. Bureau of Labor Statistics

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Figure 4: 2020 Unemployment Rate

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As the cloud of the pandemic continued to hover, businesses pivoted and found new ways to meet consumer needs. Many companies hired back workers on furlough more quickly than anticipated, and the sectors with the biggest staffing gains included healthcare and social assistance, professional and business services, and transportation and warehousing. Although real estate was not among the top ranks of the fastest-growing industries in 2020, the industry achieved seven steady months of job growth from May through November and added over 117,000 jobs to the U.S. economy.9

Real Estate Resiliency in 2020 and Beyond

Global trends changed the real estate landscape considerably in 2020 and will continue to do so as we look ahead to 2021 and beyond. Home prices are still expected to rise and mortgage interest rates are forecasted to remain low. As such, whether homeowners are planning to buy, sell, refinance or stay put, it will be equally important to keep a pulse on how the current environment is impacting real estate trends. And, as the changing landscape continues to propel real estate investment and development, more Americans may even consider a career in real estate. eXp Realty is a commendable case study for a real estate brokerage that not only survived the roller coaster ride that was 2020, but also prospered. eXp Realty was founded in 2009 as the nation’s first agent-owned, cloud-based brokerage. The brokerage offers generous overall compensation with attractive commission splits, revenue share and equity programs that include opportunities for stock awards, and access to healthcare. The brokerage has a fully immersive virtual office environment that when the pandemic hit, enabled its agents and brokers to persevere through online training classes, meetings, client consultations, and conferences, all of which foster a sense of community.

These foundational elements of eXp Realty - its cloud-based brokerage, compensation and community - ensured that the company did not skip a beat.

Source: U.S. Bureau of Labor Statistics

Figure 5: Top 10 States with the Highest Unemployment Rates

01 Hawaii - 9.3%

02 Nevada - 9.2%

03 California - 9.0%

04 Colorado - 8.4%

05 New York - 8.2%

06 New Mexico - 8.2%

07 Rhode Island - 8.1%

08 Connecticut- 8.0%

09 District of Columbia - 7.9%

10 New Jersey - 7.6%

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eXp Realty’s successful business model continued to attract agents at an unprecedented speed and trajectory in 2020. The brokerage kicked off the year with 24,557 agents nationally in January and rounded out December with over 39,058 agents on board, a 59% growth increase across the U.S. Figure 6 below shows the 2020 agent growth by month for the U.S., which soared when organizations worldwide were implementing hiring freezes, decreasing staff and closing their doors.

In 2020, eXp Realty achieved a 59% growth increase in U.S. agent count.

Month

Agen

t Cou

nt (i

n Th

ousa

nds)

Source: eXp Realty

Figure 6: 2020 Month-End eXp Realty Agent Count

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Figure 7 illustrates the top five states in the U.S. with the highest eXp Realty agent growth in 2020, tallied using the ending agent count as of December 2020. Texas led the ranking with 5,336 total agents at the end of December, followed closely by California with 5,200 agents. Florida had a total agent count of 4,387 with North Carolina following at 2,525 agents, and Arizona rounding out the list with 1,853 agents.

Figure 7

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Figure 8

In addition to agent growth, commission rates across eXp Realty also sustained and grew in 2020. The national real estate market and local market conditions, rather than individual real estate brokerages, ultimately drive agent commission, and the extraordinarily healthy housing market in 2020 contributed positively to agent commission. Overall, agent commission and revenue share increased throughout the year despite a few small dips.

As shown in Figure 8, agents with a tenure of at least one year at the brokerage who sold one unit in 2020, achieved an average annual commission and revenue share of $7,140, whereas agents who sold 2-4 units achieved an average annual commission and revenue share of $20,664. These figures continued to rise for agents who sold 5-9 units in 2020, who were able to attain an average annual commission and revenue share of $49,925 and expanded even further to $182,446 for agents who sold 10+ units.

These compelling figures continue to uphold eXp Realty’s sustained business model that attracts agents who can work virtually from anywhere using the brokerage’s tools, technology and training. Bundled with a competitive commission structure, rewarding revenue sharing model and stock awards, eXp Realty has attracted top agents from around the globe. In 2020, eXp Realty landed in the top five rankings within several categories of the elite 2020 REAL Trends 500 Report, including being named the #1 mover in transactions, the #1 independent in the country and #3 in closed transaction sides.4 We invite you to learn more about the reasons why eXp Realty is being called the Amazon of real estate: exprealty.com

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Sources: 1. https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-

report-03-05-2020.pdf

2. https://cdn.nar.realtor/sites/default/files/documents/ehs-11-2020-overview-2020-12-22.pdf

3. https://cdn2.hubspot.net/hubfs/6521591/2019-REAL-Trends-500.pdf

4. https://cdn2.hubspot.net/hubfs/6521591/2020-REAL-Trends-500.pdf

5. https://data.bls.gov/cgi-bin/surveymost?bls (Select “Unemployment Rate Seasonally Adjusted” and then “Retrieve Data”)

6. https://www2.census.gov/library/publications/1975/compendia/hist_stats_colonial-1970/hist_stats_colonial-1970p1-chD.pdf

7. https://www.bls.gov/news.release/pdf/empsit.pdf

8. https://www.bls.gov/web/laus/laumstrk.htm

9. https://www.bls.gov/ces/publications/highlights/2020/current-employment-statistics-highlights-11-2020.pdf