The Effect of Declining Listings on Concentration and Market Structure in Residential Real Estate Brokerage

Abstract

Real estate brokers compete in localized markets generally characterized by low barriers to entry and many participants; however, widespread and consistent price coordination has persisted over multiple decades. Previous research has found that while anecdotal instances of high concentration exist, the industry is relatively unconcentrated. In the past decade and a half, a major recession and a pandemic have significantly reduced housing supply in many markets. We analyzed the competitiveness of the market structure of residential real estate brokerage in 200 individual U.S. markets, varying by size and geographic location, to see whether real estate brokerage markets have become more concentrated. Contrary to expectations, we found that larger firms were more adversely affected by the nationwide reduction in listings and that competitiveness of market structure in this industry was not negatively impacted. Additionally, we were able to engage in a longitudinal comparison in 90 of these markets, 14 years apart, allowing us to observe the impact of a sizable contraction in the overall volume of listings that occurred in 2021.