Revelations that United States investment icon Warren Buffett’s Berkshire Hathaway empire is offloading its real estate business are being viewed as an ominous sign of industry consolidation amid a protracted period of dismal U.S. home sales.
It’s understood that Compass, the largest real estate brokerage in the U.S. – which operates in 35 U.S. states and Washington DC, with more than 33,000 agents - is in the middle of talks to buy Berkshire Hathaway’s HomeServices of America.
With around 820 brokerage offices, 270 franchisees, and 5,400 employees in 2024, HomeServices is said to be the industry’s fourth-biggest player.
In 2023, HomeServices will have more than 50,000 agents, close around $127 billion in sales and have more than 1,500 offices globally.
While the acquisition price has not been disclosed, a recent Wall Street Journal report suggests a deal announcement could be imminent.
Industry consolidation
Buffett's decision to step back from the real estate game marks another major consolidation in a housing market that has been struggling with sluggish sales in recent years.
Low home sale volumes due to sky-high mortgage rates, tight housing inventory, and record-breaking home prices, have triggered a spate of consolidation among the industry’s brokerage firms.
Compass’ play for HomeServices follows the company’s recent acquisition of smaller brokerage firms throughout the U.S. including Chicago-based @properties Christie's International Real Estate and boutique luxury brokerage Washington Fine Properties.
Compass' CEO, Robert Reffkin recently told the market that the brokerage's size presents a competitive advantage.
“I believe 2025 will be the year that the gap between Compass and the industry widens,” Reffkin said.
Structural advantages
'By leveraging our structural advantages and our affiliation with the Christie's International Real Estate brand, we are positioning ourselves to accelerate our market share gains.”
At the end of 2024 Compass had 17,752 principal agents, up nearly 21% from 2023.
This led to US$1.4 billion in revenue during the quarter, up nearly 26% year on year.
In FY22 Compass reported a net loss of $602 million, which was reduced to $154.5 million in 2024. This was due to lower expenses, an improved platform and market share growth.
A shrinking pool of brokerages could further limit consumer choice in an industry already stacked against the average buyer.
Recent divestments by Buffett, including shares in companies like shares of companies like DaVita, Bank of America, CitiGroup, and Apple - plus the ETFs he recently praised as money-makers – have ignited speculation that he is retiring or anticipating a recession.
