Understanding the Divergence in Labor Costs Within Brokerages
Labor Cost Efficiency Displayed Across Brokerages
AccountTECH, a trusted provider of accounting software for real estate brokerages, has announced valuable insights into the labor cost landscape for July 2025. Their Labor Cost Index measures labor expenses against income for residential real estate firms. This useful metric is key to understanding expense discipline across the industry.
Latest Labor Cost Index Findings
The Labor Cost Index for July 2025 stood at 5.12565%. This percentage reflects the median labor cost relative to income among brokerages adhering to GAAP compliance. It's essential for firms to track these fluctuations to maintain financial health.
Comparative Analysis: Historical Labor Costs
When looking at the history of Labor Cost Index values, we see an interesting trend. For instance, in comparison to 2024, the current index is 98% of the July 2024 data, indicating a slight reduction. Moreover, it aligns with levels recorded in July 2022.
Yearly Labor Cost Index Comparison
Below is a summary table of the Labor Cost Index for the past several years:
- In 2025: 5.12565%
- In 2024: 5.2312%
- In 2023: 5.63725%
- In 2022: 5.14705%
- In 2021: 4.73485%
- In 2020: 4.14585%
- In 2019: 5.6115%
- In 2018: 6.18505%
- In 2017: 7.2376%
- In 2016: 5.5201%
Contrast Between Profitable and Unprofitable Brokerages
A significant divergence exists between profitable and unprofitable firms regarding labor costs. As of July 2025, profitable brokerages reported a labor cost index of 4.7418%. Over the last few years, these companies have consistently kept their labor costs below 5% of their income, showcasing effective cost management.
Profitable Brokerages Labor Costs Over the Years
- In 2025: 4.7418%
- In 2024: 5.03795%
- In 2023: 4.8278%
- In 2022: 4.1038%
- In 2021: 4.58045%
Challenges for Unprofitable Brokerages
In stark contrast, unprofitable firms recorded a labor cost index of 8.6392% in July 2025. With a median gross profit margin of 18.24% for July, those with labor costs exceeding 10.6% of income face significant challenges in reaching profitability.
Unprofitable Brokerages Labor Costs Over Time
- In 2025: 8.6392%
- In 2024: 8.6392%
- In 2023: 7.8718%
- In 2022: 8.8456%
- In 2021: 15.64705%
The Financial Landscape for Real Estate Agents
Another crucial insight from the July 2025 report indicates that the labor cost per agent is now $349.19, which represents a decline from the previous year's peak of $416.65.
Expert Commentary
Mark Blagden, CEO of AccountTECH, stated, "The labor cost index for July reveals that profitable brokerages maintain discipline, consistently managing their expenditures under 5% of their income. In contrast, firms with higher labor costs struggle with profitability, emphasizing that expense management is critical in the real estate brokerage sector."
About AccountTECH and Its Index
AccountTECH's Real Estate Brokerage Financial Health Index series provides essential benchmarks across various financial indicators, including EBITDA margins, gross profit margins, and labor costs. Their wealth of experience over three decades in real estate makes their data a fundamental industry resource.
Frequently Asked Questions
What is the Labor Cost Index for July 2025?
The Labor Cost Index for July 2025 was 5.12565%.
How do profitable and unprofitable brokerages compare in labor costs?
Profitable brokerages reported a labor cost index of 4.7418%, while unprofitable brokerages had a significantly higher index of 8.6392%.
What was the trend of the Labor Cost Index over the past years?
There has been a noticeable fluctuation, with the index peaking in 2017 and experiencing a decline until it rebounded through 2023.
What does a high labor cost mean for a brokerage?
A high labor cost, particularly over 10.6% of income, can indicate significant challenges in achieving profitability for brokerages.
How can brokerages improve their labor cost efficiency?
By managing expenses carefully and maintaining labor costs below 5% of income, brokerages can harness better financial results.
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