Brokerage giant Realogy Holdings reported a net loss of $462 million during the first quarter as coronavirus threatened to freeze the housing market.
The company reported a $447 million impairment charge that it attributed to “broad-based declines” in the market, as well as a $38 million increase in interest expenses.
But momentum heading into the first quarter propelled Realogy to $1.1 billion in revenue, up 6 percent year-over-year. The brokerage giant — the parent company of the Corcoran Group, Sotheby’s international Realty and Coldwell Banker — said transactions rose 8 percent before the pandemic took hold.
“I loved our Q1 momentum, but Covid eclipsed that,” CEO Ryan Schneider said during an earnings call Thursday.
In March, Realogy made crisis-level spending cuts, which it said will lower costs by $80 million to $100 million per quarter. It ended the quarter with $628 million in cash, including $400 million it proactively drew down on in March.
Although the full impact of the pandemic hasn’t been realized, Schneider described a steep drop in transactions and contract activity in April.
Overall, Realogy’s transaction volume slid 20 percent to 25 percent, with New York and California each experiencing a 30 percent decline. “This is actually better than I thought it would be when the crisis began,” the chief executive said.
Contract volume, on the other hand, dropped 50 percent at its company-owned brokerages in April, and 40 percent among franchises. Inventory is also down, particularly among $1 million-plus homes. But Schneider said the declines peaked in mid-April. “Consumers are clearly still engaged in housing,” he said. “Demand still seems to be out there — even if it’s pent-up for a while given the crisis.”
Realogy disclosed that it suspended its TurnKey pilot with Amazon, through which buyers could get up to $5,000 in Amazon smart-home products.
The program, which required in-person service and installation, “just doesn’t work in a Covid, social-distancing world,” Schneider said. “We and Amazon had a decision point on the next phase in April. In a Covid world, bluntly, it didn’t make sense to continue that pilot.”
Realogy is modeling a V-shaped recovery, and said listing inventory is starting to come back. “Anyone out looking for a house right now is a very serious buyer,” Schneider said. “No one is messing around.”
The company has temporarily cut salaries for a majority of employees, including CEO Ryan Schneider, who took a 90 percent pay cut. It also pulled back on marketing and delayed strategic investments to cut costs.
Before the coronavirus, Realogy enacted an aggressive cost-cutting strategy to pay down more than $3 billion in debt. In 2019, it reduced net debt by $78 million.
Realogy generated $5.6 billion in revenue last year, down 3 percent year-over-year. It lost $188 million, compared to net income of $137 million in 2018, largely because of accounting expenses associated with the planned $400 million sale of its relocation business Cartus.
In recent weeks, however, that deal has fallen apart. Realogy sued to enforce the deal after buyer Madison Dearborn Partners and its subsidiary SIRVA tried to walk away. In court documents, the brokerage said Madison Dearborn was using Covid-19 as an eleventh hour excuse to get out of the transaction.