Citing explosive growth in the housing market, Realogy’s profit surged during the third quarter and the brokerage giant said it would add to its bet on iBuying.
Realogy said sales volume for the quarter rose 28 percent year-over-year, with September sales up 50 percent. “The volume improved each month during the quarter,” CEO Ryan Schneider said during an earnings call. Through Oct. 29, sales were up 35 percent from a year ago.
Overall, Realogy’s revenue rose to $1.9 billion during the third quarter, up 20 percent year-over-year. Net income for the quarter was $98 million, after a $14 million loss in the second quarter. Realogy lost $70 million in 2019’s third quarter, which the company attributed to an impairment charge.
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In a sign of the shifting residential market, Realogy said it will double down on iBuying by formalizing a joint venture with Home Partners of America. The partnership, dubbed RealSure, has been a pilot program in select cities. Schneider said it will expand to a “substantial number of new markets” next year.
Unlike iBuyers, which use debt to purchase homes, Realogy’s iBuying program is “capital light.” Through RealSure, Realogy agents can offer sellers an instant offer from Home Partners of America that is good for 45 days. During that time, however, the agent lists the home on the open market to try to beat that price.
Schneider said Realogy will invest in the joint venture, but home purchases will be “off balance sheet” making it less risky. He described iBuying as another tool for agents, not a replacement of them.
“All the iBuyers shut down in Q2 and agents kept going,” he said.
Asked if he viewed Zillow’s decision to hire agents as a threat, Schneider said consumers would still look to brokers for infrequent, high-dollar transactions that are “different than buying something on Amazon.”
U.S. home prices climbed 5.2 percent in August, according to the S&P CoreLogic Case-Shiller 20-city home price index. And existing-home sales surged in September, with the median price hitting $311,800, up 15 percent year-over-year.
For Realogy’s brokerage group — which includes the Corcoran Group and Coldwell Banker — sales rose 10 percent year-over-year and the average home price jumped 11 percent year-over-year to $563,513.
Schneider said until this year, the U.S. housing market had been “stuck” at 5 million to 5.5 million homes sold each year. Historically low mortgage rates and social shifts have put the market on pace for 6 million sales.
“It’s a silver lining in a terrible year,” Schneider said. “Houses are moving much more quickly.” He cited migration from urban to suburb markets (a trend seen in the Northeast) and demand for housing in tax-friendly states.
Since last year, Realogy has been cutting costs in an attempt to pare down $3 billion in corporate debt. At the end of the quarter, it reduced that amount by $276 million from the prior-year period. It finished the quarter with $380 million in cash.
Realogy’s title and mortgage business benefited from a surge in refinancings, rising 129 percent year-over-year. The title and mortgage business generated $95 million during the quarter.