Realogy reports strong quarter, expands iBuying
Brokerage giant’s revenue up but profit down 30%; mortgage venture loses $8M
UPDATED April 28, 2022, 6:55 p.m.: Realogy expanded its iBuying arm to seven more markets last quarter, according to the company’s first-quarter earnings report.
Investing in the joint venture with Blackstone’s Home Partners of America, called RealSure, has been a priority for the company since last year. RealSure also has a selling product, which is now in 25 markets, but iBuying is the riskier endeavor, as Zillow’s disastrous experiment with the strategy showed.
Meanwhile, a Realogy mortgage joint venture lost $8 million last quarter. Realogy President and CEO Ryan Schneider blamed rising mortgage rates for the performance.
RealSure differs from other iBuying tools because it gives homeowners the option to list with a traditional agent for 45 days. “We remain skeptical of the pure iBuying concept,” said Schneider.
Brokerages owned by Realogy include Corcoran, Coldwell Banker, Century 21, Sotheby’s and Coldwell Banker Commercial. Realogy did not respond to an inquiry about which markets RealSure added last quarter, nor did it break out financial results for the operation.
As a whole, Realogy said it had one of the best first quarters in company history despite a 30 percent year-over-year decline in profits: It reported $23 million in the quarter and earnings per share of 20 cents, down from $33 million and 28 cents, respectively, a year ago. But Realogy executives touted the company’s revenue, which was up by $88 million to $1.6 billion. Transaction volume rose 10 percent over last year’s first quarter.
“Excluding the unseasonably high 2021, we delivered the best first-quarter top and bottom line results in the company’s history,” said Schneider. “We saw some really powerful geographic trends with standout strength in New York City and Florida.”
Realogy’s hot start is a continuation of its strong 2021, driven by the surging housing market. Last year, the company reported annual transaction volume growth of 29 percent and annual profits of $323 million.
The company also continued its strategy of paying down debt, a priority last year, and expanded its brokerage agent headcount by 6 percent year-over-year, the seventh consecutive quarter of growth.
Continuing its plan to reduce debt, Realogy last quarter met its target net debt leverage ratio of three, meaning it would take three years to pay off its debt if net debt and EBITDA remained constant. It also retired $1.1 billion of high-interest bonds, which Schneider said will reduce annual interest expense by $40 million.
Schneider expects the company to deliver operating earnings before interest, depreciation and amortization of $750 million to $800 million this year. Despite such headwinds as rising interest rates and low inventory, Schneider had a positive outlook on the market given strong demand, particularly in the luxury market, which is more insulated from rising rates.
“While the near-term volatility in the housing market is tough to predict, we remain convinced the medium-term outlook for housing, especially over the course of this decade, anchored in positive demographics and social trends, remains bright,” he said.
Correction: An earlier version of this story misstated the financial results of Realogy’s iBuying arm. The $8 million quarterly loss was attributable to a mortgage joint venture.