The record climb in home sales and staggering increase in home price has not necessarily translated into success for the biggest U.S. residential real estate companies. Zillow, Compass, and Redfin each posted nine-figure losses in 2021.
However, at least one significant player did capitalize on housing’s banner year. Brokerage and franchise conglomerate Realogy reported its yearly financials Thursday, and the Madison, New Jersey-headquartered company tallied $343 million in net income for 2021. The profitability marked a dramatic turnaround from 2020 when Realogy lost $360 million.
Realogy’s revenue also grew to $8 billion, a 28% jump from 2020. That revenue figure includes the full commissions on home sales, which mostly are returned to the real estate agent on the deal.
Once the $4.8 billion in commissions and other related costs are subtracted, Realogy’s revenue is just $3.2 billion. Still, the figure compares favorably to bitter rival Compass, which posted $1.1 billion in revenue after deducting agent’s cut of the commissions.
Ryan Schneider crowed on an earnings call about the company’s best financial year since Schneider became CEO in 2017.
“Realogy is on a transformation journey,” Schneider said. “We have gained market share. We have driven greater profitability, and we have massively improved our balance sheet.”
Regarding the latter, Realogy reported $2.3 billion in corporate debt, and $735 million cash on hand. In regard to market share, Realogy’s brokerage operations, which include branches of Sotheby’s, Coldwell Banker, Century 21, Better Homes & Gardens, and Corcoran, may no longer generate more sales volume than Compass, which reported 68% year-over-year leap in sales volume.
However, Realogy also includes vast network of franchisees. Agents affiliated with Realogy franchise outlets participated in 245,000 homes sales in 2021, the company reported, while the brokerage took part in 75,000 deal sides. The brokerage, however, does more high-end deals. The average home sold by the brokerage cost $609,000, while the average franchise sale was $394,000.
Unclear is how long Realogy’s solid financial performance can last.
Schneider repeatedly cautioned on the call that seasonality was returning to the housing market. He predicted that the company’s first quarter 2022 operating income “will be the smallest of our four quarters and well below” the first quarter of 2021.
Also, Realogy feels the pinch from the clock striking midnight on the mortgage refinancing bonanza.
In 2020, Guaranteed Rate Affinity, a partnership known as a joint venture between Realogy and Chicago-based mortgage lender Guaranteed Rate generated $126 million in earnings for Realogy, mostly through homeowners refinancing their 30-year, fixed rate mortgage. That figure fell to $49 million in 2021 and is likely to fall further in 2022 amid higher interest rates.
Schneider asserted that Realogy is pursuing multiple “seven and eight figure” range acquisitions for 2022, in the vein of acquiring longtime Manhattan brokerage Warburg Realty this past year.
The company is also ramping up RealSure, an iBuying joint venture with Blackstone Group-owned Home Partners of America. RealSure was the talk of the company’s third quarter earnings call, but few additional details were provided Thursday.