“We’ve seen solid sequential growth with residential purchase open orders per day up in both Q1 and Q2 and even holding strong in the month of July, which is not a typical since orders usually crest heading into the back half of the year,” Mike Nolan, Fidelity’s CEO, told investors and analysts on the firm’s second quarter earnings call Wednesday morning. “We feel the resiliency of residential purchase volumes, which have held up in a weak market despite mortgage rates spiking to 7%, is a testament to the underlying demand for housing the exists in this country.”
Even with the uncertainty of where the housing market and mortgage rates are headed in the next few months, Nolan said this underlying demand makes him feel cautiously optimistic about the future of the real estate industry as a whole.
Nolan’s assertions about the housing market were underlined by the strong performance of Fidelity’s title segment during the quarter. While the title segment’s revenue dropped 27% year over year to $1.9 billion, which executives said is in line with revenue levels recorded in 2018 and 2019, net earnings for the quarter rose slightly year over year to $165 million compared to $164 million in Q2 2022.
“So far, 2023 has been encouraging as we have found our footing in a more typical seasonal pattern, albeit in a weak market and with the cost structure that is aligned with this environment,” Nolan said.
In addition to the 18% decline in purchase orders opened per day, dropping to an average of 5,400 orders, refinance orders opened per day dropped 36% and commercial orders opened per day dropped 22%. Fidelity did however note that on a sequential basis, purchase orders opened per day were up 12% compared to Q1 2023.
Overall, Fidelity reported total revenue of $3 billion for the quarter, up from $2.635 billion in Q2 2022, as the firm’s total assets rose roughly $12 billion to $73.021 billion, but the firm’s net income for the quarter fell to $219 million from $537 million a year ago, as the F&G insurance solutions segment of the business saw its net income drop to $110 million from $385 million a year ago.
“This strong performance really demonstrates our approach to running the business, highlighting our ability to manage economic cycles and react quickly to changing order volumes,” Nolan said. “Our performance this year is a direct result of the actions we took in the back half of 2022 when, in light of the steep decline in mortgage volumes, we reduced our field staff by 26% net of acquisitions. This positioned us well given the low inventory coming into 2023.”