The headwinds multiple real estate leaders warned of in the first quarter of 2022 have come to fruition for Anywhere Real Estate, with the real estate holding company’s Q2 earnings declining 6 percent year over year to $2.1 billion.
Despite the negative impact of lower transaction volume and the absence of underwriting earnings due to the $210 million sale of Title Resources Guaranty on revenue, the Madison, New Jersey-based company still managed to remain profitable.
Anywhere drew in a net income of $88 million and a basic earnings per share of $0.76 — both of which were below last year’s $141 million net income and EPS of $1.28. The company’s operating earnings before interest taxes depreciation and amortization (EBITDA) also declined 34 percent from $310 million in Q2 2021 to $202 million in Q2 2022.
In a written statement before the company’s Thursday morning earnings call, Anywhere Chief Executive Officer and President Ryan Schneider expressed his continued confidence in Anywhere’s trajectory and noted the annual declines seen this quarter are due to the near-180-degree turn in market dynamics as sales activity and other markers take a nosedive.
“Even in a much tougher housing market, Anywhere delivered the solid profitability and Free Cash Flow that we believe the market is increasingly valuing,” Schneider said. “Anywhere continues to invest in the business, especially our strategic focus on simplifying and reimagining the home buying and selling experience for consumers as we leverage our strong financial profile and demonstrated ability to deliver results.”
The company’s combined closed transaction volume decreased 6 percent year over year. Anywhere Brands (formerly known as “Realogy Franchise Group”) and Anywhere Advisors (“Realogy Brokerage Group”) logged annual declines in transaction sides of 18 percent and 8 percent, respectively.
Despite the decline in transaction volume and sides, Anywhere Advisors’ agent count grew 6 percent year over year as retention rates remained at “historical highs.”
Anywhere Executive Vice President and Chief Financial Officer Charlotte Simonelli struck a cautiously optimistic tone as she highlighted the company’s cost savings strategy, $70 million in generated cash flow, and Net Debt Leverage Ratio of 3.4x.
“We continued to strengthen our balance sheet in July with an amendment and extension of our revolving credit facility giving us even further financial flexibility,” she said. “We have targeted an additional $70 million of cost savings to give us greater flexibility to balance our strategic priorities and growth investments against the current housing market backdrop.”
In the company’s live call, both Schneider and Simonelli said Anywhere’s blueprint for success in an increasingly volatile market will be focusing on the consumer experience through innovation in technology and service — a promise encapsulated by the company’s surprising rebrand at the end of May.
“What will be most important as the future is changing is the customer experience,” Schneider said. “We believe people will buy and sell houses in a spectrum of ways in the future, all anchored in an improved customer experience.”
“And so we continue to invest in growing our future,” he added. “That includes driving growth from our existing businesses, especially our franchise business and our luxury focus, increasing market share by utilizing our market-leading scale incumbency, strength and exciting investments in products technology and talent, and delivering great consumer experiences buying and selling a home.”
Like previous quarters, Coldwell Banker, Corcoran and Sotheby’s International Realty were the crown jewels among Anywhere’s brands that also include ERA Real Estate, Better Homes and Gardens Real Estate and Century 21.
Coldwell Banker, Corcoran and Sotheby’s International Realty collectively generated $1.8 billion in revenue in Q2 2022 with an $11 million in operating EBITDA, all of which Simonelli said contributed to Cartus’ robust relocation performance with affluent consumers.
“Our relocation business generated favorable operating EBITDA in the quarter led by strong client initiation volume, which was up almost 40 percent year-over-year, including a resurgence of international volume are Anywhere Advisors business, which [have] an average price point above $700,000.”
Even as Schneider and Simonelli highlighted the silver linings in Anywhere’s performance amid a major rebrand and restructuring, both leaders said the upcoming quarters will be challenging and unpredictable as mortgage rates, inflation, recession fears and other headwinds slow the market.
“The biggest change since we last spoke has been the shift in the housing market record increases in mortgage rates to nearly double the levels they were a few months ago, combined with rising inflation and broader macroeconomic concerns has substantially changed buyer affordability, buyer demand and seller expectations,” Schneider said.
The CEO said the emerging headwinds of Q1 2022 have accelerated as annual home price growth drops out of the double digits, affordability issues push an increasing number of buyers out of the market, and contract signings slip 20 percent from Q2 2021.
“The most consistent feedback I’m hearing when talking with agents and franchisees, and looking at our data is the speed at which change is happening,” Schneider said. “Looking ahead, the housing market volatility the pace of change, and potential additional [Federal Reserve] actions together make it pretty tough to forecast the rest of the year.”
With that in mind, Simonelli offered a cautious estimate of $600 million to $700 million for Anywhere’s full-year 2022 operating EBITDA, granting homesale transaction declines stay within the projected 6 to 11 percent.
Despite a projected decline in the coming quarters, Schneider said demographic trends will keep the market ticking along and provide Anywhere-affiliated agents and brokers plenty of opportunity for long-term sustainability.
“We’re ready as Anywhere Real Estate to navigate and deliver during this challenging part of the housing cycle, while remaining focused on the innovation required to win in the future.”