Franchise giant Realogy Corp. turned a $222 million profit in the second quarter as sales and home prices surged, but warned that the third quarter is shaping up to be more challenging, with sales down 17 percent in June and July from a year ago.
Realogy’s strong second-quarter results — boosted by the federal homebuyer tax credit — helped bring the company back into the black for the year. The $25 million in net income posted for the first six months of 2010 compares to $274 million in losses at the same point in 2009.
"Clearly, Realogy had a strong second quarter, and we are pleased with our operating and financial results for the period," said Richard A. Smith, Realogy CEO, in a press release. "Looking forward, however, it is shaping up to be a difficult third quarter because of the expiration of the homebuyer tax credit and an uncertain near-term outlook for the economy."
High affordability and near-record-low mortgage rates alone cannot offset the impact of high unemployment and declining consumer confidence, Smith said. Fannie Mae and the National Association of Realtors have both revised their 2010 forecasts and expect 2010 home sales to be flat in comparison to 2009 at 5.1 million units.
Among brokerages that Realogy provides franchise services to, but does not own, closed transaction sides were up 11 percent from a year ago, with 288,479 buyers and sellers represented during the second quarter. The average sale price was also up 5 percent, to $197,637, Realogy said in a regulatory filing. That helped offset a slight decline in the average commission, from 2.57 percent a year ago to 2.54 percent.
Non-company-owned brokerages operate under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, Coldwell Banker Commercial and Better Homes and Gardens Real Estate brand names.
At Realogy’s company-owned real estate brokerages, which serve the higher-end market, closed transaction sides were up 16 percent, to 83,583, while average sale price was up 12 percent, to $424,442. The average commission rate was 2.49 percent, down slightly from 2.52 percent a year ago.
Company-owned brokerages operate under the Coldwell Banker, ERA, Corcoran Group and Sotheby’s International Realty brand names.
Company-owned real estate brokerage services generated $956 million in revenue for the quarter, a 25 percent increase from a year ago. Revenue from franchise services provided to non-company-owned brokerages was up 21 percent, to $173 million.
Revenue generated by Realogy’s relocation services segment was up 32 percent from a year ago, to $106 million, boosted by the Jan. 21 stock acquisition of Primacy Relocation LLC.
The only operating segment that saw a decline in revenue was title and settlement services, which generated $86 million in revenue, $2 million less than during the same period a year ago.