Real estate franchisor and brokerage giant Realogy Corp. reported that it lost $22 million during the second quarter as revenue fell 6 percent from a year ago, to $1.2 billion, as a result of a slowdown in sales.
Transaction sides were down 13 percent at both company-owned brokerages and among independently owned Realogy franchisees operating under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, and Better Homes and Gardens Real Estate brand names, the company said.
"The comparative weakness in the second quarter of 2011 was primarily related to the unfavorable year-over-year comparisons to the second quarter of 2010, which experienced a significant spike in unit sales directly related to the homebuyer tax credit (program)," Realogy CEO Richard Smith said in a statement.
"Sluggish macroeconomic conditions such as weak (gross domestic product) growth, continued high unemployment rates and low consumer confidence also contributed to a suppressed demand for housing this past quarter."
While the decrease in transaction sides mirrored industry trends, Realogy said both company-owned brokerages and franchisees outperformed the market in terms of average sales price.
In its quarterly earnings report, Realogy said its franchisees closed 251,045 transaction sides, down 13 percent from a year ago. But the average selling price was up 2 percent, to $202,045. Realogy’s royalty per side was virtually unchanged at $258, as the net effective royalty rate declined 21 basis points, to 4.83 percent.
For Realogy’s company-owned brokerages, transaction sides were also down 13 percent from a year ago, to 73,061. The average selling price was up 5 percent, to $445,550. The average broker commission rate remained steady at 2.49 percent, and gross commission income per side climbed 6 percent, to $11,931.
Real estate franchise services continued to be the company’s most profitable division, generating $97 million in adjusted earnings before interest, tax, depreciation and amortization (EBITDA) on $160 million in revenue. Revenue was down 8 percent from the same time a year ago, and EBITDA dropped by 21 percent.
Among Realogy’s company-owned brokerages, adjusted earnings (EBITDA) fell 43 percent from a year ago, to $48 million, while revenue was down 8 percent to $884 million.
Adjusted earnings from title and settlement services rose 19 percent, to $32 million, as revenue grew by 5 percent, to $90 million.
During the six months ended June 30, Realogy said its subsidiary NRT acquired seven real estate brokerages for a total of $2 million.
As of June 30, Realogy had approximately 14,400 franchised and company-owned offices and 256,000 independent sales associates operating under its brands in the U.S. and 99 other countries and territories around the world.
That figure includes approximately 740 company-owned and operated brokerage offices with approximately 43,300 independent sales associates.
The number of sales associates at both franchisee and company-owned offices was down about 3 percent from 264,000 a year ago. That includes a 3.8 percent drop in sales associates at company-owned brokerages, who numbered 45,000 a year ago.
The National Association of Realtors reported a 5.8 percent drop in membership during the same period.