Despite a quickly slowing market in the second quarter, many of the dozen or more real estate companies that posted earnings last week managed to turn a profit and stave off ruin.

In the end, it wasn’t the Red Wedding.

A week ago, Inman reported that one of the most pivotal earnings seasons in recent memory was beginning. From older stalwarts like Keller Williams to tech behemoths like Zillow to powerful startups, including Opendoor, nearly every major publicly traded company was about to reveal how much money they made during the second quarter of 2022.

Why did all of that matter so much?

Because the second quarter was, of course, when the market shift was finally in full swing. As a result, this earnings season was the first chance to see how major players were dealing with a slowing market. Would brokerages and iBuyers, for instance, managed to eek out profits in an environment that suddenly didn’t resemble recent years? Or would it be a bloodbath, akin to Game of Thrones‘ infamous Red Wedding that killed off several of the show’s protagonists?

With the lion’s share of earnings now in the rearview mirror, it’s clear that companies are dealing with some tougher times as sales slow and mortgage rates rise.

However, this earnings season proved — somewhat surprisingly — to not be a bloodbath. In fact, many companies managed to turn profits when doing so was far from guaranteed. That doesn’t mean the second quarter was necessarily easy for real estate companies, but it does hint that the industry is managing to cope with the market shift.

Here’s what you need to know:

Zillow: Premier Agent dips as Zillow hangs on to modest profits

Zillow faced a number of headwinds in the second quarter including rising mortgage rates, worsening affordability and tight inventory. Those headwinds led to losses in two of the company’s segments. And overall, revenue was down 23 percent year over year to $1 billion.

But significantly, the company managed to turn a profit of $69 million.

That’s despite the fact that Zillow is still exiting something of an existential crisis related to its abandonment of iBuying. Zillow has also lost money during recent quarters, meaning a profit was far from guaranteed this time around.

Offerpad: Profitability continues for 3rd-straight quarter even with an ongoing market shift

Offerpad is the second largest dedicated iBuyer, but is the first company from its segment to appear on this list because it managed to clock its third straight profitable quarter between April and June. The company ultimately reported a net income of $11.6 million, up 26 percent year over year.

That a major iBuyer managed to turn a profit this year is a noteworthy feat by itself. Questions about iBuying’s viability related to Zillow aside, there were some who have wondered what might happen to institutional home flippers if prices weren’t rising rapidly. Offerpad’s answer is that at least in its case, it can still make money.

Opendoor: Prices get cut to offload inventory, but profitability proves elusive

After losing money for the entirety of its history, Opendoor in May revealed that it finally had its first profitable quarter during the beginning of 2022.

Unfortunately for the largest iBuyer, it couldn’t turn that performance into a streak and last week reported a loss of $54 million during the second quarter of this year.

The company also revealed in its earnings report that it bought more homes than it sold during the quarter and is now focused on “inventory health” — or in other words cutting prices in order to sell homes quickly.

It might be tempting to read Opendoor’s dip back into losses as a meaningful development. But the company has a track record of losing money and still growing, so this earnings report may just represent business as usual for the firm. That seems like a particularly reasonable interpretation in light of analyst Mike DelPrete’s comments last week at Inman Connect Las Vegas, where he said the iBuyer has more than enough cash to play the long game.

It’s also worth noting that Opendoor and Zillow announced a new partnership the same day that both companies reported earnings.

Rocket Companies: Huge cuts help the mortgage giant stay profitable

Rocket is the largest mortgage lender in the U.S., and the mortgage sector was the first and hardest-hit when rates began rising earlier this year. So if there was any company that was poised to have a brutal earnings season, Rocket seemed like a good candidate.

But the company ultimately defied the odds and reported a $60 million second quarter profit on $1.39 billion in revenue. In fairness, the company made a massively larger profit of $1 billion during the same time last year. But the fact that Rocket turned a profit at all is noteworthy given the widespread chaos in the lending business of late.

Ultimately, though, these numbers probably say more about Rocket than the mortgage industry generally: The company made a profit after cutting $300 million in expenses.

EXp World Holdings: Revenue jumps, but profits are down year over year

EXp Realty is one of two relatively new, tech-oriented public brokerages (the other being Compass). And so the company’s earnings are always a gage of how the upstarts are doing relative to the legacy players in the brokerage space.

In eXp’s case, it turns out the company is doing alright. In the second quarter, the company’s revenue jumped 42 percent year over year to $1.4 billion — results that gave it a “record quarter,” according to its report.

EXp was also profitable, earning a total of $9.4 million in net income. However, that was down significantly from $37 million in profit in the second quarter of 2021. The company attributed the drop to tax expenses and other one-time costs.

Despite the modest profits, eXp’s rising revenue suggests that the market shift ultimately has not been an apocalyptic situation for brokerages — at least for those that can run lean operations.

RE/MAX: Profits and global agent counts tick up slightly

Speaking of the brokerage world, RE/MAX also managed to turn a profit in the second quarter of the year. The company specifically brought in $5.8 million in net income.

That’s less than eXp made. But notably, RE/MAX’s profit was actually up year over year, from $5.3 million the second quarter of 2021, further suggesting the brokerage world is still chugging along amid the market shift.

RE/MAX’s global agent count also rose 2.7 percent year over year to 143,939 in the second quarter. However, in just the U.S., agent count actually dropped 2.6 percent year over year to 60,825.

Redfin: Revenue and losses both spike

This earnings season was a bit of a double edged sword for Redfin. The company’s revenue leapt 29 percent year over year to $606.9 million. But losses also mounted, growing from $27.9 million in the second quarter of 2021 to $78.1 million during the same period this year.

In the company’s report, CEO Glenn Kelman was frank about the state of the market, saying it “took a turn for the worse in the second quarter.”

Redfin — which is unique for combining a variety of businesses including a brokerage, iBuyer, portal and more — is another company with a track record of earning and losing money in various quarters. So this rounds losses don’t necessarily mean the sky is falling. Still, Kelman’s comments and the fact that losses are so much higher this year further highlight how different the housing landscape is now compared to the recent past.

Keller Williams: Sales volume ticks up, but inventory woes drag on other metrics

Keller Williams isn’t publicly traded, but shares some limited earning information with the public anyway. This quarter, the company revealed that its overall sales volume climbed 1 percent year over year, ultimately hitting $146.8 billion in the second quarter.

At the same time, a variety of other metrics including new listings, projected closings and written contract volume all decreased for the third consecutive quarter.

Keller Williams does not share information on profitability, but the declines in a variety of metrics hint at how brokerages and franchisors are currently facing some headwinds.

Fathom Realty: Revenues rise, but mortgage drags the company to a net loss

Fathom Realty operates a real estate services and brokerage business. In the second quarter of 2022, the company’s revenue shot up 52 percent annually, reaching $128.2 million. But the company ultimately lost $5.7 million, which it attributed to struggles with its mortgage business.

Those numbers highlight the challenges of the lately moribund mortgage market.

Vrbo: Traveler deposits fuel strong returns for Expedia even amid losses

Expedia, operator of home sharing platform Vrbo, revealed in its earnings Thursday that gross bookings during the second quarter of the year were up 8 percent compared to the second quarter of 2019. Expedia’s revenue also soared 51 percent year over year to $3.2 billion.

Nevertheless, the company still suffered a net loss of $185 million with an adjusted net income of $310 million.

The travel sector offers a different intersection with real estate compared to other companies on this list, as the segment is centered on second homes and vacation rentals. This sector thrived during much of the coronavirus pandemic as remote workers spent more time traveling. But it now remains to be seen what the new normal will look like for travel companies.

WeWork: Losses decline as workers returned to the office

Co-working company WeWork has a huge impact on the commercial real estate landscape, but for professionals in the residential side, it’s most useful as a gauge of how workers are returning to offices — a trend that will obviously impact where people live.

In the second quarter of 2022, WeWork saw its net loss decrease 31 percent year over year to $635 million, while revenue rose 37 percent year over year to $815 million. Those numbers fell short of analysts’ expectations and didn’t impress investors, but the company did attribute the trend to more people returning to work in offices.

Douglas Elliman: Revenue dips in the face of a luxury housing shortage

Douglas Elliman experienced a decline in revenue in the second quarter of 2022 as the housing market — and in particular the luxury sector — slowed down. But despite the decline, the quarter still delievered Douglas Elliman’s second highest quarterly revenue ever. The company ultimately raked in $364.4 million, down 7 percent year over year.

The company’s net income clocked in at $10.2 million compared to $39.5 million in the second quarter of 2021.

The slowdown ultimately stopped the company from besting its previous records, but Chairman and CEO Howard Lorber said in a statement. “We are extremely proud of our team for delivering another successful quarter.”

Email Jim Dalrymple II
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