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Anywhere Real Estate logged declining revenues for the second consecutive quarter on Thursday, with the real estate holding company raking in $1.8 billion during the third quarter — 17 percent below the same period last year.
The Madison, New Jersey-based company’s combined closed transaction volume also decreased 17 percent year over year. However, Anywhere Advisors’ agent count grew 7 percent, marking the ninth-consecutive quarter of such gains, according to a third-quarter earnings report released Thursday morning.
Despite the negative impact of lower transaction volume, the absence of underwriting earnings due to the $210 million sale of Title Resources Guaranty and legal accruals on revenue, Anywhere managed to remain profitable.
Anywhere drew in a net income of $55 million and a basic earnings per share of $0.49 — both of which were below last year’s $114 million net income and EPS of $0.98. The company’s operating earnings before interest taxes depreciation and amortization (EBITDA) also declined 107 percent from $273 million in Q3 2021 to $166 million in Q2 2022.
In a written statement before the company’s Thursday morning earnings call, Anywhere Chief Executive Officer and President Ryan Schneider focused on the company’s “meaningful profitability” even as rising mortgage rates, inflation, worsening affordability and several other socioeconomic factors continue to dampen homebuying and selling activity.
“In the third quarter Anywhere delivered meaningful profitability, even with an increasingly challenging housing backdrop,” Schneider said. “I believe Anywhere is well-positioned to lead through the current environment and into the future as we continue to strategically invest to grow our core business and simplify the consumer experience.”
Much like the last quarter, Anywhere Executive Vice President and Chief Financial Officer Charlotte Simonelli struck a confident tone as she highlighted the company’s $150 million cost savings strategy, $99 million in generated cash flow, and Net Debt Leverage Ratio of 3.8x.
“We are on course this year to realize our cost savings target, proactively redeem our 2023 debt maturities, and integrate our brokerage and title operations, all of which strengthen the foundation of our business and improve our cost basis,” she said in a press release. “Our third quarter’s results demonstrated our profit delivery even in a challenging part of housing market.”
In the company’s live call, Schneider provided a deep dive into the market and company factors that resulted in a second-consecutive quarter of declines.
“The macroeconomic drivers of this fall off and housing activity are not a mystery with mortgage rates more than doubling to now at or above 7 percent, affordability challenges given the rise in home prices, and economic uncertainty anchored in high inflation,” he said. “Beyond those macro factors, I can’t emphasize enough how the continued lack of inventory contributes to this drop-off. Many homeowners are locked into their current homes with low mortgage rates creating a barrier to new supply coming onto the market.”
Schneider said he doesn’t expect the near-time market to improve, as homebuying and homeselling activity widely varies among Anywhere’s markets.
“While a challenging macro housing outlook for the rest of 2022 and 2023 is clearly disappointing,” he said. “We are seeing pretty meaningful geographic variation with about 25 percent [sales] volume declines in the West, but only kind of high single-digit declines in places like the Midwest and the Northeast.”
“We’re also seeing the same geographic variations in the dynamics of the market. Let’s take Coldwell Banker as an example,” he added. “Average days on market in Q3 increased five [days] versus the prior year to 20 days overall. Average days on market stayed flat in the Northeast but increased by 11 days in the West. But to put it in context, that 20 average days on market is still substantially lower than more normalized years like 2019 when it was 30 days.”
Including weathering a mixed bag of a housing market, Schneider acknowledged the pressure of several class action lawsuits on Anywhere’s bottom line.
“There are a large number of industry class action lawsuits, as well as additional litigation facing the company to have a trial date set in the next six months,” he said in reference to several buyer broker commission and antitrust suits. “All these cases are complex and constantly evolving, and while we’re vigorously defending these lawsuits and believe we have substantial defenses, we increased our legal approvals for several matters in Q3.”
Looking forward, both leaders predicted a rough Q4 with transaction volumes declining 25 percent from Q4 2021.
Simonelli said the forecast for the company’s Operating EBITDA for full year 2022 had been in the range of $600 to $700 million; however, the company won’t be able to achieve the low end of that estimate. “The further deterioration of volume from our previous guidance combined with the legal accruals as below our previous EBIT da guidance, we do not plan to give new guidance at this point due to the high degree of macro volatility,” she said.
Still, Schneider managed to end the call positively with a brief statement on the long-term health of the housing market.
“Its clearly a volatile and challenging housing market right now and in the near future, but I like Anywhere real estate’s demonstrated ability to deliver meaningful profitability, cost discipline, prudent growth investments and our potential for differentiation in an improving competitive environment,” he said. “I still believe the long-term housing market outlook is pretty good, driven in large part by positive demographics, strong consumer balance sheets and strong demand for housing.”
“But today and in the near future, we’re clearly facing a tough part of the cycle,” he added. “We believe we’re well positioned for the future, taking a proactive approach to confronting the challenging near-term market and continuing to look ahead to grow our business, simplify the transaction for the consumer and create competitive differentiation.”