Most publicly traded real estate companies continued to bleed money in the first chunk of 2023. These metrics help explain why investors aren’t panicking.

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For months, real estate companies have been losing money hand over fist — and that continued in the latest round of earnings reports.

These filings shed light on how some of real estate’s biggest companies fared amid a protracted market downturn in the first three months of the new year. Brokerages and other companies continued to lose money — sometimes well over $100 million per quarter — as home prices fell and as companies kept shedding costs.

But now, agents and companies have largely adjusted to the demand shock, offering the industry a chance to look ahead to the tail end of the year — which may feature year-over-year increases in terms of transaction activity, eXp World Holdings CEO Glenn Sanford told investors this month.

“Those who were taking it on the chin last year through the mid-year, they’ve adjusted [to] the new normal,” Sanford said. “I believe that we’re now fully into the new normal in terms of sales volumes and those types of things. For now, it will be more of a steady growth. I think once we get into especially Q3 and Q4 we’ll actually start to see year-over-year growth rates — that’s my guess. And I think agents are starting to pick that up as well.”

It can be time-consuming to compile the information from all of these various sources and get a pulse on how the real estate industry is doing as a whole.

That’s why, to help digest the flurry of earnings news, Intel has poured over the latest data from financial markets, company earnings reports and other investor materials.

Intel’s review suggests that the industry still has a long way to go before executives at the biggest companies will breathe a collective sigh of relief. But for now, investors are reacting as if the latest news is about what they expected — and perhaps even a bit better than once feared.

To illustrate why that is, Intel distilled the numbers into five key takeaways, each represented by a chart below. Take a look at these observations and what they might spell for the future as brokerages, listing portals and iBuyers try to claw their way out of the present downturn.

1. Investors thought the latest data was (mostly) fine

It’s been a couple weeks since the start of earnings season, and the markets have had time to digest the latest numbers reported by real estate companies.

Their overall impression? The numbers aren’t great, but they could have been worse.

Compare their recent reactions to those toward the previous round of earnings reports, which became public in mid-to-late February.

Chart by Daniel Houston

There’s been a pretty obvious improvement in investor sentiment.

Share prices went on a steep slide in February. The brokerage giant Anywhere announced that month that it had lost more than $450 million in the final three months of 2022. The iBuyer Opendoor had followed up its third-quarter loss of nearly $1 billion with a fourth-quarter loss of another $400 million.

In other words, things were worse than expected to close last year for several key companies, and investors stepped back further from real estate companies as a result.

But turn the page to this most recent earnings season, and that bleeding began to slow. And since the start of May, when these numbers first started coming out, share prices in most big real estate companies have been on the rise.

2. Companies have narrowed their losses

The last year hasn’t been kind to the brokerage business — nor has it been easy for just about any business that depends on real estate transactions.

Mortgage rates doubled, home-transaction volumes plummeted, and — starting in the third quarter of 2022 — home prices even began to turn downward nationwide for the first time in years.

The result was an industry that wasn’t quite ready to lose this much revenue this soon. And it started racking up big losses.

Chart by Daniel Houston

As the chart above shows, the back of of 2022 was when real estate really started to report big — and in some cases, even jaw-dropping — losses.

But for nearly every company above, things improved from January through March as the demand levels leading up to the spring homebuying market came in more robust than many in the industry expected.

Virtually every company had trimmed expenses over the previous year, so when existing-home sales posted a surprisingly big jump to open 2022, company losses began to narrow substantially. For some of the bigger brokerages, such as Anywhere, legal costs are also taking a toll on the bottom line as big class-action cases work their way through the courts this year.

“Legal accruals aside, we were pleased that March operating EBITDA [an adjusted measure of profit] was solidly positive,” Anywhere CEO Ryan Schneider told investors earlier this month. “We expect that trend to continue. We are also glad to see open-volume metrics continuing to outperform closed [transactions] in the first quarter, which indicates positive future volume levels. And our numbers in April so far are continuing the trend.”

Still, few of these companies made a profit. And not all of them are sitting on large reserves of cash, meaning the months ahead could still be bumpier than they’d like.

3. Some companies have less room for error

Major real estate companies fall in roughly two categories with regard to their cash reserves: those with plenty of savings to get through a lengthy downturn, and those that are relatively cash-thin and dependent on tools like lines of credit to get through this period.

Each of the companies below have relatively short runways, holding enough cash to last between 4 to 7 months without the aid of, say, a revolving credit line like Opendoor and Compass have been tapping.

Chart by Daniel Houston

The four companies in the chart above are each in an uncomfortable spot. Both Opendoor and Compass have been able to stabilize their respective runways, utilizing credit lines to keep roughly the same amount of cash on hand from quarter to quarter, relative to their ongoing losses.

Things are perhaps dicier for a company like Redfin, whose CEO Glenn Kelman said is being run “out of the cash register” in 2023.

By the end of March, Redfin was down to $150 million in cash or cash equivalents, the latest earnings show. That’s down from a reserve of nearly $613 million the same time last year. And the company continued to lose money at a rate of approximately $20 million a month.

Still, Redfin was one of the many real estate companies to see a jump in its share price when the latest earnings came out. The company, like other real estate businesses with listing portals, had benefited from some favorable tailwinds in the first few months of the year.

4. Buyers are flocking back to listing sites

When homebuyers turned away from popular listing sites such as Zillow, Redfin and in the closing months of 2022, it wasn’t completely unprecedented.

Those are the slowest months of the year for real estate in general as the market comes down off the spring and summer rush.

Still, it wasn’t obvious that slowdown in traffic would come to a halt in this unusual winter and spring. That is, until the latest earnings reports came out.

Chart by Daniel Houston

Zillow remains the king of these listing portals, averaging more than 200 million active users each month, according to its latest filings.

But other portals saw a jump in web traffic as well, signaling that buyers remain interested in the housing market — even if a number of them on the more affordable end of the spectrum have been sidelined by higher mortgage rates and a strained affordability environment.

One interested observation above is that — the real estate portal owned by Fox News parent News Corp — has lost web traffic share to Zillow, Redfin and others over the last two years. Still, despite its 24 percent year-over-year decline in users, the site saw an uptick in traffic in the early months of the year.

5. That toxic iBuyer inventory is headed out the door

Perhaps no class of real estate company has seen its fortunes dimmed over the last year and a half than the iBuyer.

Once hailed as the future of the industry, these instant-cash-offer companies have since seen their market valuations fall by well over 90 percent from their peaks in 2021.

The two publicly traded iBuyers — Opendoor and Offerpad — were both caught flat-footed last year as the properties they purchased at peak market prices later dropped in value. Both companies have been selling these homes at a significant loss, leading to their troubled earnings reports.

Investors remain low on the longterm prospects for this model, relative to where they were a few years ago. But they’ve warmed to the idea a bit more in recent weeks as both iBuyers stressed how they’ve been moving to offload their bad inventory and plot a path to profitability.

Offerpad has been particularly eager to get the worst properties off its books. As of the end of March, the smaller of the two iBuyers said that virtually all of its “legacy” inventory — homes purchased at higher prices before September of last year — had been sold.

Meanwhile, Opendoor still had a number of properties to sell from the market peak — about $1.5 billion worth, according to its latest earnings report. Still, that marks a substantial improvement from where the company stood at the end of last year.

Chart by Daniel Houston

Moving these homes off the books is critical for Opendoor, as the company’s executives have acknowledged in the past.

The homes Opendoor sold from this “old book” cohort — the group purchased in June of 2022 or earlier — sold at a 13 percent loss on average in the first quarter of the year, after accounting for the direct costs of holding and selling the properties, as well as the prices those homes eventually sold for.

By contrast, the homes purchased as part of the “new book” cohort show much more promise for the company. Opendoor has been scaling back its purchases in recent months, largely by offering lower prices that are more likely to result in high-margin transactions.

And the new-book homes sold in the first quarter appeared to meet that expectation, earning a nearly 9 percent profit on average, after holding and selling costs.

Shortly after their earnings report was made public, Opendoor CEO Carrie Wheeler told Inman that the company expects to continue selling homes for a loss for a few more months, in part because the old book has already been picked over by buyers, leaving some of the less desirable homes left to be sold.

“We indicated that next quarter will be the last quarter of contribution margin losses, in other words like negative unit economics,” Wheeler said. “And that’ll reverse because the old book will be behind us and it’ll be all about the new book.”

Email Daniel Houston

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