It has been a shaky and odd housing market so far this year. With fears of a major crash receding but no sign of a broad rally, big public real estate companies are seeking to find their footing against a varying and uncertain real estate landscape. So far, iBuyers have failed to effectively adapt to a down market, while big, legacy brokerages have largely weathered the storm.
As Q2 earning season wraps up, we saw decidedly mixed results almost across the board. Zillow and Redfin continue to diverge in their focus and profitability, while CoStar remains heavily engaged in residential against the threat of a commercial real estate downturn. There are more signs of hope for mortgage behemoths after a dizzying downward spiral in 2022. And more brokerage-centric companies like Anywhere (formerly Realogy) and eXp saw uneven success in adapting to 2023’s challenges.
Here are highlights from the Q2 earnings season:
The big picture: Mortgage lenders got rocked in 2022 as rates skyrocketed (no pun intended), but Rocket appears to be adapting, focused on resurgent purchase loans and customer loyalty programs.
Revenue: -11% YoY, $1.24 billion
Net Income: -$139 million
Closed loan origination volume: -35% YoY, $22.33 billion
What they’re saying:
“In Q2, against the backdrop of housing affordability and inventory challenges, we reported adjusted revenue that exceeded the high end of our guidance range, and profitability on a net income and Adjusted EBITDA basis. These results are reflective of our continued focus on operating a growing and efficient business.”
-Rocket Companies Interim CEO Bill Emerson
The big picture: Headwinds in the mortgage industry couldn’t keep UWM down for long as the purported top lender in the U.S. rebounded from consecutive quarterly losses with a fiery Q2 surge in origination volume.
Revenue: +4% YoY, $587 million
Net income: +$228.8 million
Closed loan origination volume: $31.8 billion
What they’re saying:
“UWM continues to prove that regardless of the interest-rate environment, our business model, coupled with the broker channel being the best place for a consumer to get a loan and the best place for a loan officer to work, is a winning formula.”
-UWM Chairman and CEO Mat Ishbia
The big picture: After watching its domestic agent count dwindle, the legacy franchisor appears to be back on the right track, and remains profitable as it leans on its Motto Mortgage franchises.
Revenue: -10.6% YoY, $82.4 million
Net income: +$2 million
Agent count: +0.4% YoY, 144,510 (domestic agent count -4.1%)
What they’re saying:
“In the U.S., we remain focused on our growth initiatives, and we continue to build our related pipelines. The combination of higher interest rates and tight inventory has made for a challenging housing market and agent-recruiting-and-retention environment. On a positive note, the pace of our U.S. agent count losses slowed quarter-over-quarter—which is encouraging, given the market conditions.”
–RE/MAX Holdings CEO Steve Joyce
The big picture: eXp has struggled to translate its tremendous pandemic-era growth to a slower market, doubling down on its virtual business model and recruitment initiatives with CEO Glenn Sanford back at the helm.
Revenue: -13% YoY, $1.2 billion
Net income: +9.4 million
Agent count: +7% YoY, 88,000 (domestic agent count +4%)
What they’re saying:
“We delivered another profitable quarter despite lower transaction volume, as persistently high mortgage rates kept many buyers on the sidelines…while high mortgage rates are expected to persist in the short term, consumer price inflation has started to cool down in our core North American market, and forward interest rate curves suggest that rates may now be at or near peak levels.”
–eXp CFO and Chief Collaboration Officer Jeff Whiteside
“With the rapid growth that we had for many sequential years, we were throwing bodies at the challenge and not being as systematic in how we solved for agent challenges.”
–eXp CEO Glenn Sanford
The big picture: It’s been a mixed bag for Compass as the New York-based brokerage has continued to struggle with its earnings in the slower housing market, but managed to shrink losses and make good on its “free-cash-flow positive” promises of the past year, thanks largely to its cost-reduction efforts that included layoffs and nixing the use of financial incentives in its recruitment efforts.
Net income: -$48 million
Revenue: -53% YoY, $1.5 billion
Agent count: -19% YoY, 13,633 principal agents
What they’re saying:
“We achieved strong financial results in line with guidance in the midst of a quarter that was impacted by mortgage rates increasing 100 basis points to 7% and unexpected market trauma resulting from the debt ceiling standoff in Congress.”
-Compass CEO and Founder Robert Reffkin
The big picture: This year has posed a challenge for the portal, which is leaning back on its core brokerage business while righting the ship after layoffs and the closure of its iBuyer arm last year.
Revenue: -59% YoY, $276 million
Net income: -$27 million
Pageviews (app and web): 52.3 million, +5.2% YoY
What they’re saying:
“We lost marketshare due to one-time setbacks from agent layoffs and the closure of RedfinNow, but we expect to return to quarter-over-quarter gains in the second half, as Redfin.com has been competing better for traffic. We believe Redfin is set up for profitable growth.”
–Redfin CEO Glenn Kelman
The big picture: With commercial real estate on shaky ground, CoStar has so far remained resilient, with big bets on residential, rentals and international CRE beginning to pay off.
Revenue: +13% YoY, $606 million
Net income: +$101 million
Residential portal pageviews: 38 million, +130%
What they’re saying:
“The debt market has not yet seen a wave of distress, with delinquencies still very low by historical standards, but there has been some movement. The next couple of years will bring more clarity to that market as more than $1 trillion in commercial mortgage-backed securities debt comes due.
“We have a huge engaged group of residential agents who are on our platforms, and they like our message. They like the fact that we are, your listing, your lead…so they’re directing a lot of their clients, I believe, into our platform because they prefer what we’re doing to alternatives.”
–CoStar CEO Andy Florance
The big picture: As a major market shift pushed companies like Zillow and Redfin to shutter their iBuying businesses, Offerpad has managed to cling on with major cost-cutting, on track to sell less than half the number of properties it did in 2022.
Revenue: -79% YoY, $230.1 million
Net income: -$22.3 million
Homes acquired: 840 (sold 650)
What they’re saying:
“Our outperformance in the second quarter reflects the improvements we have made to our business processes and our elevated focus on profitability through margin expansion and cost discipline. Our agile business model makes integrating improvements and adapting to changing market conditions part of our everyday culture.”
-Offerpad Chair and CEO Brian Bair
The big picture: After proactive cost-cutting measures in 2022, Fathom is seeing positive movements around cash flow and agent recruitment despite the overall down market, with hopes of being profitable this year.
Revenue: -22% YoY
Net income: -$1 million
Agent count: 10,940, +14.3%
What they’re saying:
“While the second quarter remains challenging for residentials and real estate overall, we are encouraged by some recent signs of stabilization across our markets. Along with the moderation in interest rates during the quarter, consumers compete to adjust to higher mortgage rates, and while transactions across the industry were down, we remain encouraged by the trends we’re seeing across our markets, and we believe we’re well positioned to continue growing marketshare regardless of what happens to interest rates.”
-Fathom CEO Josh Harley
The big picture: The brokerage conglomerate has been hit harder than most by fading home sales, but Q2 showed a potential light at the end of the tunnel as Anywhere pared losses and projected a stronger finish to 2023.
Revenue: -22% YoY, $1.7 billion
Net income: +$19 million
Gross commission income: $1.36 billion
What they’re saying:
“In the midst of a challenging housing market, we delivered results in line with our expectations and continue to invest to set Anywhere up for an even stronger future. We are accelerating our strategy, which includes growing our high-margin franchise business, expanding our luxury leadership, simplifying and integrating the consumer transaction experience and further transforming our cost base as we position Anywhere to lead real estate to what’s next.”
–Anywhere President and CEO Ryan Schneider
