The uptick in home sales during the second quarter of 2023 helped Anywhere Real Estate get back in the black. After posting a net loss of $138 million in Q1 2023, the real estate conglomerate rebounded to report $19 million in net income for the second quarter.
Although this figure is a big improvement on the first quarter, it still marks a 78% decline compared to a year ago. The annual decrease in net income came as revenue for the quarter dropped 22% year over year to $1.67 billion.
Anywhere, world’s largest franchisor of residential real estate brands and formerly known as “Realogy,” attributed this drop to a steep drop in home sale transaction volume.
“We remain in a tough part of the cycle,” Ryan Schneider, the CEO of Anywhere Real Estate, told investors and analysts on the firm’s second quarter earnings call Tuesday morning. “With six months of the year behind us, it looks like our industry is heading to 4.2 million to 4.3 million annual unit transactions, which would be by far the lowest level in over a decade. If you look past the Great Recession, we have not seen unit transaction this low since the mid-90s.”
During the second quarter, transaction sides at the firm’s franchise group, Anywhere Brands, dropped 23% year over year to 203,928. The firm’s owned brokerage group, Anywhere Advisors, recorded a 21% annual decline in transaction sides to 75,506.
While Anywhere Brands reported that its average home sale price remained relatively flat year over year at $473,312, Anywhere Advisors recorded a 3% yearly decline in average sale price to $709,764. (Anywhere Advisors typically targets luxury markets.)
Despite the decline in transaction sides, Anywhere executives remain optimistic about the future of the firm. In the quarterly earnings call, executives stressed how prudent they’ve been in controlling costs. The brokerage conglomerate said it recorded a cost savings of roughly $50 million in the quarter, and is on track to deliver cost savings of $200 million for the full year. This is due, in large part, to a 15% head count reduction since June 2022.
As Anywhere looks to the future, Schneider said Anywhere is “laser focused on changing how [it] operates to deliver efficiencies that help simplify, automate and streamline [its] operations.”
To reach this goal, Schneider said the firm is integrating its brokerage and title operations, which the firm hopes will lead to higher attach rates in its mortgage and title operations. During the second quarter, Anywhere reported its purchase title order volume was down 27% compared to a year ago to 30,136 orders, while refinance title order volume was down 51% year over year to 2,308 orders.
In addition to streamlining measures, Anywhere also announced during the call that it has enter into an exchange agreement with funds managed by Angelo, Gordon & Co., L.P to exchange $273 million of the 5.75% senior notes due 2029 and 5.25% senior notes due 2030 it holds for $218 million in new 7.0% second lien secured notes due 2030.
“We view these transactions as an opportunistic way to deleverage, with minimal, incremental annual cash interest expense, maintaining our flexibility going forward,” Charlotte Simonelli, the firm’s chief financial officer, said.
A hot topic on the call Thursday morning was the three class action lawsuits — Nosalek, Burnett, and Moehrl — related to buyer broker commissions that Anywhere and several rivals currently face. While Schneider said he would not speculate on how the potential decoupling of buyer broker’s commissions from home sale prices could impact the industry, he told investors and analysts the he was confident in his firm’s ability to successfully defend itself against the allegations, which have potential damages in the billions of dollars.
“We have a strong belief in our ability to defend this pretty vigorously,” he said. “We are pretty focused on it. We have a trial coming up in October and we dispute the allegations against us and believe we have substantial defense, but litigations and class actions have a lot of uncertainty. These antitrust cases have a lot of codefendants and joint and several liability.”
Schneider also noted that Anywhere is on the public record stating that the firm does not believe the National Association of Realtor’s participation rule is necessary. “We don’t the rule is necessary for the market to operate well,” Schneider said. “We think agents for both buyers and sellers create real value for the consumers and there are geographies in the U.S. that don’t have that rule and they operate really well for consumers, for agents and for homeowners.”