Realogy Holdings Corp. (NYSE: RLGY) -- parent company of Century 21, Coldwell Banker, ERA, and Sotheby's International Realty -- has seen a sharp drop-off in sales among its 190,000 independent agents in the United States.
But a quick pivot to digital and a determination to get deals done when possible did enable the close of approximately 150,000 transactions from mid-March through the end of April, President/CEO Ryan Schneider said in an earnings call on Thursday, May 7.
"We're leveraging the technology investments we've been making over the last few years to support more tech-enabled virtual transaction execution," Schneider said.
TurnKey turned off
The imperatives of social distancing did lead to the demise of a joint project by Realogy and Amazon: the TurnKey program launched last July as a pilot in 15 markets. The program connected Realogy-affiliated agents and Amazon (NASDAQ: AMZN) Home Services to offer new homeowners such services as cleaning, handyman tasks, and smart home products. The problem: TurnKey was built around in-home services and installation.
Scheider said in the call that they, together with Amazon, decided to suspend TurnKey because they think that "smart home products and their own services that require people being in someone's home just doesn't work in a COVID kind of social distancing world." He added that they like the program a lot, but the coronavirus "just cut the core proposition kind of off at the pass."
Amazon, in fact, has apparently turned off that service's landing page.
Transaction volume up, but COVID-19 plagues the bottom line
The Madison, New Jersey-based Realogy did report a year-over-year increase of 8% in transaction volume across its franchises and owned brokerages for the first three months of 2020, helping generate quarterly revenue of $1.1 billion, an increase of 6% from the first quarter of 2019.
But the company still incurred a net loss of $462 million for the quarter ended March 31, Realogy said in a press release, "driven primarily by a $447 million impairment charge related to broad-based declines in the overall market due to COVID-19 and a $38 million net increase in interest expense due to mark-to-market adjustments on interest rate swaps."
The residential real estate services giant also is struggling to complete the planned sale of its Cartus relocation service.
On the plus side, operating EBITDA was $37 million in the first quarter of 2020 compared with $2 million in the year-ago quarter, and "Our ongoing strategic execution, rigorous cost management, liquidity, and capital allocation decisions are designed to enable us to manage the challenges of the COVID-19 pandemic," company CFO Charlotte Simonelli said in the press release.
Pandemic slammed sales and closings
Schneider told analysts in the earnings call that year-over-year closed transaction volume was down 20% to 25% in April among its franchises and owned brokerages. He said the worst three areas were New York City, at about 30%, along with California and New Jersey. Florida also was down about 20% while single-digit declines were recorded in Texas, Minnesota, and Georgia.
Even more dramatic: open transactions -- new contracts to buy and sell a home -- were down 40% to 50% for the month.
Schneider said the decline slowed in the second half of April. Upticks in mortgage applications and online search activity also provide optimism that pent-up inventory and consumer demand will emerge when the pandemic subsides.
And what business is out there is determined to happen, the Realogy CEO said. "We have seen a huge number of stories of consumers interacting with agents and transacting in new, creative ways to get deals done. Frankly, we're seeing anyone in the market now is serious about getting transactions done despite the crisis."
Running away from the cities, but not with excitement
He also cited an increased interest in single-family homes. "You've all seen multiple articles about the increased interest in suburban living," Schneider said. "While we are not sociologists, a shift to more dispersed living could be an enduring change from COVID that would … contribute a substantial number of housing transactions."
He added, "While we're excited to see the improvement since mid-April, we're not running away with our excitement because it's only a few weeks of trend that could obviously change."