At this point, we've pretty much run out of superlatives to describe today's hot housing market. All that activity has been good news for real estate agents battling bidding wars and multiple offers to secure homes for eager buyers. No wonder there are over 1.5 million Realtors in the U.S. right now.
All of this has been great news for real estate brokerages too. Last quarter, many publicly traded brokerages had strong results. In the second quarter of 2021, the positive numbers from Realogy (NYSE: RLGY) were driven by a steady stream of transactions. Still, the company is looking toward more than commissions to drive the business going forward.
Outperforming the benchmark
Realogy achieved revenue of $2.3 billion in the second quarter, an increase of 81%. The company -- which has a variety of well-known brands such as Century 21, Coldwell Banker, Sotheby's International Realty, and Corcoran -- saw transaction volume rise 85% year over year, beating the reported increase of 53% in existing home sales reported by the National Association of Realtors.
Realogy did a good job of trimming its sails in 2020 when the pandemic hit, and the company reaped the benefits, coming in with a net income of $149 million. Realogy has gained market share over the last four quarters as well and now has a 16.4% share, making it the largest national real estate company.
The uptick in vacation and luxury home sales contributed substantially to Realogy's success. Sotheby's International Realty became its top-performing brand. Realogy has set records for the number of $1 million-plus and $10 million-plus transactions. While this is a positive result, it's also one that Realogy can't rely on to continue long term.
Beyond the core
The bulk of Realogy's revenue was achieved through agent commissions, but that's not the only way the company makes money. In fact, its still-new revenue streams may hold more promise for the future of the business. Realogy has a national title business and a joint-venture mortgage product. Realogy Title Group brought in a tidy $255 million, up $95 million from the previous year.
The company has also seen promise with RealSure, its answer to iBuying. The product is a joint venture with Home Partners of America, a rental portfolio operator that Blackstone recently spent $6 billion to acquire. Currently active in 21 markets, RealSure offers a 45-day cash offer while the home is for sale through traditional methods with a Realogy agent.
Unlike other iBuyers, Realogy uses RealSure as more of a backstop. It's hoping that during those 45 days, it can sell the home through traditional methods and get a higher price and resulting commission.
As CEO Ryan Schneider put it on the earnings call: "We've really focused a lot on doing something that's not at all new for real estate, which is to capture more of the transaction economics from title, from mortgage, from insurance, etc." The problem with that is that Realogy is in a bit of a race against time. The company needs a strong market to generate revenue while it builds out these other threads of revenue.