After a strong second quarter, franchise giant Realogy Corp. slipped back into the red in the third quarter, reporting a net loss of $33 million.
Transaction volumes fell year-over-year both at Realogy’s company-owned brokerages and at brokerages affiliated with Realogy brands but not owned by the company.
Company-owned brokerages operate under the Coldwell Banker, ERA, Corcoran Group and Sotheby’s International Realty brand names.
These brokerages completed 61,092 transaction sides in the third quarter, down 25 percent from third-quarter 2009. The average home sale price among these brokerages rose 12 percent to $457,782, and the average commission per transaction side dipped slightly to 2.47 percent from 2.49 percent during third-quarter 2009.
Franchisees closed 229,241 transactions sides in the third quarter, down 19 percent from the same period last year. The average price among franchisees rose 4 percent to $202,272, and the average commission per transaction side remained flat at 2.53 percent.
Realogy franchisees operate under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, Coldwell Banker Commercial and Better Homes and Gardens Real Estate brand names.
The company had warned of a slowdown in real estate sales after the second quarter, partially due to the expiration of the federal homebuyer tax credits on April 30.
"The improvement in home sales, aided by the homebuyer tax credit in the second quarter, clearly did not survive the program’s conclusion," said Richard A. Smith, Realogy’s CEO, in a statement. "That said, we do believe it contributed to more stabilized pricing."
Realogy’s net revenue fell 10 percent year-over-year to $1.1 billion in the third quarter. During the first three quarters combined, however, net revenue was $3.1 billion, up from $2.9 billion during the same period in 2009.
"Our emphasis on growing our businesses has produced results," Smith said.
Year-to-date, new franchisees and sales associates have generated $264 million of gross commission income (GCI) for the company, he said. That includes the addition of Pleasanton, Calif.-based Mason-McDuffie Real Estate Inc. as a franchisee under the Better Homes and Gardens Real Estate brand at the end of September.
The former Prudential Real Estate brokerage has 1,900 agents and 36 offices in Northern California and Nevada.
At the beginning of October, NRT LLC, which oversees Realogy’s company-owned brokerages, took over one of its formerly independently owned real estate brokerage affiliates, Coldwell Banker Preferred in Philadelphia. The brokerage has eight offices and 500 sales associates. In 2009, both brokerages were listed among the largest in the country by Real Trends.
At the end of the third quarter, Realogy reported approximately 14,700 franchised and company-owned offices and 267,000 sales associates operating under its brands worldwide.
Although Realogy expects home sales in the fourth quarter to decline compared to the same period in 2009, projections from the National Association of Realtors and Fannie Mae indicate that home sales will rise between 7 percent and 8 percent quarter-to-quarter on a seasonally adjusted annualized basis, the company said.
That quarter-to-quarter data "will be the best gauge of the housing market on a comparative basis because the homebuyer tax credits in the fourth quarter of 2009 and the second quarter of 2010 created swings in year-over-year comparisons that are not representative indicators of the direction of the housing market," said Anthony Hull, Realogy’s chief financial officer, in a statement.
"We are seeing gains in sequential monthly closed sales as reported by NAR, which, if continued for the balance of this year and into 2011, could result in an improved housing market, particularly in the second half of 2011."
The effects of foreclosure freezes by some lenders in October remain to be seen, Hull said.
"The uncertainty created by the disruptions in the foreclosure review process could further complicate an already fragile housing market," Hull said. "While we have not seen any significant national impact caused by the uncertainty in the REO market, we continue to monitor foreclosure developments and their potential effect on our business."
Revenue generated by Realogy’s relocation services segment stood at $122 million, up 32.6 percent from $92 million generated in 2009’s third quarter. As in the second quarter, revenue from the company’s title and settlement services fell — to $84 million in the third quarter, down 7.7 percent from $91 million at the same time last year.
