Residential real estate is recovering but still has a long way to go before it returns to normal, according to financial results from two of the largest residential real estate firms. Both privately held Realogy Corp. and Move Inc. (Nasdaq: MOVE) painted encouraging but realistic pictures of a market struggling to recover lost momentum.
Realogy, whose portfolio includes real estate franchising, brokerage, relocation, and title services, is awash in debt -- $6.8 billion to be exact. But the Parsippany, N.J., firm reported improvement so far this year. Owned by affiliates of Apollo Global Management LP, a leading private equity and capital markets investor, the firm posted a net loss of $237 million in the first quarter. Realogy executives, who attributed the loss largely to interest on long-term debt, also reported net income of $831 million, an increase of 1% from the same period a year ago.
Comparing year-over-year results isn't as clear as it seems. Real estate firms benefited during much of 2010 from the $8,000 federal first-time homebuyer's tax credit, which expired this past September. Many transactions were front-loaded to the first half of 2010 so buyers would qualify for the tax credit. As a result, sales spiked early in the year and fell sharply in the latter half.
Most industry experts expect home sales to be smoother in 2011, without the steep peaks and valleys created by the tax credit. "We continue to be encouraged that the existing home market is following a course of modest but steady improvement," Anthony Hull, Realogy CFO, said during a teleconference earlier this month.
Realogy, the biggest housing broker in the US, is the parent company of Coldwell Banker, Better Homes and Gardens Real Estate, Century 21, the Corcoran Group, ERA, and Sotheby's International Realty. Hull predicts lower sales volume in the second quarter, comparated to the second quarter 2010.
But Hull also expects average sale prices to climb. If they do, it will be a long awaited sign of renewed strength for the housing market -- and could persuade some potential buyers to get off the fence before prices climb higher.
Move Inc., which operates a network of real estate Websites, including Realtor.com, the official site of the National Association of Realtors, is still operating in the red. But company executives reported improvement in the first quarter, noting real estate conditions now are better than they were a year ago.
The company recently reported a net loss of $1.6 million, or $0.01 per share, on revenue of $49.1 million in the first three months of 2011. That compares to a net loss of $20.3 million, or $0.13 per share, on revenue of $48.6 million during the same period in 2010.
Move Inc. CEO Steve Berkowitz is also predicting slow and steady growth, both for his firm and for residential real estate in general. "We continue to execute steadily through the current market headwinds while laying the strategic foundation for 2012 and beyond," he said.
He described his primary goals for 2011 as continuing to expand distribution channels, developing and releasing more products, and delivering "the best online destination for real estate information" to consumers. "With the growing use of mobile devices in the real estate search process, we have the opportunity to lead the industry as it adapts to new technologies that are fundamentally changing how consumers and real estate professionals connect."