RE/MAX Q3 earnings: Higher interest rates have ‘reset the housing landscape’
RE/MAX leaders say that the company’s franchise models and strategic growth initiatives helped to drive revenues in the third quarter.
- RE/MAX reported revenue of $88.9 million in Q3, down slightly from the previous year.
- Profits were slim at around $100,000 for the quarter.
- ‘The Fed’s move to cool inflation is clearly having an effect on the housing market,’ president and CEO Nick Bailey said.
"The historic pace and magnitude of interest rate increases have created a reset of the housing landscape," RE/MAX president and CEO Nick Bailey told investors Friday, reporting third-quarter revenue of $88.9 million, down just over 2% from the same period a year ago.
Adjusted EBITDA was $31.5 million for Q3, down 9.5% from the same period last year, the company reported.
"The Fed's move to cool inflation is clearly having an effect on the housing market," Bailey said, noting that inventory climbed to a two month's supply for the first time in two years in September.
"With a supply of two months, there are a lot more choices for homebuyers," said Bailey, adding that there is more balance in the market that favors both buyers and sellers.
"We are pleased with our third-quarter results. Particularly given the current market conditions, our franchise model is a competitive advantage," said interim RE/MAX Holdings CEO Steve Joyce, noting that dues and broker fees accounted for almost 65% of total revenue. "We have a relatively low cost structure that allows for robust EBITDA margins."
Joyce and other company leaders said on the earnings call that rising interest rates are continuing to weaken housing demand. But the company was able to partially counteract their overall lower market volume with revenue from its 2021 acquisition of Integra, which brought 19,000 independent agents into the RE/MAX network, including 12,000 from Canada. Integra has 1,100 offices in both the U.S. and Canada.
The Integra network of agents and offices, combined with the company's expanding mortgage business, Motto — which grew by almost 20% year over year — provided additional growth and diversified revenue sources, said Joyce. He said that he expects these and similar initiatives to drive revenues in Q4 and beyond.
Joyce noted that RE/MAX continues to execute strategies and initiatives "at full speed announced at the beginning of the quarter… It feels good to play offense while others take a more defensive stance" in the shifting real estate market, he said. "We believe we are in a very desirable position as we approach the next phase of the housing cycle."
The company is focused on increasing the number of RE/MAX agents, which grew by 3,000 through Oct. 31. The total agent count is now at 144,300, up 2.4% year over year. But the combined agent count for the U.S. and Canada — which is more than 85,000 — decreased by .6%.
Bailey described 2021 as an uncommonly good year for the market, and said that 2022 is "shaping up to be a pretty good year for home sales."