Realogy Holdings Corporation
Realogy Holdings Corporation presentation delivered at the 2020 Ultimate Services Investor
Conference on Thursday, November 19, 2020 at 4:05 PM
Anthony Paolone: Good afternoon everybody. Welcome to the fireside chat with Realogy. My name is Tony Paolone, and along with my colleague, Arjun Chandar. We're pleased to have the management team here. We have Ryan Schneider, who is the CEO of Realogy, and we have Charlotte Simonelli, who is Chief Financial Officer.
This session, as the other ones have been today, is about 30 minutes. Given the limited amount of time, I think we should jump right into things here.
The first item we'd love to talk about is to start from a bigger picture point of view on the housing side. I'll throw it at you, Ryan. Perfect day to do this. 6.85 million existing home sale, print this morning. What's behind the demand? Who's behind this demand right now?
Ryan Schneider: Look, we love the number. Thank you for having us here today. 6.85 million, I know that's an annualized number. Don't take all of it to the bank yet. The fact that that number starts with a six is incredibly powerful.
US housing has been stuck around five million resale transactions for most of the last decade. If you go back in history, it's often been above that. With household formation, population growth, GDP growth, it definitely should be a bigger number. It's great to see that it is.
The reality is I've been asked the question for years of what will unlock more housing growth. The thing that has been unlocking it is the combination of low mortgage rates right now, historically low, and the fact that they're going to continue for a while combined with the social shifts that we're seeing with COVID.
We are just seeing people move from urban to suburban environments. We're seeing people pick and move among different suburban houses to better fit their needs, especially among the work- from-home population. Then the already existing flight of people to attractive tax and weather destinations has accelerated recently, both for first and second home purchases.
All of those trends, we saw over the summer, thought they might be some pent-up demand there. They have not only continued through the summer but then very strong here in the fall.
Even in October, we told the world how our October preliminary numbers were about 55 percent up on volume, more than half of that units compared to the year before. That's very consistent with the kind of industry numbers that NAR printed today, again, on an annualized basis.
Anthony: Thanks. We might want to go back to that 55 percent number that you all talked about. I think you did it on your third quarter call. It was a great number. Maybe I'd like to go back to that.
In the meantime, one of the narratives you brought up was just some of the changes in moving to suburbs and things we're seeing there. How do you think about just the legs that that trend might have?
Ryan: If we've learned anything, it's 2020 is a tough year to make too many predictions. we saw that trend over the summer.
There were hypotheses that it was a one-time bubble and if you were going to do it, you did it then, but it's continued. It's rolled into those October numbers that we just talked about for us, where, again, the fact that it's more units than price shows there is more actual people moving.
We're seeing it in the local transaction data, all the trends that I just talked about. This conference probably isn't the perfect focus group to do, but literally, throughout this day, I've had multiple people interacting with us who have either they've moved out of New York and they're renting, looking to buy, or they already have plans to move out in 2021 and be a buyer down there.
I hear it anecdotally from both agents and brokers, that there's more of it to come. Then I see it in the data. The school situation is also, frankly, contributing to people making some different choices around lifestyle and location. We'll see how long it runs. At minimum, we're going to have a strong end of the year and enter '21 quite strong with these trends.
That, combined with low rates, could last for longer and would be a healthier housing market if we have six-plus million transactions happening plus the real exciting news that builders are building more.
Anthony: That's interesting. I was going to get to inventory. That is something that, as part of
just the broader housing narrative, comes up as an item that might be a limiting factor. How are you thinking about inventory and keeping this all moving ahead?
Ryan: I look at it differently. There's a lot of confusion out there in the world between inventory and supply. Sometimes, they're the same thing, but sometimes, they're not. Right at the moment, they're actually different.
Inventory has been historically low for, really, the last two or three years. It's historically low right now. As you can see from the actual unit transaction numbers that NAR is publishing nationally and that we're printing here in the third quarter and the fourth quarter, units are clearly going up.
There is actually a lot more supply coming onto the market. It's moving quickly. It's not sittin' around in inventory for three or six months or something like that. Some of the supply coming to market's never getting captured in the inventory measurements because it's coming onto the market and selling within 30 days.
Look. More inventory is typically a better thing for housing. Nothing but good in that. It's why I like the fact that builders are building more, now, wealth for the future, but the reality is the market is showing us that there is more supply right now. Again, that's the velocity of transactions is faster.
I wish inventory was higher so there were more choices, but the fact that supply is actually up is what is happening in the market.
We're real excited by that, especially, again, whether it's our data or industry data, the fact that most of the recent volume increase is not coming from price, it's coming from units -- that's a sign of a healthier housing market than if we were getting all the growth on the price side.
Anthony: Maybe shift this a little bit more to Realogy specifically. As we think about the competition for agents and how that's playing out in this market, can you give us an update on the state of play there? What is happening out in the field?
Ryan: The competition for agents out there in the market is intense, and we're part of that intensity. We like our results. Our agent count has grown every quarter for I think the last six quarters. Our agent retention has improved every quarter for the last four quarters.
We think both those things are part of the reason we actually gained some share in Q3 after fighting some share headwinds for multiple quarters. This is a competitive industry by definition.
There was some increasingly intense competition in '18 and most of 2019.
That has gone down a little bit post-the WeWork thing about a year ago and has kind of held steady since then, but steady at an intense level. It's not easy. It's a fight every single day.
Whether it's the value proposition we're offering with some of our new products, technologies, marketing things, etc., newer lead generation programs, or frankly, just having to sometimes be economically -- step up a little bit, as you can see in our agents' lit clause -- all those go into the competition, but we like our results.
The market, while intense, is better on that dimension than it was one or two years ago. We obviously are rooting for that to continue.
Anthony: Maybe let's dig a little bit into that further. Because you have been pretty successful in the past year or so, it's really moving the agent count up. What do you think in the changes you made or the initiatives you took on have had the greatest impact in the market in either retaining folks or bringing new people into the system?
Ryan: I think over the last five years globally, Realogy's been on a journey to get its economics a little more at-market in some places. You've seen that in some of our economic headwinds on that stuff.
More importantly, recently, I think it's been the combination of two things. One is that menu of different offerings, whether it's RealSure, RealVitalize, Social Add Engine, conversion boost -- a spectrum of either technology or product or marketing tools that are helping agents be more successful. They care about their bottom line. We want them taking share, gaining share, and we think we saw, again, a little bit of that in the report.
The other thing we like that's happening is our growth on the franchise side. Not just growth in the business, but the success of launching our corporate franchise. Very iconic, upscale leisure brand, well-known in Long Island and New York City and Palm Beach, but it's now gone to a lot of cities nationally. It continues to expand.
Our first franchisee has now crossed over a thousand agents. We like the fact that we're investing for growth in the franchise business also, and with some orthogonal things to the core brands that we remain excited about their growth.
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Realogy Holdings Corp. published this content on 19 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 November 2020 19:42:01 UTC