RE/MAX relies on a ‘proven track of success’ to address the market
RE/MAX will celebrate its 50th anniversary in 2023. As the housing market shifts and transaction volume declines further, RE/MAX Holdings CEO Steve Joyce said that the firm will continue to rely on its “proven track record for success.”
In Q4 2022, mortgage rates reached their highest point in decades and buyer demand declined. This led to existing home sales dropping 34% year-over-year in December. However, RE/MAX revenue fell to $81.3million in the same quarter — an 8.9% decrease compared to Q4 20201. The firm also recorded a net loss $2.6 million. RE/MAX attributes this relatively low revenue drop to a 9.1% decline of organic growth and negative foreign currency movements.
Despite weaker financial results in the fourth quarter, total revenue for 2022 was up 7.2% at $353.4 million. The firm also reported a net income in excess of $4.8 million. This was due to a 7.8% annual growth, which was attributed to acquisitions, and offset by a 0.8% decrease in organic growth year-over-year.
“The rapid fall in housing market activity during quarter four was extremely unusual. Although we expect headwinds will continue, we see reason to be optimistic as we enter the spring sales season. Joyce spoke to analysts and investors Friday morning during the fourth-quarter earnings call. Joyce said that the company has learned a lot over the past 50 years about the importance of knowing the difference between what we can control and what we cannot. We cannot control the macroeconomic swings in the industry, but can prepare for them and manage our reactions to them. Right now, our 50-years of experience, highlighted by five decades consecutive growth, tells us to keep our eyes on our two networks and provide them with the technology, tools, and training they need to thrive.
RE/MAX executives were also happy to see the firm’s agent number grow in a year that saw a decline in active agents in the market. Year-over-year, the fourth quarter’s agent count increased 1.4% to 144.014 agents. Despite the increase in agent count, the firm’s U.S.- and Canada agent count was 2.3% lower year over year at 82,917 agents on January 31, 2023.
Nick Bailey, president of RE/MAX, stated that although there has been a recent contraction in the U.S. net agents count and the overall realty market, he was happy to see thousands of agents join RE/MAX last Year. “Nearly 10,000 agents were registered in the United States, nearly 4,000 in Canada, and more than 27,000 in the rest of world. This was all in 2022. Our growth prospects for 2023 will depend on the continuation of this type activity and our strategic initiatives.
The firm was also optimistic about its real estate agent technology suite MAX/Tech powered with kvCORE. Canada’s rollout began in late 2022. Executives stated that 90% of agents had been onboarded since then. The firm stated that the success of the Canadian rollout encouraged them to accelerate the U.S. launch to week one of January 2023, which was two months earlier than expected.
Executives also highlighted Motto Mortgage’s growth, with its franchise count increasing 23.5% year-over-year in Q4, and the office count jumping from 211 to 231 nationwide.
“The Fed’s efforts to cool inflation by raising interest rate has had a significant impact on the mortgage industry, which in turn has impacted the housing market. We believe Motto’s franchise model protects them from wider industry gyrations, but they are not immune to them, just like RE/MAX. Motto Mortgage president Ward Morrison said that there has been a strong correlation between the rise of interest rates and the slowdown of our franchise sales in Q2 last year. Model sales have been increasing, but at a slower pace. Last year we sold 40 franchises, which is a respectable number considering today’s business climate. However, it is still below the 60 unit sales rate and 70 unit sales rate that we had in the past few years. Our news regarding the openings of Motto offices is even better. 2022 was our best year in terms of office openings. This helped us accelerate our growth rate in Q4 at the end of the year with over 230 open Motto office with more in the pipeline.
RE/MAX executives are optimistic about the future and feel that they have what it takes to address the 2023 housing market.
Bailey stated that Bailey is focusing on market changes and driving innovation. Bailey cited Bailey’s initiatives around teams, mergers, acquisitions, and conversions of brokerages. Timing is important in the real estate market, but it’s not as important as people think. It’s not about timing rates, inflation, headlines or headlines. It’s timing based upon the individual needs and life events of people. The 2023 market will focus on marriage, children, divorce, and jobs. This is what we have seen drive the market for the past five decades.