“Our Adjusted EBITDA was lower than the same period in 2013 primarily due to the broad industry decline in mortgage refinance volume and the resulting impact on our mortgage origination joint venture and our title agency, TRG,” continued Smith. “This trend, which is expected to continue for much of 2014, along with a pause in the rate of growth in the housing recovery we are seeing this year, could make for challenging near-term comparisons, although current industry forecasts for 2015 are more favorable.”
Business Drivers
For the first quarter of 2014, combined full-year homesale transaction volume (transaction sides times average sale price) increased by 10 percent, as compared to first quarter of 2013. The Realogy Franchise Group (RFG), our franchise segment, and NRT, the operator of our company-owned brokerage offices, reported homesale transaction declines of 3 percent and 2 percent, respectively, in the first quarter of 2014. Average homesale price improved 12 percent at RFG and 14 percent at NRT compared to the first quarter of 2013. NRT’s first quarter 2014 average homesale price of approximately $489,000 is double the national average of $240,500.
At Cartus, initiations for first quarter 2014 increased 5 percent and referrals increased 5 percent compared to first quarter 2013. At TRG, first quarter 2014 purchase unit volume decreased 3 percent year over year, which was consistent with NRT homesale transaction declines. Average fee per transaction improved 30 percent due to the shift in mix to home purchase transactions from refinancing transactions. TRG’s refinance title and closing units decreased 71 percent in first quarter 2014 compared to 2013, which was expected given lower refinancing trends.
“The seasonality of residential real estate is always most apparent in the first quarter results, which are not indicative of full-year results,” says Anthony E. Hull, Realogy’s executive vice president, chief financial officer and treasurer. “Historically, the first quarter EBITDA of every year has been the smallest contributor of the four quarters. This is the case largely because the fixed costs of the business are generally spread evenly throughout the year, while the first quarter normally has the lowest transaction volume.”
“Looking ahead, for the second quarter of 2014 we expect to see our homesale transaction volume in the range of -2 percent to +2 percent year-over-year,” continued Hull. “Based on our closed sales activity in April, along with contracts opened in March and April, we expect homesale sides to be down -5 percent to -7 percent year-over-year for RFG and NRT combined, and average sale price to increase +5 percent to +7 percent on a combined basis. At this point, RFG and NRT expectations for Q2 are different — RFG transaction volume is expected to come in at or above the high end of volume guidance of -2 percent to +2 percent, while NRT transaction volume is currently expected to come in at or below the low end of the range.”
“As we have moved into our spring selling season, thus far the level of open activity we expected has not materialized, particularly as it relates to homesale transaction sides,” continued Hull. “Having says that, we expect our aggregate number of homesale transaction sides to increase sequentially from 260,000 in the first quarter of 2014 to between 367,600 to 375,500 in the second quarter.”
