Nick Bailey, president, and CEO at Re/Max, LLC joined Cheddar News to talk about the company's strong Q4 earnings results and the tight real estate market overall. "Real estate has continued to be a very strong sector, and coming into '22, we're already seeing the spring selling season be accelerated because of such high buyer demand," he said. "Buyers thinking that interest rates could fluctuate and go up even more are wanting to be in the market sooner than later."

Opening Bell

Re/Max Reports Strong Q4 Results Amid Tight Housing Market

Welcome back to Chester's opening bell, everyone Remax reporting its fourth quarter earnings on Wednesday this week. The real estate company is showing strong results with total revenue up 23% as the housing market continues to boom for more on this. We have nick bailey president and Ceo of re max LLC. Thank you so much for joining us. What were some of the biggest highlights from your fourth quarter earnings report? Thanks great to be with you. Yeah, we're thrilled in the fourth quarter. We hit some new records and exceeded expectations and those were driven primarily by two things. One was the organic growth of our core operations and second was out performance By the largest acquisition that in our 49 year here uh 49 year history that we conducted last year. Yet you saw revenue soar over 20% this most recent quarter. What do you attribute that rapid growth that you mentioned to? Well, I have to say as a global company, it comes down to the strength of our core business model and we hit a new record all time high of 100 and 42,000 Remax professionals spanning over 110 countries. And so the core business model is really what's showing the strength and the growth, Something that jumps out to me as you mentioned, the international presence of 110 countries. Of course the geopolitical tension that we're feeling right now, it's hindered a lot of different sectors to be able to grow at this point. Are you at all concerned about that and moving forward being able to build on this growth and continue the momentum? Well, look, it's, it's early with what's happening globally, but I'm sure there will be some impact overall. Too many companies or countries and economies as things progress. But as we look at it, real estate is continued to be a very strong um sector. And coming into 22, we're already seeing the spring selling season be accelerated because of such high buyer demand buyers thinking that interest rates could fluctuate and go up even more are wanting to be in the market sooner than later. And so because of the overall demand of real estate, it continues to be strong. Got it. How big of a role did your acquisition of Integra play when it comes to revenue from this past quarter? You know, it had an impact. This is the largest acquisition, as I mentioned that the company has done in the 49 year history. It brought 19,000 agents spread across five provinces in Canada and nine states in the us into our core company operated regions. So it played a significant role Nick, I think you've touched on this, your total Agent count increased 3.1% over 140,000 agents. What do you credit the influx of agents to, we talk about the heat we're seeing within the housing market. And also despite the volatility, seeing really increased demand continuing forward. Well, this is really driven by demand and we have we are in somewhat uncharted territory. I mean if you look back over the past three or four decades, we have solid price appreciation over time. But when you look at the price appreciation that's taken place in the last two years, driven primarily by low interest rates. Even today, we've seen prices stabilized in January but there's still 15.9% higher than a year ago. And so I think that there's going to be a balance between price stabilization which buyers are appreciating and that balance of where interest rates are going to go. Do you expect that total agent count metric to ramp up this quarter coming up? We do expect to see continued growth. We look at our Canada operations that has exceeded 24,000 agents and carries number one market share throughout the country. They were growing by 10% this last year. And so when we look at the pockets of the growth from around the globe to here in North America, we expect to see a continuation of that growth. I want to bring up a remax housing report in some recent highlights here last month's home sales falling 31.4% compared to December of 2021 and they were down 5.3% compared to January of 2021. What does this tell you about the place of the housing market right now. Well, the key when we look at December to January is that is on par and very typical with the seasonality of the business coming out of year end and going forward. But what we really have to look at is the the year over year and the demand that's still out there and present, there's estimated to be a shortage of housing in the us by 5-6 million units. And though there were 1.6 million new home starts, we know about the labor constraints and the supply chains that new construction can't get out of the ground fast enough to make up for the demand that's there. And so given this high demand rates are still extremely favorable for buyers, inventory is still at an all time low of 1.2 months on average, I'm here in Denver and we're leading the way at only .4 months. Uh and so the demand is just so high that it is going to likely be a very strong continuation of a good market in 22 nick. And what markets are you seeing the most growth domestically? It depends on how you define that. When you look at for example, price appreciation phoenix has led the way areas Boise Idaho is one that has led the way in pricing. And so um I was asked just a couple of months ago, one of the hottest markets and I said, I think the first time in my 26 years, I can say every market has been red hot and we know that because in the last two years, um I I think it for all of us, we can say home has never been more important and with job flexibility and location flexibility, people decided to change lifestyle with their home. And with that we still have two generations millennials being the number one driver of home purchasers and gen z just as large right behind them coming into the marketplace and they're the largest generations of household formation and purchasers that our country has ever seen. So even the demand on the long term continues to look very strong. Really interesting. Also that report recently released by Remax said the median home price sale was at 15% last month compared to the same time just a year ago, the same period. Do you think we're going to start to see prices calm down any point soon? I know there's a lot of volatility going on at this point with potential changes to the Fed's monetary policy moving forward and how that might affect interest and mortgages. Um but what do you see as the future in terms of prices? I think the two main toggles that take place is when you look at interest rates and price appreciation, interest rates being so historically low over the last year really contributed a combined with the demand to the double-digit price appreciation that many markets experienced some of them that I mentioned like a Phoenix or Boise upwards of nearly 30% price appreciation. And so I think what we're also going to see though is when we've seen at the start of the year, the stabilization that the prices are returning to more of a single digit appreciation in most markets now. There are some that are driven by jobs that will likely continue to see upwards of double digit price appreciation, but that's not going to continue. I think that we're seeing that stabilization and that's being offset by a little bit of the higher interest rates, which is actually a good thing for the market overall. Where do you predict? Real estate goes in 2022 but also beyond something that really struck me about what you said was the remote work situation that we're in right now. And of course uh the aging into this generation of new homeowners from millennials to gen Z and kind of the disbursement that we're seeing just regionally across the US in places where we may not have seen that growth if it were not for this pandemic. How do you see it playing out not only in the current, the short term, but long term over like the next five years or so. Well, it's interesting, there were immediate needs that everyone felt, for example, kids were at home the home became the school, it became the home office uh and people said, I may need more space or I need my space divided differently. And that really drove an immediate surge uh in 2020 that continued into 21. What we're already seeing though is a lot of the metropolitan areas or high density areas that had um an out flux people moving to more rural areas or moving out of the cities. We're starting to see as um as as some of the restrictions have been reduced, people are coming back into those metropolitan areas. So we're seeing uh some some interesting dynamics of people that moved a year or two ago and saying I want to get back closer to the metropolitan areas. So that's driving some of it as well. But I think the reality is on the long term our lives have changed on our flexibility of how we live and work. And that is going to be an important part of how people choose where they live and what type of home they live in. We did Consumer studies and it was interesting uh number one and number two features that they were looking for. Number one was a backyard and number two was the home office. And so it just goes to show that backyard for lifestyle and home office for business, we are likely for the long term going to live and work differently. So fascinating. That's nick bailey President and Ceo re max LLC thank you so much for joining us here on cheddar news