eXp Commercial is one of the fastest-growing national commercial real estate brokerage firms. The Chicago Multifamily Brokerage Division focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.
Equity Residential CEO Mark Parrell on Wednesday said he's not sure just how high rents would get.
But he said he expected that whatever inflation was — they'd increase by more than that.
Parrell also said typical residents of Equity Residential's luxury units could afford increases.
As American renters continue to reel from rising housing costs, Wall Street investors are betting that housing will get even pricier relative to the costs of other goods and services.
While Equity Residential CEO Mark Parrell says he doesn't know how high rents will be in the long term, he adds that they are likely to outpace inflation.
One of the largest owners of rental housing in the US, Equity Residential operates more than 80,000 luxury units across 210 buildings in places from longtime hubs like New York City to pandemic hot spots like Austin, Texas.
"I think you should expect that apartments, especially in our portfolio, are optimized in a way with our pricing engine that we can continue to have a real return that exceeds the rate of inflation," Parrell told analysts Wednesday on the company's second-quarter earnings call.
The consumer price index — which is used to measure the rate of inflation — rose by 9.1% from June 2021 to June of this year. Economists predict it will probably level out at about 8.6% by the end of the year.
If Parrell's business calculus is right, then, rents would go up by more than 8.6% in 2021. In the average year, he added, rent grows by about 3.5%.
Clearly, a big difference. And some might ask how rents could keep growing after a record-shattering year in 2021 when rents across the US rose by 10.1%.
Parrell cites the simple economics of supply and demand, arguing that there are still many more people who need housing than there is housing available.
"With inflation the way it is, the numbers are likely to be a fair bit higher because supply and demand are still also good," Parrell said.
Buoyed by increasing rents, Equity Residential reported a net income of $223.3 million with a 14.6% increase in funds from operation per share, an alternative to earnings per share used by real-estate firms.
And according to him, people are willing — and able — to pay higher rents.
He said in the earnings release that his firm viewed its "affluent resident base as more resilient to rising inflation due to higher levels of disposable income and lower relative rent-to-income ratios."
For instance, he said, renters of Equity Residential's units in New York City put about 18% of their income toward rent, so renters can handle increases. A personal-finance rule of thumb is that people should spend 30% or less on rent.
Population-level research, however, shows that not everyone can absorb higher housing costs so easily. According to US Census Bureau data from 2020, 46% of those polled said they spent more than 30% of their income on rent. People putting over that much of their income towards housing expenses are known as "house poor," according to Bankrate, and they may be forced to skimp on other necessities to afford a roof over their heads.
eXp Commercial is hosting the Commercial Real Estate Symposium on September 19-20 2022! Register now to reserve your seat.
Hear from the industry’s top leaders, national economists, and thriving entrepreneurs on the future of the commercial real estate.
Dates: September 19-20, 2022
The Commercial Symposium connects CEOs, presidents, owners, and CRE leaders with top agents and brokers to drive innovation in the commercial industry.
Featured presenters include:
- Glenn Sanford, Founder + CEO of eXp World Holdings, to provide welcoming remarks and updates on the latest innovations at eXp.
- Kevin Harrington, the original "shark" on the hit TV show Shark Tank, shares the most effective methods and procedures to find and catch investors and scale your business exponentially.
- Jason Gesing, CEO of eXp Realty, and Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings, to provide company updates.
- Michael Valdes, President of eXp Global, to discuss international commercial real estate opportunities.
- Craig Kaplan, Chief Customer Officer of Virbela, an eXp World Holdings company, to discuss the pivotal role the metaverse plays in providing businesses with solutions for hybrid- and remote-work options.
- KC Conway, Founder, and President of Red Shoe Economics is a recognized expert in commercial and investment real estate with deep knowledge of capital markets, the new regulatory environment, and the availability of data and how it’s reshaping today’s commercial real estate transactions.
- Mike Miller, Founder and Chief Operating Officer of Enriched Data, an industry leader that provides nationwide property, ownership, and sales data with state-of-the-art valuation, prediction, and reporting applications for commercial real estate professionals.
RSVP today!
Limited multifamily construction will help sustain the sector even if demand cools.
Slowing construction will likely keep multifamily supply and demand in balance for some time despite fears of a recession, according to some analysts.
“Even if multifamily demand cools, limited multifamily construction will help sustain the sector,” a trio of economists from Moody’s write in a new report, adding that “housing substitutability” can transfer demand to the sector. Would-be owners of single-family homes are opting to rent instead of buy as the average property is now nearly 44% more expensive than in 2019—and that in turn is driving increased demand for multifamily units. It’s also being amplified by the rising short-term rate and the impact of those increases on mortgage rates, and Moody notes there are already signs of markets cooling in some of the cities where prices went up most quickly over the course of the pandemic.
“Although this may not lead to a widespread slashing of housing prices everywhere, housing price declines are a real possibility in the next few quarters or years depending on how severe and how long the next recession will be if there is one,” Moody’s report notes. “Multifamily rents, on the other hand, are generally slower to respond to rising interest rates and remain more stable. If the substitutability within housing matches the Great Recession’s strength, then multifamily rents may remain elevated for some time until single-family housing stabilizes. Based on the past few recessions, the effect on multifamily performance may not begin until near or after a recession ends.”
Low unemployment and a tight labor market are also likely to sustain multifamily demand—which was not the case in previous recessions (as in the 1980s, when unemployment topped 9%). But while household balance sheets are generally faring better than in previous downturns, disposable personal incomes are shrinking.
“As the multifamily and single-family home affordability crisis intensifies across more and more metros nationwide, this diminishing financial safety net is troubling, even for multifamily,” Moody notes. “Job losses or affordability issues could force some renters to find roommates or put off that move to single living.”
The Moody’s analysts also note that strengthened financial regulations “could be a blessing” for multifamily.
“Even if the Federal Reserve fails to engineer a soft landing this year or next, these rules will likely prevent the real estate market from sliding into a deep and long recession or suffering large aftershocks,” the trio writes. “While many single-family markets will likely see small to moderate prices decline in this situation, multifamily’s positive performance should hold up relatively longer, as in previous downturns. Overall, in a mild recessionary environment, we would expect only a moderate vacancy rate increase and rent growth to simply decelerate. A slight and short-lived dip into negative territory towards the end of the recession is possible, but a free fall is highly unlikely.”
Fiscal Year 2023 (FY23) appropriations are in full swing. The House has already quickly passed its proposals out of the subcommittee and full committee including the spending bill which includes funding for the U.S. Department of Housing and Urban Development (HUD).For 2023, the committee recommends an increase of $8.9 billion for the Department of Housing and Urban Development. Here are some key highlights:
Housing Affordability
Renewal of tenant-based vouchers ($26.1B);
Incremental vouchers to expand housing opportunities ($1.1B), adding more than 140,000 new incremental vouchers to expand affordable housing opportunities for low-income people in America including those experiencing or at risk of homelessness and approximately 5,600 new units for seniors and persons with disabilities.
Recently, our advocacy in support of legislation to improve the Housing Choice Voucher (HCV) program led more than 50 organizations to sign aletter of supportcalling on the House and Senate Appropriations committees to include it in the fiscal year (FY) 2023 appropriations bill funding alongside key policy provisions.
Additional Appropriations
Community Development Block Grant Program ($3.3B);
Lead hazard reduction and healthy homes ($65M). For competitive grants to reduce residential health hazards, including lead-based paint, carbon monoxide, mold, radon, and fire safety, of which not less than $25M for lead-based paint hazards;
Climate resiliency and utility efficiency ($75M). To further the Department’s goal of energy-efficient housing construction and climate resiliency;
Eviction Prevention ($20M). Providing competitive grants to nonprofit or governmental entities to provide legal assistance, including assistance related to pretrial activities, trial activities, post-trial activities, and alternative dispute resolution, at no cost to eligible low-income tenants at risk of or subject to eviction;
Department of Homeland Security: National Flood Insurance Program (NFIP): $222.5M for FY23.
What’s Next
The Senate has yet to introduce its spending bills for FY23. It is unlikely that all of Congress will pass its spending bills by the end of this fiscal year (Sept. 30,2022); however, it is highly unlikely in an election year that there will be a government shutdown. We expect that Congress will pass a continuing resolution that will fund the government at current spending levels until sometime before the end of the year when the 117th Congress will adjourn or into 2023.NAA will continue to monitor and support spending priorities that will benefit housing providers.
eXp World Holdings Reports Record Second Quarter 2022 Revenue of $1.4 Billion
Q2 2022 Revenue Increased 42% Year over Year to $1.4 Billion With Agent Growth of 42%Company Declares Cash Dividend for Q3 2022 of $0.045 per Share of Common StockRepurchases $50 Million of Common Stock During the Second QuarterBELLINGHAM, Wash. — Aug. 3, 2022 — eXp World Holdings, Inc. (Nasdaq: EXPI), (or the “Company”), the holding company for eXp Realty®, Virbela and SUCCESS® Enterprises, today announced financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 Financial Highlights as Compared to the Same Year-Ago Quarter:
Revenue increased 42% to $1.4 billion.
Gross profit increased 34% to $107.3 million.
Net income of $9.4 million, compared to net income of $37.0 million in the year-ago quarter. Year over year tax expense increased $22.3 million due to one-time VA allowance release in 2021 and reduction in excess stock-based compensation tax benefit. Earnings per diluted share of $0.06, compared to earnings per diluted share of $0.24 in the year-ago quarter.
Adjusted EBITDA (a non-GAAP financial measure) of $26.9 million.
As of June 30, 2022, cash and cash equivalents totaled $134.9 million, compared to $107.4 million as of June 30, 2021. The Company repurchased approximately $50 million of common stock during the second quarter of 2022.
The Company paid a cash dividend for the second quarter of 2022 of $0.04 per share of common stock on May 31, 2022. On July 29, 2022, the Company’s Board of Directors declared a cash dividend of $0.045 per share of common stock for the third quarter of 2022, a 13% increase, expected to be paid on Aug. 29, 2022, to shareholders of record on Aug. 12, 2022.
Management Commentary
“During the second quarter, eXp continued to increase its market share and revenue to record levels, reinforcing that our model was built for all market conditions and that our agent value proposition resonates around the world,” said Glenn Sanford, Founder, Chairman, and CEO of eXp World Holdings. “We are focused on strengthening our platform to provide even better support to our agents through technology, operations, training, coaching, and community. In the third quarter, we acquired Zoocasa, providing an exponential boost to Canadian agents that we expect to expand to a broader group of agents and real estate customers. We also further strengthened our management team with world-class hires focused on affiliated services and innovation of our proprietary technologies. We are leveraging our core strengths of agent satisfaction and innovation as we continue to redefine the real estate industry.”
“eXp delivered another record quarter with 42% revenue growth and solid profitability while returning a record $56 million to our shareholders through share repurchases and dividends,” said Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings. “Looking ahead, we expect our agile model to result in ongoing market share gains as we navigate more challenging market conditions. We expect our focus on affiliated services and technology will further strengthen our agent and customer value proposition. Simultaneously, we will focus on increasing operating efficiencies for our business and our agents’ businesses. We remain confident in our ability to deliver profitable, sustainable growth over the long term.”
Second Quarter 2022 Operational Highlights as Compared to the Same Year-Ago Quarter:
eXp World Holdings and eXp Realty strengthened the leadership team with Shoeb Ansari, Chief Information Officer; Leo Pareja, President of Affiliated Services
Patrick O’Neill appointed Chief Operating Officer, eXp Realty beginning Aug. 4, 2022. Patrick brings more than 25 years of experience and a proven track record of building and optimizing high-growth technology businesses. More details to come.
Agents and brokers on the eXp Realty platform increased 42% to 82,856 as of June 30, 2022.
Real estate transactions closed increased 30% to 150,032.
Real estate transaction volume increased 44% to $57.9 billion.
eXp Realty expanded into New Zealand in the second quarter of 2022.
eXp Realty ended the second quarter of 2022 with a global Net Promoter Score of 68, a measure of agent satisfaction as part of the Company’s intense focus on improving the agent experience.
Second Quarter 2022 Results – Virtual Fireside Chat
The Company will hold a virtual fireside chat and investor Q&A on Wednesday, Aug. 3, 2022 at 8 a.m. PT / 11 a.m. ET with:
Glenn Sanford, Founder, Chairman, and CEO, eXp World Holdings
Jeff Whiteside, CFO, and Chief Collaboration Officer, eXp World Holdings
Shoeb Ansari, Chief Information Officer, eXp World Holdings
Leo Pareja, President of Affiliated Services, eXp Realty
The discussion will be moderated by Justin Ages, Equity Research Analyst at Berenberg Capital Markets.
The investor Q&A is open to investors, current shareholders, and anyone interested in learning more about eXp World Holdings and its companies.
Date: Wednesday, Aug. 3, 2022
Time: 8 a.m. PT / 11 a.m. ET
Location: EXPI Campus. Join at https://expworldholdings.com/contact/download/Livestream:expworldholdings.com/eventsAbout eXp World Holdings, Inc.
eXp World Holdings, Inc. (Nasdaq: EXPI) is the holding company for eXp Realty®, Virbela, and SUCCESS® Enterprises.
eXp Realty is the fastest-growing real estate company in the world with more than 83,000 agents in the United States, Canada, the United Kingdom, Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany, Dominican Republic, Greece and New Zealand and continues to scale internationally. As a publicly traded company, eXp World Holdings provides real estate professionals the unique opportunity to earn equity awards for production goals and contributions to overall company growth. eXp World Holdings and its businesses offer a full suite of brokerage and real estate tech solutions, including its innovative residential and commercial brokerage model, professional services, collaborative tools and personal development. The cloud-based brokerage is powered by Virbela, an immersive 3D platform that is deeply social and collaborative, enabling agents to be more connected and productive. SUCCESS® Enterprises, anchored by SUCCESS® magazine and its related media properties, was established in 1897 and is a leading personal and professional development brand and publication.
For more information, visit https://expworldholdings.com.
Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA, which is a non-U.S. GAAP financial measure and may be different than similarly titled measures used by other companies. It is presented to enhance investors’ overall understanding of the company’s financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.
The company’s Adjusted EBITDA provides useful information about financial performance, enhances the overall understanding of past performance and future prospects, and allows for greater transparency with respect to a key metric used by management for financial and operational decision-making. Adjusted EBITDA helps identify underlying trends in the business that otherwise could be masked by the effect of the expenses that are excluded in Adjusted EBITDA. In particular, the company believes the exclusion of stock and stock option expenses provides a useful supplemental measure in evaluating the performance of operations and provides better transparency into results of operations.
The company defines the non-U.S. GAAP financial measure of Adjusted EBITDA to mean net income (loss), excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense, and stock option expense. Adjusted EBITDA may assist investors in seeing financial performance through the eyes of management, and may provide an additional tool for investors to use in comparing core financial performance over multiple periods with other companies in the industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to Net Income (Loss), the closest comparable U.S. GAAP measure. Some of these limitations are that:
Adjusted EBITDA excludes stock-based compensation expense and stock option expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in the business and an important part of the compensation strategy; and
Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, amortization of acquired intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.
Safe Harbor Statement
The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Such forward-looking statements speak only as of the date hereof, and the company undertakes no obligation to revise or update them. These statements include, but are not limited to, statements about the continued growth of our agent and broker base; expansion of our residential real estate brokerage business into foreign markets; and revenue growth and financial performance. Such statements are not guarantees of future performance. Important factors that may cause actual results to differ materially and adversely from those expressed in forward-looking statements include changes in business or other market conditions; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the company’s Securities and Exchange Commission filings, including but not limited to the most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K.
Media Relations Contact:
eXp World Holdings, Inc.
[email protected]Investor Relations Contact:
Denise Garcia
Managing Partner, Hayflower Partners
[email protected]
Source: eXp World Holdings Reports Record Second Quarter 2022 Revenue of $1.4 Billionhttps://www.creconsult.net/market-trends/exp-world-holdings-reports-record-second-quarter-2022-revenue-of-1-4-billion/
