Douglas Elliman posted another quarterly loss as high mortgage rates and limited listing inventory continues to weigh on productivity. However, executives remain pleased with the company’s “impressive resilience.”
During the company’s earnings call on Tuesday morning, Chairman and CEO Howard Lorber stated that Douglas Elliman outperformed many of its competitors during the second quarter.
He attributed this to “stable pricing in their luxury markets where buyers are more immune to interest rates pressures and the competitive advantage provided by Douglas Elliman’s strong marketing business.”
However, the overall results still reflect the headwinds affecting the broader industry at the moment.
Elliman reported a net loss of $5.2 million in the second quarter of 2023, well below the $17.6 million loss of the prior quarter but down significantly from the $10.2 million net income recorded in the second quarter of 2022.
The firm posted a consolidated operating loss of $8.3 million in the second quarter of 2023, down from a gain of $14.6 million in the same period last year.
Elliman reported a $2.6 million loss in its adjusted EBITDA, down from a gain of $19.2 million in the second quarter of 2022. However, the company’s real estate brokerage segment’s adjusted EBITDA was $2.5 million, compared to $24.4 million in the same period last year.
According to Lorber, mortgage rates are to blame.
“The sharp increases in mortgage rates have created sustained listings inventory shortages in the luxury markets we serve. We expect these industry wide challenges to continue and to impact our results in the second half of 2023,” he said.
However, executives underlined some encouraging trends. For the three months that ended June 30, 2023, Douglas Elliman’s real estate brokerage segment reported an average price per transaction of $1.64 million. It was the highest quarterly average since the second quarter of 2022.
Lorber also said that luxury markets are usually the first to emerge from a down cycle as buyers are less mortgage reliant. He also expects supply to increase as consumers adjust to higher rates.
The CEO went on to highlight “sequential improvements” in the financial operating results of Elliman. He touted improvement in the firm’s revenues and noted that the average selling price per home was better than in the previous three quarters. He also highlighted improvements in total listings for the two first quarters of 2023.
In the second quarter, Douglas Elliman maintained a strong balance sheet with cash and cash equivalents of $130.4 million as of June 30, 2023. Additionally, the company stuck with its cost-reduction strategies, Lorber added.
Elliman reduced its headcount by 45 positions during the first half of 2023, in addition to cutting some sponsorships, streamlining advertising and launching a program to consolidate office space.
Thanks to these measures, the real estate brokerage segment was able to reduce its general and administrative expenses by $2 million and its operations and support expenses by $2.2 million in Q2 2023, compared to Q2 2022, said Lorber during the earnings call.
The brokerage segment finished the second quarter with $9.9 billion in gross transaction volume, compared to $13.6 billion in the same period last year.