Alicia Swift – Senior Vice President, Investor Relations and Financial Planning and Analysis Richard Smith – Chairman, Chief Executive Officer and President Tony Hull – Executive Vice President, Chief Financial Officer and Treasurer.

Steven Kent – Goldman Sachs Jason Deleeuw – Piper Jaffray David Ridley-Lane – Bank of America Michael Dahl – Credit Suisse Ryan McKeveny – Zelman and Associates Adam Rudiger – Wells Fargo Securities Steven Kim – Barclays Will Randow – Citigroup.

Good morning, and welcome to the Realogy Holdings Corporation’s Full Year 2014 Earnings Conference Call via webcast. Today's call is being recorded and a written transcript will be available in the Investor’s Information section of the company's website later today. A webcast replay will also be made available in the company's website until March 10.

At this time, I would like to turn the conference over to Realogy’s Senior Vice President, Alicia Swift. Please go ahead, Alicia..

Thank you, Shawn. Good morning, and welcome to Realogy’s full year 2014 earnings conference call. On the call with me today are Realogy’s Chairman, CEO and President, Richard Smith; and Chief Financial Officer, Tony Hull.

As shown on Slide 3 of the presentation, the company will be making statements about its future results and other forward-looking statements during this call. These statements are based on current expectations and the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. Actual results may differ materially from those expressed or implied in forward-looking statements.

For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, February 24, and have not been updated subsequent to the initial earnings call.

Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release issued today, as well as in our annual and quarterly SEC filings.

Also certain non-GAAP financial measures will be discussed on this call and these measures are defined and reconciled to their most comparable GAAP measure in our press release. Now, I will turn the call over to our Chairman, CEO and President, Richard Smith..

Thank you, Alicia, and good morning and thank you for joining our call. Our fourth quarter and full year results were the product of solid operational execution and continued advancement of our strategic initiatives.

During our third quarter earnings call, we provided fourth quarter 2014 forecast for homesale transaction volume to increase in the range of 4% to 8% as compared to the same period in 2013.

We are pleased to report that for the fourth quarter we achieved the high-end of our volume range, an increase of 7% on a combined basis, for our company-owned and franchise business segments as indicated on Slide 4. Realogy Franchise Group, which also refer to as RFG, sales volume increased 8% in the fourth quarter.

On a component basis, RFG had an average sales price increase of 6% with a 2% increase on transaction sides. NRT volume was up 4% in the fourth quarter with price gains of 2%, and a 2% increase in sides, which included the incremental impact of the ZipRealty and Martha Turner Properties acquisitions.

As you can see on Slide 5, Realogy achieved a 5% increase in homesale transaction volume in 2014, attributable largely to strong relative demand at the high-end of the housing market. When compared to the National Association of Realtors’ national average increase of 1%, it is clear that Realogy outperformed the market last year.

On an NRT and RFG combined basis, Realogy’s affiliated brokers and agents were responsible for closing 1.37 million transaction sides last year where approximately $420 billion in homesale transaction volume.

Our market penetration increased 1 percentage point to 27% in 2014 versus 26% in 2013, which means Realogy was involved in approximately 27% of the U.S. existing homesale transaction volume involving a real estate brokerage firm.

We believe the key contributors to our market penetration increase were our relative strength at the high-end of the housing market and our ongoing strategic growth initiatives. As a reminder, market penetration is a comparison of Realogy transaction volume size times price relative to the overall U.S.

existing homesale transaction volume involving a real estate broker. Our regional performance varied widely as one would expect in a recovering housing market. The South was our best performing region in 2014 with combined volume of 8% followed by the West region with a 7% combined volume increase.

The Northeast and Midwest each experienced volume increases of about 1%. Operationally, we enjoyed a strong quarter. The execution of the ZipRealty strategic plan is well underway. As we stated at the time of the acquisition last summer, our intend is to make ZipRealty’s Zap technology platform available to the entire RFG franchise network.

The Zap platform when rolled out to franchisees is expected to generate incremental business for our franchisees and their independent sales associates.

Fundamentally, we are building the framework for a single integrated end-to-end platform that will make it possible to deliver innovative products and new services to our franchisees, their sales associates, and the buyers and sellers of real estate faster and more consistently.

The reaction to this strategy from our franchisees has been overwhelmingly positive and our technology team is preparing for an aggressive deployment effort that will commence late in the second quarter.

We look forward to discussing the ZipRealty technology strategy in more detail with you during our Investor Day presentation, which is scheduled for March 18. Now, allow me to discuss some of the operational highlights for each segment.

Turning to Slide 6, the Realogy Franchise Group added new franchises and sales associates representing $309 million in franchisee gross commission income in 2014, which is a 21% increase over the prior year. And RFG achieved a 98% GCI retention rate in 2014 that’s a full percentage point above its five-year average of 97%.

If you recall, during last year’s Investor Day presentation, we discussed in detail the NRT digital commerce strategy, which is primarily focused on using search engine technology to generate incremental leads. The NRT management team continues to make good progress on its lead generation strategy.

In particular, the startup consumer-facing website we announced last year is operational in 14 of our 40 NRT-targeted markets and is expected to be operational in the balance of our NRT markets by mid-year. The expected result is an increase in company generated leads, which we then distribute to participating agents on attractive economic terms.

In 2014, NRT completed 17 brokerage acquisitions representing $182 million in incremental gross commission income or GCI, including the ZipRealty brokerage operations. Our M&A pipeline is solid and we will continue to be opportunistic with respect to accretive acquisitions.

NRT management performed well against its operating metrics, retained more than 93% of the production of its top 50 percentile sales associates last year, recruited more than 81 million in GCI in new agents and managed its agent commission split to a year end 68%.

As to the ZipRealty brokerage operations, we have integrated this new business model into our NRT field operations. We like the model, find the operating metrics attractive and are focused on the potential growth opportunities of this new channel.

In a very competitive relocation services environment, Cartus signed 102 new clients in 2014, the benefits of which we will recognize over the next several years, more than half of the Fortune 50 is represented on Cartus’ client list and their top 25 clients have an average tenure of 19 years.

Last year, Cartus managed more than 171,000 international, domestic and affinity moves on behalf of its clients. Of the approximately 97,000 domestic real estate referrals generated in 2014 by Cartus, the majority were handled by our franchisees and our NRT company-owned offices.

In our title and settlement services segment, TRG’s direct operations had capture rates of 41% on NRT closings in 2014. In addition, their underwriter experienced a claims rate of 1.8% in the fourth quarter, which is well below the industry average loss ratio of approximately 5%. Now let’s take a few minutes to discuss the current market environment.

For the first quarter 2015, the data indicate that Realogy’s homesale transaction volume will increase in the range of 5% to 9% as shown on Slide 7. We anticipate that transaction side increases will be in the range of 2% to 4% on a combined basis for RFG and NRT and average sale price gains will be in the range of 3% to 5%.

Nationally, inventory continues to be low, but should begin increasing at advance of the seasonal spring housing market. As to the lending environment, Washington has taken a number of actions that should encourage lending particularly as it relates to first-time buyers.

These include HUD’s recent decision to lower fees, the Federal Housing Finance Administration offering 97% LTV loans and the clarification of the loan putback rules. According to NAR estimates, reduced FHA fees alone could add an incremental 90,000 to 140,000 buyers to the market on an annual basis.

As you can see on Slide 8, prominent industry forecast for existing homesale transaction volume for full year 2015 are showing increases in the range of 6% to 12% with an average of 9%. As we discussed last year, we believe the next stage in the housing recovery will be the return of the first-time home buyer.

According to the latest census report issued in January, more than 1.6 million households reformed during 2014, the highest annual figure since 2005, and the data support an increase in long-term demand for housing.

Overall, for 2015, we believe current tailwinds, including the likelihood of an expanding credit box, continued low mortgage rates, improving consumer confidence, and the government reported jobs gains averaging 336,000 over the past three months, should help mitigate the pressures of low inventory levels and continued difficult lending standards.

In summary, we are pleased with the progress we have made on our short-term and long-term strategic initiatives.

Our fee-for-service business model enables us to invest in long-term strategies that will enhance the value of our brands, the success of our franchisees, vitality of our relocation and settlement services segments and the expansion of NRT operations.

Management and our board are taking a long-term view of the business, simultaneously balancing the near-term and long-term interest of our shareholders.

To that end, we continue to focus on our goal of shrinking the debt on the balance sheet and investing in growth, which is made possible by the proven and resilient free cash flow characteristics of our business and eventually returning capital to our shareholders.

With that, I will turn the call over to Tony and we will have Q&A at the close of Tony’s comments.

Tony?.

Thanks, Richard. Turning to Slide 9, let me make some comments about the fourth quarter and full year of 2014. Q4 2014 revenue of $1.3 billion, increased 3% compared to the fourth quarter of 2013, driven by higher transaction volume at RFG and NRT. Q4 2014 adjusted EBITDA was $167 million, compared to $151 million in Q4 2013, an increase of 11%.

For the full year 2014, revenue was $5.3 billion, that’s a 1% increase compared to 2013 and that increase was driven by higher transaction volume at RFG and NRT that was offset by lower refinance volume at TRG.

Full year 2014 adjusted EBITDA was $779 million, which was above the range of $765 million to $775 million that we anticipated and communicated to you during our third quarter call.

Adjusted EBITDA excludes the impact of a number of items, including $47 million of early extinguishment of debt charges incurred in 2014, as well as $10 million of ZipRealty transaction and integration related costs. Full year 2014 net income was $143 million.

On an adjusted basis, which removes the impact of tax related valuation allowance reversals and loss on early extinguishment of debt, adjusted net income was $160 million relative to $137 million in 2013 on the same basis.

The company generated $367 million of free cash flow during the year or $2.51 per share, which reflects a $63 million or 20% reduction in cash interest expense year-over-year that was primarily result of refinancing activities executed in 2014. Lastly, our net debt to adjusted ratio was 4.6 time at December 31, 2014.

Next, I will discuss our key revenue drivers for the full year on Slide 10. RFG homesale sides decreased 2% year-over-year in 2014 and average homesale price increased 7%. NRT homesale sides decreased 3% year-over-year compared to 2013 and its average homesale price increased 6%.

Average broker commission rate or ABCR was off 2 basis points for RFG and 3 basis points for NRT in 2014, due to the continued strength of the high-end price segment. ABCR has held up very well over the past three years in the face of the 22% increase in average homesale price that we’ve experienced during that period.

The high-end price segment outperformed the lower priced segment throughout 2014 as activity from the first-time homebuyer was still below historical averages. Homes with price points above $750,000 represent a 24% of homesale volume at RFG, and that’s up from 21% in 2013. At NRT, those homes represented 51% of homesale volume, up from 48% in 2013.

Across RFG, the volume of homesales at price points under $300,000 in 2014 was 43% of total homesale volume down from 46% in 2013. RFG’s net effective royalty rate was flat at 4.49% in 2014 and continues to reflect the strong performance of our larger affiliates.

NRT’s commission split was 68.4% for the year, which was a slight increase compared to 2013. In 2015, both the net effective royalty rate and split rate are expected to remain at 2014 levels. Now, let’s look at revenue and EBITDA for full year 2014, compared to 2013, as shown on Slide 11.

As we have mentioned, revenue totaled $5.3 billion for the year, an increase of 1%, which was due to higher transaction volume offset by lower TRG revenue, and that lower TRG revenue was result of a 64% decline in refinance-related closed units.

RFG EBITDA increased $15 million, primarily due to higher third-party domestic franchisee transaction volume. NRT EBITDA decreased $13 million, despite a 2% increase in revenue, primarily due to the $16 million decline in PHH Home Loans joint-venture earnings and that was mostly refi-related.

Cartus EBITDA decreased $2 million, primarily due to higher employee-related costs. TRG EBITDA decreased $14 million, primarily due to lower refinance volume. And finally, corporate expenses, factoring our early extinguishment of debt charges and one-time acquisition-related transaction costs, increased $3 million, from $58 million to $61 million.

With the bulk of the increase coming from the inclusion of recurring ZipRealty overhead costs from August 2014 on and that was offset by lower bonus levels for the year.

We expect our ongoing book tax rate to be 42%, but because of the reversal of a state tax valuation allowance in the fourth quarter, the 2014 full year income tax expense rate was approximately 37%.

Turning to Slide 12, in the first quarter of 2015 we expect homesale transaction volume increases in the range of 5% to 9% with 2% to 4% coming from sides growth and 3% to 5% coming from price growth. You will recall that our one-quarter ahead transaction volume guidance reflects our most current open and close sales transaction data.

Our guidance track record has proven to be an accurate short-term predictor of the direction of the existing homesale market.

One note on expenses in 2015 relative to 2014 that we want to remind you off is that we will be reflecting a full year of Zip-related expenses that will add $12 million of incremental expenses at corporate and RFG in aggregate and they will be spread ratably during the year.

Although adverse, in the short-term, we think this investment will pay significant dividends over the long-term. Also in 2015, we anticipate approving for performance based management incentives at 100% relative to the 60% achieved in 2014, obviously, that’s if the 2015 performance goals are met.

This adds about $30 million to our run rate expenses in 2015 versus 2014. The company generated $367 million of free cash flow during the year and we have $313 million of cash and cash equivalents at year-end. Slide 13 provides cash flow guidance for 2015, including our estimate for the year CapEx of $80 million to $85 million.

Capital expenditures are expected to be higher in 2015 due to the inclusion of ZipRealty and one-time facility improvements at Cartus. Corporate cash interest expense is expected to $205 million to $215 million, assuming no changes to the current capital structure.

Working capital is expected to be a source of $10 million to $20 million and legacy cash settlements are expected to be a use of $15 million to $20 million. Cash taxes are expected to total $15 million to $20 million for 2015.

To summarize, 2014 performance relative to the national existing homesale market was strong as we outperformed the national market by 4 percentage points on sales volume and increased our market penetration from 26% to 27%.

Similar to many of the industry prognosticators out there, we believe that there are certain factors that are encouraging for an enhanced phase of recovery for the housing market in 2015. These include an improving employment picture, moderating price increases and progress on expanding the credit box.

The timing and magnitude of those factors and the cadence at which they may affect transaction volume growth is difficult to predict and it’s likely the cause of the wide range of forecast, the average of which is 9% for the year. We expect to continue to generate significant cash flow due to the operating characteristics of Realogy’s businesses.

In addition, cash flow in future periods will be enhanced by the utilization of our $2 billion in net operating losses and related minimal cash taxes, as well as lower cash interest requirements.

As Richard mentioned, we intend to use our free cash flow primarily to de-lever our balance sheet, invest in the growth of our business, and eventually return capital to our shareholders. With that, I’ll turn it over to the operator, who will open this call for Q&A..

[Operator Instructions] Your first question comes from the line of Steven Kent from Goldman Sachs. Your line is open..

Hi, good morning.

Can you hear me?.

We can..

Hi, Steve..

Hi. So a couple of things.

One, can you just give us a little bit more color on what you are seeing in terms of regions pick up, we’ve seen some pick up in existing and pending home sales in New York, California, Florida, just what you are seeing? And then I’m always intrigued by Zip and what the reaction was from your – where you’ve rolled it out and what peoples views are as that has been rolled out because that seems like an interesting driver over the next few years?.

Steve, this is Richard. Let me address the Zip and then Tony can you give you some regional color. Zip, as you know, an entirely new technology platform, which we are going to introduce to our franchisees. We are actually installing pilots as we speak, but the full-blown distribution will not occur until the end of the second quarter.

It’s going to, in many cases, replace current forms of technology that are expensive, not synergized, generally not consistent, and really don’t deliver a lot of value. So this is a platform that was built around the needs expressed by brokers and agents, so it’s extremely friendly to the brokerage industry from that perspective.

The reception thus far has been overwhelmingly positive. It’s been introduced at all the national conferences. We literally can’t keep up with the interest being expressed by the franchisees. So we are very bullish on its near-term and the long-term prospect.

So long-term, it makes it easier for the broker to create and deliver new services both through the agent and to the buyer and seller. It’s an integrated form of technology that we’ve never had and in fact I don’t think the industry has it. So it will be I think first to market and again, the distribution begins, end of the second quarter.

Tony, do you want to give color…..

Sure, just on the regional fee, Steve, for the year, or NRT, which is the biggest revenue driver of the company, the strongest region was the South and the other three regions – so the South was up about 12% in volume for the year and then the other three regions, the West, Midwest and Northeast were all up 3% each on total volume.

So, the fourth quarter was a little bit different than the full year. There was a little more strength in the South, it was up 16% on volume. And the weakest in the fourth quarter was the Midwest, which was down about 1% in volume. So, just – expect good strength in the south region for NRT. For RFG, it was spread more evenly.

The West region and the South region were the strongest for RFG for the year, at 7%, 8%, 9%. The Midwest and Northeast were flattish for the year, in terms for volume.

So again, very different outcomes depending on what region, I mean, obviously looking at the first quarter, you would not be surprised to know that the one area showing some weakness is New England, which is not a surprise because there are inventory constraints, inventory constraints because of snow build up, not because there is lack inventory but people can’t get to the homes.

The only other place that’s a little bit strange, that we’re seeing right now in the first couple of the months of the year is the San Francisco area, just because of lack – the chronic lack of inventory but the rest of the country – the rest of NRT’s markets are performing well.

So it’s really those two markets that are sort of off year-over-year, the rest are flat or up..

Okay, thank you..

Your next question comes from the line of Jason Deleeuw from Piper Jaffray. Your line is open..

Thank you and good morning.

Just getting back to the supply issue, it’s sound – are you trying to say that the supply issue is not really holding back sales when you look at it from a national level and it’s just kind of confined to certain markets or do you think supply as an issue is holding back just the total national unit size?.

No inventory is low across the board. It’s around 4.6 months, 4.7 months depending on your listing too. It should be six months or better, six months or better. We literally have as, Tony mentioned, San Francisco proper as inventory – as inventory you can measure in weeks, there is just nothing sell.

It’s always generally that way in January of any year and here we are in early stages of February, so it’s not really the spring market yet. So we expect inventory to build. We’d be very disappointed if we didn’t see an improved spring inventory levels.

But I think it’s – for the most part, typical of the entire – for the most part, no inventory is problem across the board..

And Jason, if you look at the NAR numbers that came out yesterday, is the national inventory levels are pretty much consistent where they were which is – the January number was 1.87 million units. It’s very consistent with year-end 2014, year-end 2013, year-end 2012. So as Richard said, it’s the normal year end.

It’s off season levels of inventory that generally build over as the spring season develops..

Let me also this, I’m sure you follow the builders. The builders are building, again, and that’s going to help build the inventory pipeline. It’s sort of an unusual way that it does it, but it does it. So we’re encouraged by the increased builder activity because that’s eventually going to create stronger existing home inventory.

So we’ll see how that shapes up over the next couple of quarters, but it looks encouraging..

Okay.

And then on the margins, we got the extra IT spend or the extra spend from Zip, some accrual for the performance base, now that volume and revenue was expected – just based on the forecast, expected to grow again, what’s you expectation for margin expansion in 2015 in light of some of the headwinds that you pointed out?.

I would just say that, we’ll talk about that a little bit at Investor Day. We said at last year’s Investor Day that our margins for the year would be 14.2% to 14.6%. We ended up at the high-end of that range and we’ll discuss sort of forward-looking margins at Investor Day..

Okay. Thank you..

Your next question comes from the line of David Ridley-Lane from Bank of America. Your line is open..

Sure. So the NAR data suggest that sales to first time homebuyers have been up for the past five months.

Just curious, have you seen anecdotal evidence of greater interest among first time buyers and also do you think mortgage availability for this group is increasing?.

In the NAR numbers, actually the first time buyer percentage went down in January versus December.

So we haven’t seen it yet, but we do think that the credit box opening and the loan available for lower fees at FHA and 3% down loans available from Freddie and Fannie, the lower put back risk is going to encourage lending and we just don’t know what the timing and the cadence of that’s going to be, but we think it’s definitely – everything is moving in the right direction to get that segment of the market more robust..

Great.

And then, is there an upward bias to the net effective royalty rate in 2015, just given the uptick that you saw in the fourth quarter?.

It’s tough to look at that in a quarterly basis. But as we said during the prepared remarks, we think its going to be flattish. Maybe a little bit up in 2015, but basically flat..

Okay. And just I squeeze one more in.

how much of a benefit do you think the snap back on refinancing activity will be for both the PHH joint venture and the title and settlement segment in the first quarter here?.

I think it will be helpful to TRG’s results, but its not going to move the needle that much. I mean they are seeing increased opens activity, but I don’t think it’s going to move the needle that much in the first quarter because most of those aren’t going to close until second quarter..

Got it. Thank you very much..

Okay..

Your question comes from the line of Michael Dahl from Credit Suisse. Your line is open..

Hi, thanks. Tony, wanted to go back to some of your regional comments for a minute and maybe just ask more specifically, within the guidance for sides and price, is it consistent across NRT and RFG or should we be looking ahead different tends? Price for NRT was quite a bit different in the fourth quarter.

So any color within that guidance by segment would be helpful..

I think that we had some very strong high-end activity in the first quarter of 2014 at NRT. And I think that’s – it’s probably not going to be quite as strong, so I think price won’t be as robust at NRT as you’ll see it at RFG. So RFG price looks sort of carrying a weight on the price increase that we gave – the price increase guidance we gave..

And are the sides pretty similar?.

Actually, sides are a little stronger at NRT and probably little weaker at RFG..

Got it. Okay. Second question, also the agent commission split on the NRT side, I think it improved year-over-year for the first time in a little while or at least all year.

So how much of that was may be you lower – just a mix with Zip coming in at lowers split rates or how much was some of the initiatives that you guys have talked about for the past several quarters and any thoughts, sorry if I’ve missed it, but on what’s the split rates will look like for the year in 2015?.

Again, we expect them to be flat to 2014 and 2015. The split movement in Q4 was more about where the business was done. You know anything kind of East to the Mississippi has better split from West of Mississippi and there was just the shift, there was slight shift in volume towards the East of the Mississippi.

So that helps splits in the fourth quarter. So nothing – long-term and we’ll discuss this on Investor Day, I mean the way we are going to manage splits because it’s very competitive about there.

There is – for NRT, it’s very competitive on this splits is really shifting more of the business to lead generated business that has better economics and that’s how, over the long-term, we’re going to – we plan to mange splits because you can’t fight the reality of the local markets because you’re going to lose your best agents if you do and we want to keep them.

So the way we’re going to do it is really just shift more of the overall business to lead generated business with better economics and that’s going to keep splits under control for the foreseeable future. That’s really the strategy.

That was the Zip strategy, it’s a strategy for all the initiatives that NRT has underway to really generate more leads – generate better leads to agents and hopefully get the closure rate on those up and that will helps – that will be a much bigger impact on splits over time than trying to fight the local battles..

Okay. That’s helpful. Thank you..

Your next question comes from the line of Ryan McKeveny from Zelman and Associates. Your line is open..

Hi, thanks guys. Good morning. First question on NRT specifically, could you just update us what you’re seeing in terms of the acquisition opportunities and I guess how competitive the environment is for those acquisitions and how you view acquisitions going forward in NRT’s prouder strategy and I guess within the guidance for 1Q as well..

It’s a good environment. As I mentioned in my comments, it’s a pretty robust pipeline. NRT prefers and we traditionally have preferred to acquire companies in our existing footprint because they’re very synergistic. We mentioned, over the past couple of quarters that we have a very strong interest in the Southwest.

We think the Sand States represent an enormous opportunity for the industry and also for our company. So we’re paying particular attention to the Sand States and their growth both income growth, job growth, stability, better economics, et cetera. So, that’s encouraging.

We did 17 last year, we have a pretty good pipeline for 2015, the environment is we compete generally – if we compete, against one other buyer that’s Berkshire Hathaway HomeServices, but we don’t see them a lot and they tend to be fairly disciplined. We are absolutely disciplined.

We paid five times to six times EBITDA and that’s before synergies we often – it was in our existing footprint as you know it’s – we deliver a point or sometimes two points of synergies. So it’s a good strong pipeline and we’re very encouraged by the prospects over the next several years..

Great, thanks and on the commission rates, RFG, we saw slight sequential increase this quarter, NRT down slightly sequentially.

Can you just describe the moving pieces between those businesses, maybe how to think about the various pluses and minuses of the commission rate going forward for RFG and NRT?.

Sure, the commission rate at NRT is always several basis points lower than it is at RFG because their average sales price is double RFG and double the national average. So it’s not surprising to see the slight disparity there and really what you’re going to see – if you see ABCR movement, it’s mostly going to be due to what’s happening with price.

ABCR has been amazingly steady over the last three years despite very robust average sales price increases so that we’ve really benefit from that and you hit moves in the future, it’ll move a basis point here or there and it’ll move mostly by what’s happening with average sales price.

So we feel pretty confident that that’s not going to be a big variable in the future..

Great, thank.

And maybe just one more as it ties a little into that topic potentially but just any update in terms of the Zillow-Trulia merger and any potential impact that you guys see from the combination versus those companies being separate?.

No, I mean there is, there are some marketing channels. So we have not see nor do we expect any material change in how we can do business with them or how our franchises do business with them.

So as we’ve said in the past, to the extent they continue being a good marketing venue then our franchisees, their agents, and also our agents will use it as a tool to generate incremental leads. So we see that only improving over time, not getting worse. So the combination probably makes a lot of sense for a lot of reasons.

So, we are indifferent as to the merger; we just hope they continue to produce good, solid actionable leads..

Okay. Thank you..

You are welcome..

Your next question comes from the line of Adam Rudiger from Wells Fargo Securities. Your line is open..

Hi, good morning, thank you.

Richard, I was just wondering if you see some more – the government trying to do some more to ease the mortgage availability and stimulate housing going forward or it's what’s we’ve seen over the last couple of months, if for a while?.

Well, the good news there is, there is an intent to expand the credit box, both Mel Watt and others, and positions of responsibility have made it clear that they would like to make it easier for a first-time buyer to buy that first home.

So, much before the dialogue I’m hearing now and the tone and the tenor versus what we saw five, six, seven years ago. So I’m encouraged by it. And I think the reduction in FHA fees is a good example of strong intent.

The 97% LTV loan strategy for the GSEs should over time encourage more first time buyers to step up to the plate and take advantage of these low interest rates. So I think the tone, the tenor and the intent are all very favorable to a stronger housing market..

Okay. And then, Tony, question for you on the balance sheet.

Is there anything to do with that first lien and first-and-a-half lien debt or is it to sit tight until 2016 when they are callable?.

You never know what market opportunities are going to come your way, but absent those, I think sitting tight is probably what we are going to do..

Just like cash pulls up on the balance sheet then?.

Exactly..

All right. Thanks for taking my questions..

Your next question comes from the line of Steven Kim from Barclays. Your line is open..

Thanks very much guys. Was wondering if I could revisit the guidance on the size again if I could. I just want to make sure that we have the proper context on that.

For example, we are hearing from the builders that in late January and into early February churns market being improved – and we just had a builder come out today, talk about sales opportunity up 24% so far. So in that backdrop the increase of 24% in the guidance is kind of – it raised some eyebrows for us.

And I was wondering, was there anything – is there anything in the first quarter that might be a bit unusual that we could adjust for? For example, some of the companies have talked about an increase in number of days, you think that's weekdays. I mean, are you having less weekends or something in the first quarter? And in addition if….

No..

…you could just help us – okay, does not. All right..

No, the number of days in the quarter is exactly the same as last year..

Yeah. Okay. And then….

And there was one less day in January; there is only one extra day in March, but the number of days for the quarter is the same..

Yeah. And then how about in terms of the mix geographically? I think you had indicated that the Northeast was flat if I remember that correctly.

Are you assuming that the Northeast is a bit of drag in 1Q relative to maybe what we are seeing nationally?.

I would limit it to more New England than Northeast, you know Boston in particular. Again, the two areas where NRT opens are down year-over-year as opposed to the rest of the markets which are flat up is New England which is mostly Boston and San Francisco..

And they both are the same reasons, which is inventory constraints, but the reason for the inventory constraints are different in Boston than they are from San Francisco..

Well, yeah. Sure. And so I guess just finishing up on this line of thought, the builders report orders, right, so – and you guys, I know the existing home sale numbers reflect more of a combination of orders as well as closing some.

So I guess I'll just ask the question outright, do you see any material improvement in the backend of January and into early February on the order side versus the closing side?.

Yeah, I mean, January, just on the close side, as you saw from – in our report yesterday, January was just not good. Not only did we lose a day, but it was just not a good month for either NRT or RFG. But the opens were strong especially towards the end of the month. And then as you say, early February opens look good as well.

But again, a lot of the opens we are starting to see now aren’t going to close till April. So, we won’t see the benefit of that until April. So anyway, we definitely saw the first part of February was very strong on closed and opens, but we still have to be content with January, which was weak.

And the most important month of the three months obviously due to seasonality in terms of overall side – the number of transactions is March. So that sort of tells the tale of the quarter; January and February don’t really tell the tale, is really when you start getting the full swing spring season which is in March.

But I think we were – again, we took into account the opens and the closes that we’ve seen through last night to give the guidance..

Yeah, Okay. That’s actually very helpful. Thanks very much for that. My next question related just to a sort of a general question about what's likely to happen when the inventory situation ultimately is relieved that we have more listing coming on the market.

I’m particularly curious about how that might affect the distribution of activity amongst the sort of higher performing agents versus the lower performing agents? Generally what we saw is that as the market improves you'll get more activity sort of going to the sort of the less productive agents.

However, giving a focus on agents who have relationships, and listing relationships, I was curious as to, when you see the market improve, do you still see that same kind of retention where the agents who are more productive tend to have those same lessons, or do you find that when morbid things hit the market, does that also get distributed to less productive agents just because of the sheer volume? Thanks..

The top-producing agents are always going to outperform their colleagues, which is the nature of the business they build and how they go about the business. The real key is that if more and more percent buyers enter the market, many of the top-producing agents would prefer not to deal with the low end of the market.

So, generally that accrues to the benefit of e-agents, which are agents that we use on a different sort of economics so that they have more attractive splits and there are a product of ZipRealty as an example that channel works very well for the first time buyer and mid-market buyers.

So if there is more business, sort of the low end of the market, everyone’s going to benefit, but generally the top-producing agents are not going to spend a lot of time going after the first-time buyer.

So I don’t see that doing anything, but just empowering agents at the lower levels and making them more productive than they would have been otherwise. So….

Okay..

That’s generally how it works. It varies by market, but that’s generally how it works..

Okay, great. Thank you very much guys..

Sure. Welcome..

Your last question comes from the line of Will Randow from Citigroup. Your line is open..

Hey, good morning and thanks for taking my question..

Hi, Will..

In terms of the luxury market, I was curious on your thoughts there. It seems like it's starting to have tougher comps from a year-over-year price appreciation perspective. And in particular this question is around the international buyer potentially slowing as well. Love to get your thoughts there.

And I assume the sensitivity is more towards NRT, but love to get your thoughts on that as well..

I’ll just add a quick comment. The one segment of the international buyer that’s noticeably absent is the Russian buyer for all the obvious reasons. So that component of the international buyer market is not completely gone but it’s substantially limited as compared to prior periods.

We continue to see there’s strong influence of the Asian buyer, and also Latin and South America continue to be pretty robust buyers. Depending on the market, it’s principally Miami and the east coast of Florida. So I don’t know if the absence of the Russian buyer is a temporary issue or a long-term issue; we assume that it’s longer than a year.

But the international buyer continues to be robust, principally because where are you going to put your money? Where in the world will your investment be safe, one, and then, two, appreciate over time. So, we continue to see strong foreign buyer interest in the major destination markets, New York City, Miami, San Francisco, LA.

So we don’t see any near term change in that. That's something we're actually expecting this year.

Anything else, Will?.

Thanks for the color on that. And then just lastly in terms of technology initiatives like the new website, using Zip’s infrastructure to boost transaction volume at RFG.

I’m sorry if I missed it, but any updates there?.

We are expected to start rolling it out to our franchises on a broad basis at the end of the second quarter. We already have a long waiting list for those franchisees who want the system installed as soon as possible.

We have pilots that are working their way through the system now so we can work out any bugs that may exist and get the system prepared for broad distribution in the second quarter. We are going to go into that in great detail on Investor Day on the March 18. So hopefully you can be there..

Okay. Thanks for taking my questions and congrats. Looking forward to the Investor Day..

Thank you..

Okay, that concludes the call. We thank you for taking the time to join us. Let me remind you that we are holding Realogy’s Investor Day at our offices in Madison, New Jersey, on March 18. Thank you..

This concludes today's conference call. You may now disconnect..