Good morning, and welcome to the Realogy Holdings Corp., First Quarter 2020 Earnings Conference Call via webcast. Today's call is being recorded and a written transcript will be made available in the Investor information section, of the Company's website later today. A webcast replay will also be made available, on the Company’s website.

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, Natalia. Good morning and welcome to Realogy's first quarter 2020 earnings conference call. On the call with me today are Realogy's CEO and President, Ryan Schneider and Chief Financial Officer, Charlotte Simonelli.

As shown on slide 3 of the presentation, the Company will be making statements about its future results and other Forward-Looking Statements, during the 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, including any statements we make related to the expectations with respect to the ongoing, COVID-19 crisis.

Actual results may differ materially from those expressed or implied in the 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 MAY 7th 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 our annual and quarterly SEC filings.

Also, also certain non-GAAP financial measures will be discussed on this call and per SEC rules important information regarding these non-GAAP financial measures is included in our earnings press release. Finally, the relocation business remains in discontinued operations, for the first quarter.

And, in Q1, we consolidated the Realogy Leads Group, into the Realogy Franchise Group. Based upon developments, in our litigation related to the relocation business sale, the company may reassess, segment classification, in future periods. Now I will turn the call over to our CEO and President, Ryan Schneider..

Thank you for joining us this morning. And I hope you and your loved ones are safe and healthy, during this COVID crisis. With the onset of the COVID crisis, we moved quickly to ensure the health and safety, of our affiliated agents, employees, franchisees and customers.

We pivoted rapidly to virtually support housing transactions, frankly more than you may be expecting. And we took quick actions to proactively position Realogy to navigate this crisis. And emerge strong on the other side. When I ended our Q4 call in February, I shared my excitement about the momentum we were building, in late 2019 and early 2020.

We delivered on that momentum with a very strong Q1, 8% volume growth and a $35 million increase, in operating EBITDA. Every business segment both, expanded margins and improved its bottom line year-over-year. We continued our technology transformation. And new growth initiatives like our Corcoran franchise expansion.

And while COVID has clearly eclipsed that momentum, our Q1 results delivery gives me confidence, that we can emerge strong from this crisis and resume that momentum. Given the substantial uncertainty driven by COVID, we thought it would be most helpful to you to do this earnings call differently, than our usual approach.

While we are excited by our Q1, we will only briefly touch on it. You can refer to the press release, for additional details. Instead, I will spend most of our time sharing what we are seeing in the April housing market. What we are doing to respond and how we are navigating this uncertain environment.

So I will now turn the call over to, Charlotte, to briefly discuss Q1 results..

Thank you, Ryan. Good morning, everyone. I also wish you and your families, continued health and safety, during this challenging time. Realogy had a strong first quarter of both, operating and financial performance and delivered improvements across many of our financial metrics.

We drove strong volume growth in the quarter and improved profitability, across all of our business segments. Q1 revenues were up $62 million year-over-year, driven by 8% higher transaction volume, across both, franchise and brokerage.

We grew volume 13% in January, 11% in February, and 3% in March, with the first half up 12%, before we started to see the impacts from COVID and the second half of March, down on 10%. We grew our own brokerage agent headcount by 4%, year-over-year in the first quarter, which represents four consecutive quarters of year-over-year agent growth.

We also had better agent retention, as the competitive environment remain more rational. Operating EBITDA from continuing operations was $37 million, an increase of $35 million year-over-year. Operating EBITDA margin expanded 300 basis points in the quarter, marking the second quarter in a row of year-over-year improvement.

More dropped to the bottom-line this quarter, despite higher commission splits. Realized cost savings in the quarter were driven predominantly, by the actions we took late last year. We remain laser-focused, on driving simplification across our business.

We took quick action on additional savings in March, in response to COVID, which Ryan will discuss in greater detail, later in the call. We benefited from the low rate environment which fuelled substantial growth in our title business and mortgage JV, in the quarter.

The GRA mortgage JV continued to contribute meaningfully to our business results, generating $9 million in operating EBITDA this quarter. We exited the quarter with $628 million in cash and cash equivalents, inclusive of regulatory cash and the $400 million we proactively drew down on our revolver in March, amid COVID.

Our total net leverage ratio was 5.2 times and the senior secured leverage ratio was 3.06 times, as of March 31 2020. I am incredibly proud of our start to the year, and our Q1 results. We have delivered solid execution and operating improvements, across the business.

Given the uncertainty of COVID going forward, let me now turn the call back to Ryan, to talk about what we are seeing in the market. And what we are doing to respond..

Thank you, Charlotte. [Technical Difficulty] in our company to confront the threat from COVID, enabled by our technology transformation substantially all of our employees, smoothly transitioned to remote working arrangements and are now supporting agents and franchisees in a virtual environment.

Since we moved to a virtual environment, we've closed approximately 150,000 transactions, from mid-March to the end of April. We're leveraging the technology investments we've been making over the last few years, to support more tech-enabled virtual transaction, execution.

We have delivered new technology and marketing product releases, to support more virtual home sale transactions for agents and franchisees. We have substantially ramped up the utilization of our digital notarization and flashed closing products to support our title and mortgage closings.

In parallel to the multiple agent and market facing actions, we made a number of rapid decisions to help Realogy navigate to COVID crisis at the corporate level and emerge strong on the other side.

First, we moved very aggressively to implement crisis level cost savings through multiple people cost levers, marketing reductions, select investment deferrals and real estate options.

The cost savings actions we took in the last two weeks of March and throughout April are expected to lower our operating costs by $80 million to $100 million each full quarter they are in effect.

Second, we drew down $400 million in cash on our revolving credit line to ensure strong cash enhancement and liquidity and ended Q1 with $628 million in cash and cash equivalents. Third, we benefit from this business decisions we made before the crisis began.

In particular, we talked with you about how we are only focused on profitable growth even at the expense of market share.

That choice should benefit us during this crisis, especially compared to those who have been making unprofitable choices, those trying unprofitable new business models or those trying to disrupt the industry with new capital-intensive, but unprofitable ideas.

And we had already adjusted our capital allocation decisions well in advance of the downturn, including focusing on debt reduction; stopping share repurchases 15 months ago and not paying a dividend since August of 2019. We implemented our cost and liquidity decisions early to ensure we were being aggressive in our response.

The length and depth of this crisis will determine how long we will need to maintain many of those actions and whether even more actions are necessary. Now, let me pivot to what we are actually seeing in the residential real estate market based on our preliminary April data. Starting with closed transaction volume, comparing 2020 to 2019.

First, we are seeing overall closed transaction volume down about 20% to 25% in April, specifically our April closed transaction volume is down approximately 20% in franchise and approximately 25% in brokerage with the delta driven by the different geographic mix between those two businesses.

This is actually better than I thought it would be when the crisis began. Second, as you'd expect there's significant geographic variation. Using the data from our brokerage business, New York City, April closed volume is down about 30% and California, which went into lockdown earlier than New York City, closed volume is also down around 30%.

Florida, closed volume is down around 20% and there are a few states that are only down, kind of, low single digits in April closed volumes such as Texas, Minnesota and Georgia. And while the specific franchise volume numbers are not exactly the same, the relative geographic performance is in the same ZIP code as the brokerage data.

The worst three performing franchise geographies are New York, California and New Jersey. More importantly, let's talk about what we're experiencing with new contracts to buy and sell a home, which we refer to as open-transactions in April comparing 2020 to 2019.

We are seeing April new open-transaction volume down approximately 40% in franchise and approximately 50% in brokerage with the delta between the two businesses, again mostly driven by the geographic mix difference. Second, the decline in new open transaction volume appears to have reached its peak decline in mid-April.

The weekly data for mid-March and April shows the decline in open-transaction volume growing every week in the second half of March and early April. But since the mid-April peak this decline in open transaction volume while still significant has lessened over the second half of April.

Finally, there are substantially fewer million-dollar plus homes coming on to the market and going under contract in April. This mix change is driving lower overall average price for April open-transactions. We did not see this high-end price effect in the April close-transactions.

So fundamentally the data we've seen in late March and April is probably better than I personally would have guessed heading into the crisis especially the mid-April peaking we've observed in new open transaction volume declines.

While we're excited to see the improvement since mid-April, we're not running away with our excitement because it's only a few weeks of trend that could obviously change, and as I already told you, the decline in new open transaction volume in the second half of April is still significant.

So let me now shift to what we're seeing on the consumer side. Consumers are clearly still engaged in housing and demand still seems to be out there even if some of it's pent-up for a while given the crisis.

While both new listings and new contracts are down in April, consumer searches are actually up substantially on our websites and have been reported up on other public-facing housing websites. Searches and viewings have shifted to more to single-family homes and you've all seen multiple articles about the increased interest in suburban living.

While we are not sociologist, a shift to a more dispersed living could be an enduring change from COVID that would trigger us and contribute a substantial number of housing transactions. Refinanced volume is definitely up substantially and in the past week we've seen mortgage applications for home purchases start to trend up.

And we have a huge number of stories of consumers interacting with agents and transacting in new creative ways to get deals done. Frankly we're seeing anyone in the market now is serious about getting transaction done despite the crisis.

So overall kind of based on what we're seeing, we believe there's going to be pent-up inventory and consumer demand post-COVID. Since housing is not a perishable good, we believe the listing and transaction volumes will improve in geographies as they reopen.

We are seeing a bit of green shoots already in our weekly data from select geographies and there have been some public articles to that effect also. Now all of this will be subject to what happens with the macro but those are the consumer trends that we're seeing in this crisis.

On the agents side, I've been excited by the agility agents in Realogy have demonstrated to continue to get deals done in a social-distancing world. Agents are using technology, both Realogy technology and third-party technology more and in new ways to help customers buy and sell homes. We're seeing an adoption acceleration of our technology products.

We're excited by rapid technology product enhancements we've deployed, including virtual home tours, expanding virtual staging, new online marketing capabilities and increasing digital payment options.

We also like the creativity we're seeing from agents and employees to complete the last mile of real estate transactions using our remote notarization product for title, our flash close product for mortgage and operational changes like our title company doing drive through title and mortgage closings.

And people are getting creative to take care of our most vulnerable customers. We've had people witness a transaction standing outside of a closed window for an immunocompromised customer. I'm proud of what our agents and employees are doing to help customers safely.

So pulling way up, we're in one of the most uncertain economic environments in recent history. We're watching the data closely. We're making aggressive corporate decisions early and we're using substantial creativity in the housing market to support agents and customers.

We're doing all this to set up Realogy to navigate this uncertain economic environment, both if the housing market comes back quicker as a few market watchers like NAR and Fannie Mae are predicting or if the recovery takes longer.

We remain laser-focused on moving quickly on the things that in our control to ensure we weather this storm and emerge strong. And at a higher level, one of the things, I've learned from past crises is that there's often both a flight to scale businesses and to quality brands like ours.

Crises also often expose unprofitable business models or unprofitable attempts to disruptions, creating new opportunities for established players. So we're working hard to be a beneficiary of both of those phenomena, especially given our demonstrated Q1 momentum.

We look forward to navigating this crisis and to taking advantage of opportunities that will occur in our industry. With that, we will take your questions..

[Operator Instructions] The first question is from the line of Stephen Kim with Evercore ISI..

Yeah. Thanks a lot, guys. A lot of super-interesting information you gave there and tons of questions, which I'm sure a lot of my peers are going to ask. But first, I hope you all are doing well, and it was good to hear that you started to see some improvement in the overall market.

My first question relates to the strong margin performance in the quarter. You addressed that the cost savings that you took in response to COVID in March, and you quantified that I believe is $80 million to $100 million on a quarterly basis while in effect.

So my question is can you be a little more specific about the permanence of these? Is any portion of that $80 million to $100 million permanent? And does it include the -- some portion of the $70 million to $90 million previous cost saves guide, or are they completely independent?.

Sure. Thanks. Yes, so they are completely independent. And as far as what percent will remain, there's a piece of it that will definitely remain but the broader bits are around salary, changes, furloughs, marketing changes, which would definitely vary with volume. So there's a piece of it that would remain.

I would also like to point you to the fact that that's we've already done. And clearly, it's still relatively early in the year. So we're always working for additional cost actions that we may have more information to share with you at a later date.

So a big piece of the $80 million to $100 million will vary with volume does not include the previous $70 million to $90 million, which is separate from that which is what you're mostly seeing in the Q1 results, and obviously we're always working on more cost actions. So that's how I would frame that..

And Stephen, it's Ryan. First off, you were the last person we got to see from this group. So I hope you are doing well.

One of the things that we're also doing that is prospective as many companies are is how do you use this time of crisis, frankly, to reimagine work, right? We're finding a bunch of stuff we're able to do either with more productive or lower cost or even higher employee satisfaction in a virtual environment and kind of the forced adoption is helping us accelerate some of that stuff.

And so, Charlotte, I think did it well right, which is we had the cost stuff earlier that is separate. We've got this additional, a lot of which will depend how the crisis evolve, but then there's going to be whatever happens on our reimagining work, and I'm excited about that.

And we don't have any numbers to share with you on that yet, but knowing that we're one of many companies taking on that challenge and can see some different things already I find exciting and I want to share with you..

Yeah, that's very encouraging. Just pressing a little bit more on the cost saves. That was very helpful.

But can you give us a sense for -- of the $70 million, $90 million program -- $70 million to $90 million cost save program, you had previously outlined how much of that fell roughly in 1Q? What was the allocation between brokerage and franchise? And then lastly, just a housekeeping.

Can you remind me what the big buckets of your costs are the way you look at them? I'm thinking specifically to things that might be addressed by that virtual environment changing thing that you just mentioned..

Sure. Sure, absolutely. So, it's relatively straight lined the $70 million to $90 million. So it was slightly higher in the first quarter, so slightly more than a quarter's worth of that, but it's relatively straight lined.

As far as the bits of brokerage versus franchise, it was predominantly on the brokerage side but you would also see some in franchise and in corporate. So I would think it'd be heavier on brokerage, but then bits in franchise and corporate as well.

And I'm sorry what was the last piece of that?.

Big cost bucket..

I was asking about....

Big cost -- big cost bucket..

Yes..

Yes. So it's predominantly two things, which is workforce optimization and office footprint optimization. So those -- it's basically people costs and the costs associated with our facilities. So that was last year's program..

Thanks very much..

Your next question is from the line of Chris Gamaitoni with Compass Point..

Good morning. Thanks for taking my call..

Good morning..

Good morning..

Good morning. I wanted to -- if you had any update on -- given the additional cost announcements you had and the survey issue. If you had thoughts on your leverage ratio throughout the year based off what you're seeing on transaction volume.

Is there any concern? Are you confident that you're fine from the senior secured side?.

Yeah. So first and foremost, obviously we are in compliance with the senior secured leverage ratio. Clearly, we have modeled many different scenarios. And so we did move quickly to take our cost actions as expeditiously as possible, but there are additional cost actions we would take if the volume was to go in a different direction.

So we have many, many scenarios, we've played out, and -- both on the volume side but also on the cost-reduction side. And yes, we are in compliance today..

All right. That's great. On virtual touring, you've mentioned your application. Are most of your brokerage and franchise agents using something that you're offering? Are they using third party offerings? I'm trying to understand, if this is accelerating them more into your ecosystem and helping kind of broad based virtualization..

Yeah. So a great question Chris. Two part answer. So, as I said in the script, the adoption of our tech products by our agent base has absolutely accelerated. And we're really excited about that. And there's a lot of different pieces obviously to that.

But, I would actually say -- but I don't think they're just using, I know for sure they're not just using our products out there and I'm fine with that, because I'm an open architecture guy. I want to enable them to use whatever.

And so for virtual tours, I mean, people are using Matterport and Stream and people have just -- have agents doing stuff with FaceTime and stuff.

I mean it's -- and so I'm good with all of that, but we are getting more of our adoption, which we think will help us in the longer term and then we want to be here to support them with other good products if that's what they want to use and make it easy to integrate those in our ecosystem with APIs.

So we are seeing more adoption of our stuff, but I love the creativity our agents are using of whatever is working for them and their customer. And we're going to continue to try to support an open architecture more than require our technology. But we like the increased adoption of our technology during this time which we absolutely have seen..

All right. That's great. And just one quick housekeeping.

On the $80 million to $100 million is that inclusive of a reduction in the marketing fund is that a pass-through expense?.

Yes, it is. That's a small piece of it to be honest, but yes..

Okay. Thank you. Thank you so much..

Sure..

Your next question is from the line of Matthew Bouley with Barclays..

Hey. Good morning. I hope everyone is doing well. Thanks for the detail today. I wanted to ask back on the cost-savings side, sort of, beyond the near-term, I guess, austerity measures.

Is there any opportunity to accelerate any of the original cost-savings plans that are obviously, meant to be a little more permanent -- accelerating footprint rationalization things like that?.

Absolutely. So I think, Ryan tried to mention it on the first question that we got from Stephen, but we are certainly taking advantage of what we'll call a bit of a cultural shift to people being much more willing to work virtually. So I think there's a lot of side benefits to that. Cost is certainly one of them.

Employee satisfaction as Ryan mentioned is certainly another one. So, I think, there's a lot of really interesting things that we're evaluating with regard to just how we work and what office footprint we actually need. So absolutely.

That's definitely -- it's not included in the 8,200 that we mentioned and there certainly is an opportunity to advance that..

Okay. Understood. And then on the competitive environment, sort of, the midst all of this I mean, I guess you guys showed -- continued to show strong progress there.

So I guess over the past six weeks or so what have you seen with, sort of, your own recruitment and retention ability to proceed through all this? And then how have you seen the competition acting through this as well? Thank you. .

So, yes, so let me start with Q1. Q1 was definitely a more rational competitive environment just like Q4 was, especially, if you compare it to Q2 and Q3 last year. And it showed up in our numbers. Charlotte mentioned, we had strong agent growth again in Q1. Our retention in Q1 was better.

So we really liked our Q1 and we like the competitive environment there. The last six weeks has been a little bit harder bluntly to read because -- both because we don't actually have the April data yet for what happened through the whole month of April on the recruiting side when we look across the ecosystem.

On our side, there's been some slowdown because we've transitioned -- people frankly to some crisis management during that time when getting the health and safety of our employees and agents was a lot more important than getting the incremental recruit kind of thing. But we continue to do it and we continue to focus our managers on it.

And I just don't have enough data to give you like a different competitive environment yet for April. But we're still focused on it. But as we've all had there's been this kind of disruptive distraction during the time that has -- taken away a little bit from that, which is why in my script I talked -- to be truthful I loved our Q1 momentum.

If you think about -- we made more money in 2020 in Q1 than we did in 2018 even with all the disruption and pressures between now and then. Love the momentum, but COVID, kind of, is -- kind of eclipsed that. I think we can get it back obviously. I believe that. But that's I think telling you more about COVID is the important thing right now.

We have kept going on other things though also, they've driven growth like on the franchise side. We did -- we've now got multiple, kind of, corporate companies out there that are building that franchise brand. All of that happened in Q1. So we're still focused on that kind of stuff.

Too early to say about April and obviously, a big curveball we all got. But we like the Q1 momentum and hope we can continue it in the competitive recruiting retention question that you asked..

Got it. Thanks for all the details..

Your next question is from the line of Ryan McKeveny with Zelman & Associates..

Hi. Thank you so much. And like everyone, I hope you guys are continuing to do well and thank you so much for all the detail. I think the commentary on April the closings and particularly, the new contracts was very helpful and it actually aligns really closely with a lot of the survey work we've done lately.

So all things considered in this period definitely good to see the less negative trends flowing in your business as well. So a question on kind of the franchisee and agent side of things. So a month ago, you've put out some of the efforts you're doing to help franchisees from a cash flow and financial perspective.

I guess, first question is just how was the reception to that been? And generally speaking how are you feeling about the franchise base kind of fighting through and making it through this period? And then on the agent side of things, I think, the number you cited in the release was 4% growth at brokerage, which is very solid.

What are you seeing even past the quarter if you can say into April is the dynamic around agent count changing? How are those agents kind of staying involved in this work-from-home environment? Are you seeing any movements even since quarter end?.

Yes. So let me start with your second question. Like my earlier answer, I don't have all the data on April from kind of any, sort of, an industry standpoint.

Again, for us we saw a little less momentum in April in part because of how focused we were on both pivoting to a virtual environment the health and safety stuff and just supporting agents doing transactions more virtually.

So maybe a little less time for recruiting, but I think we're kind of getting back to that as we get to this semi new normal that maybe we're in right now. But we -- it's a huge focus for us and it's going to remain a focus for us.

On the franchisee side, we think we're entering the crisis with a bit of a healthier franchise system than in the last crisis, frankly. And we've been really pleased with what we've seen from our franchisees in the last month. It's an important topic. We got to watch it closely and work with them. But we were proactive trying to provide some relief.

I think that was well-received. The franchise consolidation we've been telling you about for the last few years where a bunch of our stronger franchisees have been absorbing the weaker ones I think helps with the health of the ecosystem there.

And then we have great franchisees, and I think all of them learned the lesson from the 2008 downturn and they have been very proactive in the last six weeks around their cost base. I've seen it firsthand talking to them. And I think that's a good thing.

And then finally and shouldn't underestimate this the unprecedented levels of fiscal and government assistance available here is a real thing and it's available for both franchisees and agents, right? And I don't think you can overestimate how helpful that is at this time.

And we've been excited about our franchisees engagement to take advantage of those programs. As part of our value proposition we've actually been running in webinars for both – for franchisees around taking advantage of the CARES Act PPP program and EIDL.

And we're really excited by – we have literally thousands of franchisees joining those kind of webinars to listen to what us and some of our experts from outside our company had to say on those. And then we've also been trying to do the same on agents.

We went out and partnered with a small business-focused lender who was willing to do kind of a dedicated process and landing page for real estate agents as independent contractors to help them apply for some of this government assistance, if appropriate, which is a pretty specialized category with a lot of complexity but they were great kind of helping agents work through that stuff.

So look, it's a crazy time for I think all companies. But I think our franchisees system is healthier than it was going into the last crisis for the reasons I just said. I like the proactive actions they're doing and we're going to continue to do what we can, obviously to help them and support them through this crisis..

That's very helpful. Thank you, Ryan. And one other question.

So some of the strategic initiatives that you've put out there, over the last year or two, whether it's social ad engine with Facebook or RealVitalize, RealSure, TurnKey, can you just give us an update on kind of where each of these programs sit, as far as kind of being active versus maybe being paused? And then especially on the kind of online side, whether through the Facebook partnership or TurnKey, et cetera, are you seeing this period of stay-at-home flow through into more engagement from agents with those programs, more engagements from consumers towards those programs? Any update there would be helpful.

Thank you..

Sure. Yes. Let me just kind of give you a laundry list here and try to hit a bunch of them. So we've actually on some of the things you talked about been pushing faster.

So social ad engine with Facebook, for example, we did an earlier release than we planned because of COVID to introduce some new capabilities to help agents even more with some of their online marketing. We're really excited about that. We went ahead and actually did do a soft launch of the AARP program.

We didn't spend the big – some of the big marketing dollars we were planning because of COVID but we went ahead into the soft launch and we've actually already closed some transactions from that less than about six weeks later. So we're really excited about that.

And Realogy Military Rewards continues to push forward with a lot of traction and that's doing really well. A couple of things that have changed. One is you mentioned, RealSure, which is kind of an eye-buying partnership we had with a slightly different model. We used Home Partners of America for the capital and the source of that.

We have paused that because it just didn't seem like the right thing for either of us when we kind of went into COVID here. And then the TurnKey program, the value proposition of the TurnKey program which we piloted with Amazon in 15 cities, the value proposition of that is all built around in-home services and in-home installation.

And so we together kind of made the joint decision that we were going to suspend that because we think helping people with smart home products get their own services that require people being in someone's home just doesn't work in a COVID kind of social-distancing world.

So we really like the TurnKey pilot program but we ran into this thing that really just cut the core proposition kind of off at the path. And we and Amazon, we had a decision point on the next phase of what we're going to do that was in April. And in a COVID world bluntly it didn't make much sense to continue that pilot.

So we're going to keep being creative on lead-generation opportunities like AARP, et cetera, but you're not going to hear that much of us about TurnKey given COVID because of the way it kind of eviscerated the value proposition that the thing was built on..

Got it. Thank you..

Your next question is from the line of Tom McJoynt with KBW..

Hey, good morning, guys. I just wanted to ask about the outlook for splits. Just given that the volumes are going to be coming down, pretty significantly year-over-year that should theoretically push – hits down a bit on the commission table.

So could you guys just kind of give us a way to think about that going forward?.

Yes. It's really too early to say. What I can tell you is in the first couple of weeks of living in COVID, it actually is the opposite because what's happening is a higher percentage of the transactions are coming from the agents that actually are higher up on the split table.

So it really comes down to two things, which agents are actually closing the transactions and in which geographies, because there's a mix piece to do with splits that way as well.

So because it's hard to say which geographies are going to come back sooner and how quickly, and how fast and how strong and which agents are going to be the ones doing the transactions, it would just be – it would be premature for us to give you any bit of an outlook on that..

Okay. No problem. And you also mentioned I think that $1 million listings or $1 million-plus listings are down sharper than the market.

Was that a temporary occurrence that you saw and that it's kind of normalized now, or is that still the case?.

Yes. Good question, Tom. So that's what we saw in April. So – and it's only with kind of new listings and new contracts.

If you think about the market dynamics I tried to give you – and look I try to give you guys a lot more detail about what we're actually seeing in a given month, which we usually wouldn't do both because our April data is still preliminary a little bit, but also because we usually just don't do that much on the month basis.

But we're in this crazy crisis and I think it's helpful for you to know, the $1 million houses that were under contract in March, they went ahead and closed in April. That happened. That's – there was no change there.

But when you look at the new inventory that came on to the market in late March and April and the houses that closed there were just fewer $1 million-plus ones. Doesn't mean they were zero but there were just less. And so – and by the way, inventory is pretty low going into this crisis.

You would be amazed at how quickly houses are selling right now even in the midst of this crisis because you do have serious buyers and serious sellers and you just have less inventory obviously with COVID. But the inventory that is out there definitely has less $1 million-plus.

And so when we see average home prices fall in April, it's a mix change as far as we can tell from this $1 million effect. It's not that every home is being sold for X percent less. It's that the mix of homes is sold in April just don't have as much at the high end as they do in most months.

And we can all get it to why there's fewer $1 million homes being put on as listings. But we're – we saw that dynamic in April and that's the that's what's happening..

Yes, that’s great. Thanks for clarifying that. That’s all for now. Thanks, guys..

Your final question is from the line of Jack Micenko with SIG..

Hi, good morning, everybody. Thanks for fitting me in. I wanted to come back to the splits question again and maybe in different way. The increase, it looks like it's stabilizing our market share. That's good. The split number was higher than we thought and higher than trend line.

Certainly better agents do more deals in tough times and they're better agents for a reason and so their splits are higher.

How much I guess of what we saw this quarter in the uptick above trends is competition versus that agent mix would you say?.

So, it's not really driven by competition. There's -- it's truly driven by the agent mix. That is the single biggest driver. There's always a piece of geography in there. There's a little bit of the loss of USAA.

So, there's some small little knits that will -- that are in the numbers that will plague us for the next couple of quarters as well, but the biggest single driver was actually the agent mix..

Okay. Okay. And then, really great April data, thank you for that. I think Ryan you talked about website traffic up, but I don't know if we've put any specific numbers around that. I think the debate in the market is obviously what -- how much of the demand is now deferred versus destroyed if you will.

Can you give us some numbers on what -- is the web traffic basically up enough to offset the decline in actual activity as people are kind of waiting around, keeping an eye on what's available, so that when the world opens up again they're back in it, or can you talk maybe about what the increase maybe in virtual touring has been in April and early May to kind of frame out the rest of that sort of view that maybe things aren't as bad as everybody had feared as a lot of these buyers are out there they're just delayed not lost?.

Yes. Look unlike a lot of stuff housing I don't think is a perishable good. So, obviously there's a real potential and there's a lot of pent-up demand. We have all kinds of different websites. The one at the top of my list here is the one number that I actually remember well enough that I'm willing to share with you.

One of our kind of premium brand kind of websites traffic is up like 35% right? And does that balance out the 20% to 25% down in April or 40% down in transaction open ones? I mean, you guys kind of can judge that.

Things like virtual tours and stuff, they've taken off dramatically, but that's more because in many geographies that's kind of the best way to see a house both from a safety standpoint and in some cases from kind of a local restriction standpoint.

Like remember real estate is actually classified almost everywhere as an essential service kind of on par with banking and we were excited to see that at the federal level and at most of the state levels. But we're -- we don't have our -- we're still being incredibly focused on the safety of our customers and agents and franchisees.

And so, all the virtual stuff is taking off dramatically. So, percentage changes in that really isn't that helpful here. Even the website thing I don't think is that helpful but since you asked, I figured I'd just share it with you. But anybody who's putting their house on the market more is out looking for a house right now is a very serious buyer.

It's probably the first thing you should know and that our agents and franchisees are telling us nobody is messing around. Nobody is just doing this for fun or whether -- cause they're interested in it.

If you bought -- if you're putting a house in the market or if you're out there actually wanting to buy a house you're very serious, we're seeing those transactions gets done at the volumes I told you about which again that are priced better than I might have thought going into this thing and then, we look at the website traffic and we look at some of the green shoots in geographies that have handled the crisis pretty well from the public health standpoint and you see the public articles too about it and we can all judge of how much of that is going to come back quickly versus long term.

But look, we're modeling both a kind of V-shape bounce back for housing, which is what the NARs and Fannie Maes are forecasting, I think Zillow's chief economist just came out and said the same kind of thing.

But we're also modeling longer scenarios and being proactive on our actions both to support transactions with agents and stuff, but also what we need to do to steer the company from a cost leverage et cetera standpoint to try to navigate this thing..

Yes. And just to sneak one more in and to follow up on that. There's been a lot made about listing cadence and listings coming off the market.

Compare -- I don't know maybe early May versus early March where are you on listings? And how -- I guess what are you hearing from the field around sort of the rebound of those listings being pulled? Are they temporary? And how does that look at -- as we look into inventory sort of into the summer?.

Yes. Look, listings are pretty close to the same ZIP code as the open transaction volume, I gave you in terms of what's been happening in listings. That said, again as I referenced, when you look at sub-geographies, you are starting to see listings growth come back stronger in some of the geographies that have handled the COVID crisis better.

There have been some public articles about green shoots in the Seattle's and San Francisco's of the world et cetera. And then there's a bunch of optimism obviously for people who do believe that it is -- that there's pent-up demand. And a lot of houses when they do come on the market in this time are moving incredibly quick.

Some of that was the low inventory coming in. Obviously, now even a lot less inventory and there's a lot of -- a lot of that is anecdotal still, but there's enthusiasm on that.

But if you're in the real estate business, you want to be enthusiastic about real estate, which is why we always just try to look at the data of what we actually know and can prove. And in this case on this call decided to share a lot more specifics of what we're seeing here..

All right. Thanks for taking my questions..

All right. Thank you everybody. Stay healthy. We'll close the call now..

This concludes today's conference call. Thank you for your participation. You may now disconnect..