Re/Max Execs Explain Low Guidance, Offer Housing Outlook

Re/Max Holdings Inc

CEO Dave Liniger and CFO Karri Callahan explained the company's lowered guidance in exclusive comment to Benzinga after the company beat Street expectations in a fourth-quarter report Thursday. The expected decrease in revenue is due to company's shift to entirely franchised brokerages, explained Callahan. Decreased costs from the brokerage sales bumped the company's fourth quarter, but cutting off corporate from the brokerages' sales will decrease revenue in the near term. Callahan explained that without the sale, revenue would have increased "five to six percent" in the first quarter. The company's fourth-quarter release expected four to five percent increase with the brokerages included. Liniger focused on concerns in the larger housing market, and said builders are holding up the pipeline of new homes. "A lack of inventory" is hurting the market "despite pent-up demand," Liniger said. He said during the housing crash, builders were stuck with excess inventory, and cut machine supply and labor to make up costs. That labor force has not yet returned, says Liniger. Some builders also hold out for high-price deals, given their high margins. "Some builders would rather build one 5 million dollar house" than a few sub-million homes, Liniger said. He said builders need stronger financing and to increase their labor pools. Liniger was not concerned about the effects of a potential March rate hike by the Fed. "Many people don't think this, but we are not interest-rate sensitive," Liniger said. "Jobs, the economy affect us more. A quarter point, half-point increase matters little to us." Liniger noted that in the 1982 market crash, Re/Max sold homes at 17 percent interest rates. Buyers assumed they could refinance. Investors were spooked by Re/Max's report Thursday, sending the stock crashing to a floor of $32.31 Friday morning. By Friday afternoon, the stock had recovered to $33.18, down 3 percent for the day.