Residential real estate services provider Realogy (NYSE:RLGY) appears well-positioned to capture a significant share of the resurgent U.S. home market.
This Parsippany, NJ-based residential real estate services provider operates a synergistic business model that should help keep it humming and competitors at bay.
Its NRT segment operating company-owned brokerages and world-class real estate franchises (Century 21, Coldwell Banker, and Sotheby's International) is the largest U.S. residential brokerage. This unit operates with Realogy's three other segments, which are in real estate franchise services, relocation services, and title and settlement services.
Robust market presence
In 2012, the company accounted for 26% of total broker-assisted transactions in the U.S., resulting in a sales volume three times that of its nearest domestic brokerage competitor. Realogy is able to corner this large market through its worldwide network of agents totaling 239,000 (as of last year), a headcount two-and-a-half times that of a major competitor, Re/Max Holdings.Realogy also has a significant international presence, which should enable it to capture foreign buyers, a continuing source of strength for the U.S. home market.
Company productivity is also driven by the websites of Realogy's major brands, which have two-way linkages with Internet-based home search engines Realtor.com, Trulia (UNKNOWN:TRLA.DL), and Zillow (NASDAQ:ZG). Its efficient online listing distribution and lead generation setup enables Realogy to have a firm handle on home buyers -- 90% of who use the Internet to search for information on available properties.
A clout from personal relationship building
The current tight home inventory, estimated at a 4.9-month supply, creates another source of strength for Realogy. With low availability of homes for sale, the residential real estate business has shifted to a seller's market. And some skeptics think this situation has made Internet-focused marketing, like Trulia and Zillow, less effective.
What carries more weight in a seller's market is the role of personal relationships in marketing strategies, an advantage that Realogy very much enjoys. The company's NRT segment has 712 offices and 41,300 agents in 35 key U.S. home markets, a commanding presence that should put Realogy ahead of competition, either online or on the field.
Market outlook remains rosy
Also building tailwinds for Realogy's business are recent indicators that the home market recovery is gaining traction. One example is the sustained rise in home prices, which is bailing out a growing number of underwater homeowners. This trend increases the possibility of previously underwater homeowners able to unlock their equity and reenter the market as move-up home buyers.
Another indicator is the recent decision of the Federal Reserve to keep its bond-buying stimulus. The Fed's move should help stem the rise in mortgage interest rates that stands as a disincentive, primarily among first-time home buyers.
Realogy has its bases well covered. Besides its strong online presence, the company has a sprawling physical network whose harmonious operations look quite capable of achieving the company's 17% to 19% year-over-year increase in home sale transaction volume for the third quarter.
Considering the sound fundamentals of the home market, buy-and-hold investors may find Realogy's upside potential appealing.
Arturo Cuevas has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.