A press release (http://dtn.fm/eWZO4) issued yesterday by the Commerce Department reported that ‘sales of new single-family houses in April 2016 were at a seasonally adjusted annual rate of 619,000’. The estimates, prepared jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, indicated that construction of new homes in the U.S. in April 2016 rose almost 17 percent above the March 2016 figure of 531,000, and about 23 percent above the April 2015 number of 500,000. This is good news for eXp World Holdings, Inc. (OTCQB: EXPI) and the over 1,100 agents and brokers who use its avant-garde cloud brokerage.
According to a Trading Economics analysis (http://dtn.fm/9w6EB), this ‘is the highest reading since January of 2008 and the biggest gain since 1992. New home sales in the United States averaged 652,450 from 1963 until 2016, reaching an all time high of 1,389,000 in July of 2005 and a record low of 270,000 in February of 2011.’
‘The median sales price of new houses sold in April 2016 was $321,100’ up by almost 10 percent from a year ago, meaning that half of the newly constructed homes sold in April 2016 had a price tag of over $321,100. The arithmetic average sales price was higher, at $379,800. According to numbers released by the National Association of Home Builders (http://dtn.fm/fOB2E), the 619,000 annual rate of new homes sold in April 2016 comprised 10 percent of the 6,069,000 annual rate of all home sales. The annual rate of existing homes sold in April 2016 was 5,450,000.
These numbers bode well for eXp World Holdings and its wholly-owned eXp Realty subsidiary. A recent research report on eXp World Holdings (http://dtn.fm/O1sMz), issued by Fundamental Research, stated that ‘the U.S. real estate brokerage industry is approximately $62 billion per year… based on the assumption that approximately 90% of the 5.25 million homes are sold through agents at an average price of $0.22 million per house, based on an average commission rate of 6%’. The Commerce Department’s April numbers would raise Fundamental Research’s estimates by about 15 percent.
eXp World Holdings is set to benefit from this resurgence in the residential housing market in two ways. First, its Agent-Owned Cloud Brokerage is attracting realtors in increasing numbers. In March 2016, the number of member agents grew by over 10 percent to more than 1,100, the fastest rate ever, according to CEO Glen Sanford in a MissionIR interview (http://dtn.fm/1wfRf). In 2015, eXp realtors put through 3,667 transactions with a value of $889 million. The company expects that figure to reach $1.5 billion this year. Revenues in 2015 were $22.87 million with gross profit of $3.41 million. As Fundamental Research point out, ‘the company can generate approximately 3% of total transactions in revenues, implying $45 million in revenues from $1.5 billion in transactions a year. Gross margin is estimated to be approximately 15%, implying gross profit of $6.75 million’.
Second, eXp World Holdings owns 90.5 percent of First Cloud Mortgage, Inc., which was set up in July 2015 to originate and provide loan products and services to potential homeowners. First Cloud will act as a mortgage broker, so no proprietary funds of eXp or its subsidiaries will be required. As of March 2016, First Cloud Mortgage was licensed to do business in Arizona, California, New Mexico and Texas. It has pending applications in Georgia and Virginia. It is expected that First Cloud Mortgage will broker between $50 million and $75 million in loans over the next 12 months and over $100 million in 2017. Gross profit should fall between 1.5% and 3.0% of transactions.
For more information, visit the company’s website at http://investors.exprealty.com
