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On Tuesday, D A Davidson provided an update on the online real estate sector, noting a year-over-year growth in total agent count for the first time in five quarters. The firm maintains a neutral stance on the U.S. brokerage space but indicates a potential shift in sentiment towards digital and cloud-based real estate companies if U.S. mortgage rates show sustained stability or decline. According to InvestingPro data, digital real estate player Fathom Holdings (FTHM) appears undervalued despite showing a strong 12% return over the past week.
The small but positive change in agent count was observed in the fourth quarter, with an increase of 0.6% year-over-year, adding 3,887 net new agents, bringing the total to 615,000. This growth is expected to continue modestly into the first quarter of 2025, supported by an easier year-over-year comparison and a dip in mortgage rates at the beginning of the year. Analysts anticipate significant revenue growth of 27% for companies like FTHM in the current fiscal year, though the sector remains highly volatile with a beta of 1.96.
The commentary from D A Davidson suggests that the brokerage industry is experiencing a slight recovery in terms of agent numbers, which could be a positive indicator for the sector’s health. The firm’s outlook for the first quarter of 2025 is cautiously optimistic, with expectations of continued agent growth. InvestingPro analysis reveals that companies in this space face challenges, with FTHM maintaining a Fair financial health score and relatively weak gross profit margins of 8.4%. Get access to 16 additional ProTips and comprehensive analysis through InvestingPro’s detailed research reports.
The analyst’s remarks underscore the importance of mortgage rates in the real estate market, implying that digital and cloud-based real estate players could benefit from favorable mortgage conditions. The overall neutral view on the brokerage space reflects a cautious approach, with a readiness to reevaluate should market conditions change. For deeper insights into the real estate sector’s valuation metrics and comprehensive financial analysis, explore the full range of tools available on InvestingPro.
The update from D A Davidson highlights key metrics that are watched by industry observers and participants, such as agent count and mortgage rates, which can influence the performance of real estate brokerages, especially those operating in the digital space. The firm’s insights provide a snapshot of the current state of the online real estate sector and its potential trajectory.
In other recent news, Fathom Holdings reported its financial results for the fourth quarter of 2024, revealing a wider-than-expected loss per share but a notable revenue beat. The company’s earnings per share (EPS) came in at -$0.29, missing the anticipated -$0.14, while revenue reached $91.7 million, surpassing forecasts of $81.99 million. This represents a 24% year-over-year increase, driven by an expansion in real estate transactions and agent network growth. Despite the earnings miss, Fathom Holdings demonstrated strong operational performance, with gross profit rising 25% year-over-year to $6.7 million. The company maintained an adjusted EBITDA loss of $2.9 million, unchanged from the previous year. Fathom Holdings is optimistic about achieving EBITDA profitability by the second quarter of 2025 and plans to focus on revenue growth through acquisitions and ancillary services. Agent count increased by 21% to 14,300 licenses, indicating ongoing recruitment efforts. The company also emphasized its strategic initiatives to enhance mortgage and title service adoption, which are expected to positively impact future earnings.
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