S&P turns RE/MAX outlook to negative

S&P said it revised RE/MAX LLC’s outlook to negative from stable and affirmed its BB issuer rating.

“Existing home sales declined with rising mortgage rates in 2022, and we expect further declines in 2023 amid a high-interest rate environment. Home sale transactions and median home prices directly affect RE/MAX's broker fee revenue, which accounted for about 24% of 2022 revenue (excluding marketing funds fees). Housing affordability decreased significantly through the second half 2022 into early 2023. As 30-year fixed mortgage rates rose to the 6%-7% area, existing home sales plummeted, with volumes down over 30% from November 2022 to January 2023, according to data from the National Association of Realtors.

“We expect these factors will result in home sale declines of about 15% in 2023, with declines exceeding 20% through the first half of 2023 before improving in the second half of the year,” S&P said in a press release.

The agency warned it forecasts RE/MAX’s leverage will increase to the 3.6x-3.9x area in 2023 from 3.3x on Dec. 31, before returning to the mid-3.3x-3.5x area in 2024.

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