Redfin CEO says strength of housing market ‘almost feels eerie’ amid economic and health crisis

Redfin CEO Glenn Kelman at the 2018 GeekWire Summit. (GeekWire Photo / Dan DeLong)

It’s been a crazy year for Redfin, to say the least.

The Seattle real estate company laid off 7% of its staff and furloughed hundreds of agents in April as the COVID-19 outbreak began spreading. But now it is bringing back workers and “scrambling to capture demand” for its online brokerage services as the U.S. housing market rebounds, said CEO Glenn Kelman.

“We’re running naked through the jungle with a Bowie knife clenched between our teeth, which is the way Redfin was born to be,” Kelman told analysts Thursday following the company’s second quarter earnings report.

Redfin topped Wall Street estimates for the quarter, reporting $214 million in revenue, up 8%, and a net loss per share of $0.08. Its stock is trading at an all-time high after nose-diving earlier this year.

The company published a report last week showing a “strong” U.S. housing market, with listing prices up 13% and closed sale prices up 6% during the four-week period ending July 12. Total number of homes for sale was down 28%, “further exacerbating the imbalance between supply and demand,” Redfin noted.

In just the second quarter alone, demand went from being down 41% to up 40% year-over-year — “a level of volatility that I have never seen in nearly 30 years of business,” Kelman said. Redfin’s online traffic and customer inquiries have been increasing at a faster rate than at any point in the last three years.

“The housing market may be volatile, but for now it would be hard to overstate how strong it is,” Kelman said.

Redfin is riding a trend of increased home ownership. The U.S. Census reported this week that home ownership rates increased year-over-year from 64% to 68%, the highest level since 2008 and one of the largest increases in history.

“Low mortgage rates, a flight to affordability, more interest in the home generally, and more interest in vacation homes are all driving demand,” Kelman noted on the call.

But the fact that the housing market is humming along amid a pandemic is not lost on Kelman.

“Against the backdrop of double-digit unemployment, a second surge of coronavirus infection, and widespread protest, the strength of the housing market almost feels eerie,” Kelman said.

Kelman, a self-described “nervous Nellie,” said he’s mindful that “the bottom of the economy could fall out a second time.” But for now, all signs point to near-term growth for Redfin.

(GeekWire Photo / Nat Levy)

The company’s monthly average visitors increased 31% year-over-year in June. For the first time it passed one of its rivals, Trulia, in total visitors in May and June.

Redfin is investing in tech-enabled tools that aid the remote homebuying process, such as virtual tours, video appointments with agents, and more to help adjust for social distancing mandates. It also expanded its Direct Access program that lets buyers self-tour vacant homes listed by Redfin agents.

The company said that nearly half of recently-surveyed homebuyers made a bid on a home without first seeing it in person, up from 28% in 2019.

“Being able to tell everyone that we can take you through the whole transaction without having to meet you is a comfort to many customers,” Kelman said.

Another trend Redfin is watching closely is a shift toward smaller cities as a result of the pandemic and a surge in remote work, which Kelman said previously would drive people to leave expensive tech hubs such as Seattle and San Francisco and look at smaller and mid-sized markets.

“It would be hard to say that this is anything but a boon to Redfin,” Kelman said Thursday.

Redfin plans to hire more aggressively in smaller markets where it is seeing more buyer activity, including cities such as Phoenix, Sacramento, Las Vegas, and Detroit. But it will continue serving customers in big metro areas as well.

“We’re omnivorous,” Kelman said. “We’re going to try to take share on the big markets and in the small markets. We’re hiring everywhere. It’s like those bears you see in Yellowstone Park. They eat the garbage, the blueberries, they eat everything.”

Redfin also continues building out its RedfinNow home-buying business that resumed last month after a pause due to the pandemic. RedfinNow brought in $72.1 million in revenue last quarter, up 81%, with a loss of $1.1 million. It is available in 10 of the company’s 97 markets.

“We remain committed to it as one part of a larger solution,” said Kelman, who joined Redfin in 2005 and helped take the company public in 2017.

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