Redfin’s Glenn Kelman
Days after Zillow took a beating for lowering its 2018 revenue projection, Redfin scaled back its own third-quarter forecast, citing “volatility” and a “significant slowdown” in recent weeks.
The warning came despite growth in Redfin’s second-quarter revenue, which rose 36 percent year-over-year to $142.6 million. Redfin’s net income for the quarter was $3.2 million, compared to $4.3 million during the second quarter of 2017.
But CEO Glenn Kelman cautioned investors that the market was likely to weaken in August and September. Redfin data show that in July, the percentage of homes that sold above the asking price declined year over year for the first time since March 2015. “We’re hearing things from our real estate agents that we haven’t heard in 3 years about homebuyers stepping back from high prices,” Kelman said during an earnings call on Thursday.
The Seattle-based tech brokerage — which went public last summer — still expects to lose money in 2018, and net income during the second quarter didn’t improve because the company’s operating expenses rose 31 percent, the company reported.
Despite headwinds in the market, Redfin said it still plans to expand Redfin Now — the company’s home-flipping venture — which generated $9 million during the second quarter, compared to $2 million during 2017’s second quarter.
Last month, Redfin raised $247 million last month to expand Redfin Now.
Kelman said even in a crowded iBuyer field — including Opendoor and Zillow — Redfin’s competitive edge is in its online audience and operational experience.
Earlier this week, Zillow lowered its 2018 revenue guidance, causing its stock to plummet 15 percent. Analysts expressed reservations about Zillow Offers (though which Zillow buys, renovates and re-sells homes).
During Thursday’s earnings call, Kelman said Redfin Now hasn’t competed directly with Zillow Offers because they operate in different cities. But he expects to see a “price war” when and if the two rivals go head to head.
But don’t expect Redfin to whip out its checkbook for the sake of beating Zillow. “Rather than take more risk on a property, and offer a price that we’re not sure we can beat when we flip the home,” Kelman said, “We would just have to step back and let someone else have that sale and take that risk. That’s the disciplined we want to have.”
During the second quarter, Redfin spent $12.3 million on advertising, up 53 percent year over year, in an attempt to build brand awareness — not just get more eyeballs to Redfin.com. “Most Americans still think Redfin is a website,” Kelman said. “That drives me crazy, because I want them to now that they could save 10,000 bucks selling a house through us, get better service and get a higher price to the home.”
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