Despite months of economic chaos because of the coronavirus pandemic, Redfin announced Thursday that it saw revenue growth during the second quarter of the year — an outcome that ran completely counter to analyst expectations and offered a backdrop for the company’s bullish outlook on the current housing market.
Redfin CEO Glenn Kelman announced the earnings in a call with investors, saying the company brought in $214 million in revenue between April and June of this year. That represents an increase of 8 percent year-over-year. Kelman said on the call that the earnings were “better than we projected.”
Glenn Kelman | Photo credit: Redfin
He added in a statement that Redfin “blew away our second-quarter financial targets,” while noting accelerated consumer adoption of digital tools like online visits during the pandemic.
“Over the past two months, Redfin’s online visits and customer inquiries have been growing at a faster rate than at any point in the last three years,” Kelman added. “We’re inside a tornado, hiring agents, lenders and closing specialists at breakneck speed to keep up with demand, but also mindful that the bottom of the economy could fall out a second time.”
The earnings come as a surprise. Analysts had expected Redfin to report revenue of just $184.78 million, down 6.6 percent year over year. However, as John Campbell, a managing director of equity research for financial services firm Stephens, told Inman earlier this week, consensus estimates aren’t entirely reliable amid a pandemic.
In prior quarters, Redfin has consistently reported revenue over $200 million and surpassed analyst forecasts. The company’s strong earnings record continued through the first quarter of this year.
However, the significantly tempered expectations for the company this time around likely reflected concern about the pandemic, which has left millions unemployed and unable to make housing payments.
But instead of falling revenue, Redfin managed to continue its earnings winning streak Thursday.
The strong earnings are good news for Redfin investors, but the bigger news for everyone else is probably Kelman’s take on the housing market. While on the call, Kelman said customer inquiries to the company were up 40 percent year over year in June — something he called “crazy” — and noted that “Redfin.com’s traffic is accelerating.”
“In May and June, Redfin attracted for the first time more visitors than Trulia,” Kelman said.
The takeaway here is that Redfin itself is growing, but also according to Kelman that “consumers are now more serious about buying a home than before the pandemic.”
“We’ve never seen such a sharp increase in home buying intent,” he added.
These are notable statements given the events of the last several months. The pandemic has been a chaotic time for real estate generally, and Redfin specifically was forced in March to suspend its iBuying program and pull back on lead sales. In April, the company announced that it was furloughing 41 percent of its employees. Redfin also increased agents’ fixed pay and sold a $110 million stake to a venture capital firm in March.
However, more recently Redfin has been ramping back up along with the broader industry. Beginning in early May, the company began incrementally bringing back furloughed staffers. Redfin has also been resuming its iBuying program in various cities. The company’s stock, which bottomed out near $10 a share in March, has risen four-fold in the months since.
Chris Nielsen
During Thursday’s call, Redfin Chief Financial Officer Chris Nielsen said housing market conditions appear to have “normalized” following COVID-related disruption. He also said the company has seen “several months” of strong demand, suggesting the current strength of the market isn’t just a reaction to the pandemic lockdowns.
“I think we’re now getting more comfortable that there’s a lot of muscle underneath this,” he said of the housing market’s resilience.
Kelman admitted on the call that he can be a “nervous nelly” and that there are reasons to be cautious. Another wave of infections could create problems, for example, and Redfin reported its earnings the same day that the federal government revealed a record-breaking economic contraction. The end of mortgage forbearance programs is also something to keep an eye on, Kelman noted.
All of which means Redfin’s executive team is operating under the assumption that the “bottom could fall out of the economy again,” Kelman noted.
Additionally, Redfin specifically also saw a 0.1 percent decrease in market share compared to the second quarter of last year, and its staffing remains lower than pre-pandemic levels. And Kelman did say that going forward, “The issue is going to be inventory and bidding wars.”
Still, though, Kelman remained bullish about housing at this particular moment.
“Right now it could not be stronger,” he said later in the call. “Every single indicator at Redfin is bright green.”
That bullishness has already translated to ongoing hiring at the company. Kelman said Redfin should be fully staffed back to pre-pandemic levels in the fourth quarter of this year, and that the plan is to continue hiring even after that happens. Renewed expansion of Redfin Now will likely happen in 2021.
More broadly, Kelman also said builders are getting more comfortable moving forward with projects, buyers are spreading into smaller cities and towns thanks to work-from-home arrangements and homeownership rates have spiked.
“In general,” he added, “we’ve been excited about the fact that we have more demand that we can handle.”
Update: This post was updated after publication with additional information from Redfin’s call with investors.
Correction: This post originally misstated the change in Redfin’s market share.
