Online brokerage and portal Redfin raked in $471 million during the second quarter of 2021 — nearly doubling its production from the first three months of the year. Redfin’s revenues represent a 121 percent year over year increase from the previous year when the company, like much of the industry, was navigating the impact of coronavirus on real estate activity.
Redfin’s net losses ballooned on an annual basis from $6.6 million to $27.9 million, as the company’s stock-based compensation increased 90.2 percent year over year to $13.7 million. The RentPath acquisition and increased marketing costs also contributed to increased net losses, the company explained. On a quarterly basis, however, net losses are down from $36 million in Q1.
Glenn Kelman | Photo credit: Redfin
Redfin CEO Glenn Kelman said the company’s second-quarter performance was “better than projected in our last earnings call,” especially when it comes to market share growth.
“Even if the housing market grew by leaps and bounds since its near-death experience in the second quarter of 2020, Redfin’s share of that market also increased by a whopping 24 basis points, reaching 1.18 percent of all home sales based on the value of the home sold,” he said. “This is our largest market share gain since Redfin’s Initial Public Offering in 2017, and the fourth straight quarter of share gain acceleration.”
The CEO attributed Redfin’s market share and revenue gains to robust activity in Redfin Premier and RedfinNow markets.
“We took share where it mattered most: in markets where we offer Redfin Premier services, Redfin listings above a million dollars grew three times faster than listings below a million dollars,” Kelman said in a written statement before the call. “Despite increased pricing discipline and record gross margins, RedfinNow bought 40 percent more homes in the second quarter than we did in all of 2020; our properties revenue grew 139 percent.”
Since the February launch of Redfin Premier, the number of consultations for homes valued above $1 million increased a whopping 111 percent year over year, and as a result, the number of Redfin’s million-dollar listings increased from 5 percent in Q2 2020 to 13 percent in Q2 2021.
Alongside Redfin Premier, RedfinNow was a winner during the second quarter despite a decline in offer price due to seasonal trends and an expected cooling of home price appreciation during Q3 and Q4. “Even with more cautious offers, we bought nearly 40 percent more homes in the second quarter than we did in all of 2020, significantly exceeding our second-quarter target,” Kelman said during the call.
Even with the success of Redfin Premier and RedfinNow, Kelman said the brokerage is still struggling with agent attrition and having enough labor to complete renovations of Redfin-owned homes.
Overall agent attrition increased 6 percent quarter over quarter to 36 percent. Experienced agents’ (+2 years) attrition increased from 9 percent in Q1 2021 to 18 percent in Q2 2021. Meanwhile, new agent attrition declined quarter over quarter from 53 percent to 49 percent.
“A major cause of higher attrition in the first half of 2021 was fast hiring,” Kelman said. “New agents are already the group most likely to leave Redfin and we haven’t had such a high proportion of new agents in years.”
“Because we’ve been eager to return to market share growth, we probably also made more hiring mistakes,” he added. “Nearly half the people who left in the second quarter were people we wouldn’t choose to hire again.”
The CEO also said the uber-competitiveness of the market likely pushed new agents out of the industry as a whole, as there are currently more agents than listings. “With Realtors outnumbering listings, it has been hard for any buyer’s agent to put a deal together, and most new Redfin agents start out as buyer’s agents,” Kelman said.
Kelman has a bullish outlook on Redfin’s immediate and long-term future as he said the portal is “still growing faster than Zillow and Trulia,” despite two consecutive quarters of declining traffic, which he said is due to waning buyer demand in the face of bidding wars.
However, the CEO said the company’s $29 million investment in marketing and a coming launch of new, robust neighborhood data will place traffic back on firm footing. “Redfin has seceded some search share to realtor.com, a trend that seems likely to continue at least until year-end when Redfin calm will import more neighborhood data,” he explained.
Lastly, Redfin is banking on its investing in rental marketplace RentPath, which was caught in a battle between CoStar and the Federal Trade Commission earlier this year. With new CEO Jon Ziglar at the helm, the company is hitting fast-forward on its plans to integrate RentPath data into the Redfin portal. “There are bigger changes to come,” Kelman said.
The company ended the call with a bullish outlook on its Q3 and fiscal year 2021 results. Redfin expects its Q3 revenue to reach a maximum of $541 million, which represents a 128 percent increase from Q3 2020. The net losses are expected to keep dropping to between $24 and $20 million, with the investment in RentPath counting for $17 million of those losses.
Redfin (NYSE: RDFN) closed the day at $60.67; however, the after-hours price per share dropped to $59.00. The company’s market cap sits at $6.16 billion.
