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Redfin’s now-shuttered iBuying venture went on longer than it should have, according to Glenn Kelman.
The Redfin CEO told the Associated Press in a new interview that he wishes he had closed RedfinNow earlier than during the market correction currently taking place, calling the business model too risky and expensive.
“I probably should have closed the iBuying business earlier,” Kelman said. “It shouldn’t have taken a housing market correction to realize how capital-intensive and risky that was.”
Redfin shuttered RedfinNow in early November and announced a round of layoffs, eliminating 13 percent of its workforce in total. Kelman told the AP his workforce is 30 percent smaller than it was a year ago before it embarked upon multiple rounds of layoffs.
The layoffs came as a result of the dramatic market correction currently playing out in the United States housing market. After hitting a fever pitch during 2021 and 2022 the market is currently seeing a lack of demand due to high mortgage rates, which currently sit at 6.33 percent for a 30-year mortgage, according to Freddie Mac.
Kelman said he feels Redfin has made enough changes to its business to weather the downturn — such as reducing staff, shutting down its lending business and buying a more profitable lender — but didn’t rule out making further cost-cutting moves.
“I think we’ve made enough changes. You can never guarantee that you’re not going to manage performance with one employee or another, or that there won’t be some kind of tactical maneuver to limit costs,” he said. “We hope that we’ve made the changes that we need to make to adapt to this environment. I’ve now been in this seat 18 years, I think. I’ve seen it all. [The financial crisis in] 2008 was nasty, and it just makes me feel better prepared for 2023.”
Kelman says he’s confident, however, that 2023 will be nowhere near as bad as 2008 when 30 percent of homes were underwater and prices plummeted.
“The price declines that people are worried could be catastrophic are just unlikely to happen,” he said. “So, yes, prices are coming down. But in 2008, 30% of homes were underwater. At the end of 2022, it was less than 2%. And even if prices fall another 5%, the number of homes underwater would be 2.2%.
“So there isn’t going to be anything forcing price discovery among individual homeowners. And that’s what usually leads to a faster, actually healthier correction.”
