Redfin CEO Discusses Market Challenges and Future Outlook
During Redfin’s second-quarter 2024 earnings call, CEO Glenn Kelman shared his perspective on the housing market and the company’s performance. Kelman expressed optimism that business could improve once mortgage rates decrease and the housing market picks up speed.
However, Kelman also acknowledged the current difficulties facing the company if mortgage rates do not decline as hoped. In response to an analyst’s question, he humorously remarked, “If rates don’t come down, we’ll have to find alternative strategies.” Despite his lighthearted comment, Kelman’s remarks highlight the significant challenges Redfin and other brokerages are facing amid a slowdown in transactions and market activity.
Kelman described the current market conditions as “unusual,” noting, “It’s been like the Twilight Zone. I don’t remember a time when rates fell this quickly, yet the market response has been so subdued.” He suggested that the timing of the rate drop might have affected its impact, as it occurred late in the homebuying season.
Redfin’s financial performance for Q2 2024 showed mixed results. Revenue increased by 7% year-over-year to $295.2 million, and gross profit rose 9% to $109.6 million. However, the company reported a net loss of $27.9 million, slightly higher than the $27.4 million loss from the previous year.
Kelman also addressed the recent settlement by the National Association of Realtors (NAR) regarding buyer agent commissions. While Compass CEO Robert Reffkin indicated that commission rates have remained stable, Kelman noted that in markets where new practices were adopted before the August 17 deadline, Redfin’s agent commissions had dropped to the lower end of the typical range.
Redfin reported an increase in recruiting efforts following the introduction of its Redfin Next payment plan in October 2023. This plan offers agents a 70% commission split in addition to a salary and benefits, and has led to the recruitment of over 200 top-producing agents. The program will expand to 25 new markets starting August 11, covering areas that account for 74% of Redfin’s revenue.
Kelman emphasized that recruiting new agents now will prepare them for the upcoming fall homebuying season, though he humorously reiterated his preference for more positive outcomes rather than resorting to alternative, less favorable strategies.
