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(Redfin Image)
It’s not often that the phrases “urine” and “blood” make it on to a public company’s earnings call with analysts. But that’s what you get with Glenn Kelman.
The longtime Redfin CEO, known for his colorful housing market commentary on earnings calls, was at it again on Tuesday after the Seattle company reported its second quarter financial results.
Redfin’s revenue came in at $295.2 million, up 7% year-over-year, while net losses were $27.9 million, slightly higher than the year-ago period. The results beat estimates, but Redfin stock was down more than 4% in after-hours trading.
Mortgage rates were a hot topic on the call with analysts, particularly given that they hit a 15-month low this week.
But even with rates finally dropping, home sales haven’t budged much. And that’s quite perplexing to Kelman.
“It’s been Twilight Zone,” he said on the call, responding to a question about housing market outlook for the third quarter. “I can’t remember a time when rates came down this far, this fast, and the market has been so muted in its response.”
Pending home sales are down 5.7% year-over-year, the biggest decline in nine months, according to Redfin data. Mortgage purchase applications are down 14%. Inventory is still 30% below pre-pandemic levels, and affordability is near a 40-year low.
Redfin CEO Glenn Kelman. (Redfin Photo)
Redfin’s monthly average visitors and real estate services transactions — which contributes to the bulk of its revenue — were down slightly in the second quarter compared to the year-ago period.
In its market report last week, Redfin pointed to home prices that are still high, wariness over political uncertainty, and a lack of desirable listings as potential reasons for the lack of market activity.
Kelman said the company’s rental segment — which drew $50.9 million in revenue in Q2, up 12% — is helping reduce Redfin’s dependence on the for-sale market.
Asked about Redfin’s plans for a scenario in which mortgage rates don’t keep falling — many predict that they will — Kelman responded with some descriptive language.
“Great question,” he said. “Plan B is to drink our own urine and our competitor’s blood. Stay in the foxhole.”
But perhaps his company can avoid such drastic measures if mortgage rates keep dropping. “We expect rates will stay low through the winter and into next spring, which should lead to a much stronger housing market in 2025,” Kelman said on the call.
There are other macroeconomic forces at play that could impact the market this year, including the upcoming changes from the National Association of Realtors settlement that go into effect later this years, as well as fears of a U.S. recession.
In 2022, responding to a housing market slowdown, Redfin laid off staff and ditched its iBuying program. It also laid off 4% of its workforce in April 2023. Later that year it debuted a new pay model for its agents and has been expanding “Redfin Next” this year.
The housing market appeared to bounce back late last year but high mortgage rates continued to keep buyers on the sidelines.
In his prepared remarks, Kelman noted that Redfin is using artificial intelligence to determine which photo of an apartment to show users first, and to let homeowners imagine how to redecorate their home, for example. The company is also developing a new self-service tool to let rental owners post property listings on Redfin.com, which will expand to the entire U.S. in September.
Earlier this year the company rolled out an AI assistant tool that answers homebuyer questions.
