Redfin reports 8% revenue growth, says housing market is booming

In April, Redfin furloughed 41% of its real estate agents. Now, it has hired back as many as will return, and is looking to onboard even more.

"It has been a wild year," Glenn Kelman, its chief executive, said during an earnings call. "We responded quickly to the downturn. Now we're scrambling to capture demand, blowing out our projections from just a few months ago. We're running naked through the jungle with a Bowie knife clutched between our teeth, which is the way Redfin was born to be."

Revenues in the second quarter were up 8% from the year before as homebuying picked up and the company's mortgage lending business boomed. The company continues to lose money, but at a slower rate. It posted a net loss of $6.6 million for the quarter, compared to a $12.6 million loss in the year-earlier period.

Demand to buy and list homes has risen so much, and more of the customer prospects are serious about buying a home, that real estate agents, who are salaried at Redfin, have increased their efficiency, bringing down the cost of revenue.

"I wish we could take more credit for it," Kelman said. "Demand went up, customer loads increased as a result and customer intent has been higher. When you meet people, they are deadly serious about buying a house. People who used to walk into houses just because they were cool; they don't want to mask up to do that."

Redfin's revenue per loan has also increased as interest rates fell and demand for loans rose sharply as a result. Redfin's lending business, like many across the country, raised rates in order to limit the volume of mortgage loan applications coming in to a flow that was manageable by its loan officers.

And Redfin's iBuying service, RedfinNow, which makes instant online offers on homes, has also seen margins improve during the pandemic. When the economy began the freeze in March, many iBuyers stopped buying homes, unsure of what the housing market would do and whether it could accurately predict how much the homes it bought would sell for.

But during the second quarter, RedfinNow was able to sell the homes it purchased before the pandemic at higher prices than the company had expected, and was able to buy new homes for lower prices than expected, because certain homeowners who wanted to sell during the pandemic were willing to take lower offers in exchange for the certainty that strangers would not enter their home, Kelman said.

Much of the reason the housing market has stayed strong, he said, was because of the federal government's response to the faltering economy. By giving homeowners with government-backed mortgages the option to pause or reduce their mortgage payments, the government prevented widespread distressed home sales from occurring by people who had lost their jobs. While the share of mortgage holders taking advantage of forbearance options has decreased, it still remains around 7.74%, according to the Mortgage Bankers Association.

Because of the federal forbearance policy, Kelman does not expect distressed sales to occur until the spring of 2021.

In the face of the faltering economy, "the strength of the housing market almost feels eerie," he said.