Redfin CEO Glenn Kelman said Tuesday on the company’s second-quarter 2024 earnings call that he expects business to improve when the housing market speeds up after mortgage rates come down.
But what is the alternative if rates don’t come down?
“Great question — Plan B is drink our own urine or our competitors’ blood,” Kelman said in response to an analyst’s question during the call.
Kelman’s cheeky zingers aside, Redfin is in the same position as a lot of brokerages that are struggling with fewer transactions and a frozen market. And there’s justifiable concern as the market has yet to respond to the recent decline in rates.
“It’s been Twilight Zone, man,” Kelman said. “I can’t remember a time when rates came down this far, this fast, and the market has been so muted in its response. I think some of it might just be that it came too late in the homebuying season. If that had happened in April, May, June, when people were raring and ready to go, maybe [homebuyers] would have had a different reaction.”
Redfin’s Q2 2024 numbers were mixed. Revenue was up 7% year over year to $295.2 million, while gross profit rose 9% year over year to $109.6 million. But the company posted a net loss of $27.9 million, up slightly from $27.4 million a year ago.
Kelman addressed the impact of the settlement that the National Association of Realtors (NAR) agreed to regarding buyer agent commissions. While Compass CEO Robert Reffkin said last week on his firm’s earnings call that commission rates haven’t changed, Kelman said that in markets that adopted new business practice changes ahead of the Aug. 17 deadline, Redfin agent commissions there sank to the lower end of a typical range.
Redfin said that its recruiting of new agents has picked up in markets where it has implemented the Redfin Next payment plan, which gives agents a more traditional 70% commission split on top of the salary and benefits the company offers.
Redfin Next launched in October 2023 in San Francisco and Los Angeles, and more than 200 top-producing agents have reportedly joined the brokerage since then. The program is expanding to 25 new markets beginning on Aug. 11, bringing it to markets that account for 74% of the brokerage’s revenue.
The new markets are Austin; Boise, Idaho; coastal North Carolina; Columbus, Ohio; Denver; Fort Myers, Florida; Grand Rapids, Michigan; Indianapolis; Inland Empire, California; Kansas City, Missouri; Memphis, Tennessee; Minneapolis; Nashville; New Mexico; Palm Springs, California; Portland, Oregon; Raleigh; Sacramento; Salt Lake City; San Antonio; Seattle; Spokane, Washington; St. Louis; and Virginia.
Kelman said that adding agents now will get them seasoned for the upcoming fall homebuying season, provided of course that Redfin doesn’t have to resort to Plan B.
“We’ll drink our urine before the blood,” he said. “Actually, I wish I just hadn’t said that. I’m a lover, not a fighter.”