Riding a wave of recent real estate activity across America, Redfin revealed Thursday that it had raked in $237 million in revenue during the third quarter of this year — more than analysts had expected and further evidence that the coronavirus pandemic hasn’t quashed the housing market.
Redfin’s revenue for the quarter represents a drop of 1 percent compared to one year ago. While that means the company failed to hit the personal records set by peers such as Realogy, it also bested expectations from analysts that revenue would actually decline by 5 percent year over year to $226.32 million.
So why does that matter?
Because it means that, overall, Redfin had another better-than-expected quarter. And along with reports from other major real estate companies, that paints a fairly rosy picture of the housing market at a time when many other industries are struggling.
During a call with investors Thursday afternoon, Redfin CEO Glenn Kelman further explained that the small drop in revenue was actually “due to a pandemic-driven shortfall in the number of homes we can sell.” And in the company’s “core business of brokering home sales,” Kelman said revenues actually “increased 36 percent compared to the same quarter last year.”
Kelman added during the call that the company has seen a “strong boom” in demand.
“Keeping pace with demand is Redfin’s no. 1 challenge,” he explained.
Redfin’s report Thursday further noted that the company managed to increase its market share during the third quarter of the year, gobbling up “1.04 percent of U.S. existing home sales by value.” That represents an increase of .08 percentage points compared to last year at this time.
It was little surprise, then, that Kelman was generally upbeat.
“Redfin’s increasing share of North America’s online real estate audience, coupled with a strong housing market, has generated demand faster than we can recruit agents, lenders and partners,” he said in the report.
Kelman also said Thursday that he expects demand for housing to stay strong in the near future.
“What’s most likely is the housing market stays strong heading into 2021,” he noted.
Redfin is a perennial earnings-season star. In July, for example, the company revealed in an earnings report that it had blown “away our second-quarter financial targets” and unexpectedly posted 8 percent year-over-year revenue growth.
Those earnings were particularly important at the time because they represented the period spanning from April to June — or the height of the coronavirus pandemic‘s first wave. The takeaway, then, was that Redfin’s earnings (along with those of other companies) hinted at how the real estate industry was actually faring better through the crisis than other sectors of the economy.
Redfin’s earnings — and those of other companies — made a similar point Thursday.
In addition to stronger-than-expected revenue, Redfin also revealed in its report that it has seen surging demand for its mortgage products, with that part of the business generating its first quarterly gross profits ever.
Kelman added that demand for Redfin mortgage products has been so significant that the company “has struggled to staff our back office.” He also believes the company can continue to quickly grow its mortgage business for years to come.
The mortgage industry has been another standout during the pandemic, with record low rates pushing multitudes of Americans into the market for new loans. The fact that Redfin is benefiting from this surge in demand suggests that big disruptive companies that were already building end-to-end platforms may ultimately emerge from the current crisis stronger.
Thursday’s earnings report additionally comes about a week after a group of fair housing advocates filed a racial discrimination lawsuit against Redfin. The suit accuses Redfin of pricing and service policies that favor predominantly white neighborhoods.
Kelman — who has been an outspoken advocate for fair housing over the years — has indicated Redfin chooses where to operate based on the locations in which it believes it can make enough money to pay its agents. But a number of other industry members nevertheless criticized Redfin for not doing better.
During Thursday’s earnings call, Kelman did not mention the lawsuit or any of its allegations. However, he did tout Redfin’s efforts to diversify its workforce and board of directors.
Updated: This post was updated after publication with additional information from Redfin’s earning call.