Redfin is continuing to experiment with new ways to get sellers to list homes on its site, and the tech-powered real estate brokerage claims those efforts are paying off.
In the fourth quarter, Redfin reported losses of $0.44 per share on $79.09 million, up 33 percent from last year. Redfin matched analyst expectations for earnings and outperformed revenue projections. Reversing a trend of previous quarters, Redfin’s losses actually increased to $36.4 million, compared to $28.1 million in the first quarter of 2017.
On a call with analysts, Redfin CEO Glenn Kelman explained that losses typically accelerate in the first quarter as the company is hiring agents, doing tours and setting up sales that take place in the second quarter
Redfin Now, a service that lets customers sell homes directly to Redfin, accounted for $3.1 million in revenue in the first quarter, down from $5.1 million the prior quarter. The experimental program expedites the process in exchange for customers typically netting lower proceeds than they might in typical sales.
When Redfin kicked off the program it only wanted to have $10 million in home values on its books at any one time. Kelman said Redfin will increase that limit to $25 million in the second quarter, showing more confidence that it could turn profits on these homes.
In the first quarter, the company purchased 15 homes, and it expects to double that number in the second. From the fourth quarter, it has sold all but two of the homes it bought, and Redfin expects to sell those two by June.
Redfin in the quarter continued to expand its 1 percent listing fee that aims to entice sellers to list their homes with the Seattle-based real estate company’s agents, bringing the program to San Francisco. The initiative is now live in 25 other markets, including its hometown of Seattle.
Kelman said the company’s aggressive marketing and growth of the 1 percent fee helped gain market share this quarter to 0.73 percent of U.S. existing home sales by value. That figure is up from 0.71 percent last quarter and 0.58 percent a year ago.
“In the first quarter, we advertised (the 1 percent fee) more broadly than ever before. If this formula of low fees, happy customers and increased advertising keeps working, the result will be not just more Redfin listings, but a better online marketplace. Several new businesses also had strong sales, which we believe can develop into major sources of growth for us not just over the next few years, but for the next decade.”
Traffic to Redfin’s site is up 28 percent over last year. Kelman warned analysts that traffic growth could moderate next quarter because traffic spiked majorly at that time last year.
Redfin stock is up slightly following the company’s latest quarterly report. After a hot start as a public company, Redfin shares have stumbled in recent months. The company’s stock is down approximately 25 percent since its high of more than $31 at the end of 2017.
In the quarter Redfin expanded its standalone mortgage business, which started last year, to Ohio, Virginia and Minnesota. Redfin Mortgage is now live in six states and the District of Columbia.