Shares of Redfin Corp. fell after hours on Wednesday, as the residential real-estate brokerage braced for what it said was a housing-market slump that could extend through at least next year and reported third-quarter results that missed expectations.
The company reported the results after a big round of staff cuts announced earlier in the day, as rising mortgage rates trigger a slowdown in housing demand. Chief Executive Glenn Kelman, during Redfin’s
RDFN,
earnings call, said those layoffs assumed a housing downturn that “lasts at least through 2023.” He said he still expected Redfin to put up its first yearly profit in 2024.
For the third quarter, Redfin
RDFN,
reported a net loss of $90.2 million, or 83 cents a share, compared with a loss of $18.9 million, or 20 cents a share, in the same quarter last year. The company reported sales of $600.5 million, compared with $540.1 million in the prior-year quarter.
Analysts polled by FactSet expected an 80-cent per-share loss, on revenue of $603 million.
Redfin said it expects fourth-quarter revenue of between $430 million and $459 million. And it said it expected to lose between $134 million and $118 million during the period. FactSet forecast fourth-quarter sales of $557 million.
Shares fell 3.4% after hours. During the regular session, Redfin sank roughly 12%.
Earlier in the day, Kelman said the company would lay off 13% of its staff, or 862 employees, following an earlier round of layoffs in June. Redfin will also shut down RedFinNow, its iBuyer service that bought homes for cash and resold them. Rival Zillow Group Inc.
Z,
exited its own home-flipping business last year.
“Laying off 862 colleagues and friends is heartbreaking,” Kelman said in Redfin’s earnings release. “But I feel relief about closing RedfinNow with relatively low losses.” He said that segment’s “appeal to consumers has waned as the market turned.”
“Home prices will at some point stabilize, but the cost of capital isn’t going back to 2021 levels anytime soon, and this is a major why RedfinNow offers had already gotten so low,” Kelman continued. “Redfin will have more cash and sell more properties by focusing on growth in our online audience, low fees, and better brokerage, mortgage and title service.”
“Housing companies are in the jungle now, but Redfin has been there before and come out stronger,” he added.
Swelling mortgage rates have cooled housing demand. Last month, however, Redfin’s economics research lead noted that prices were being held up by a decrease in the amount of homeowners putting their homes up for sale.
“The housing market will get smaller in 2023,” Kelman said in an email to Redfin employees earlier Wednesday. “A layoff is awful but we can’t avoid it. We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021.”
Redfin stock has plunged 91% so far this year. By comparison, the S&P 500 Index
SPX,
has slid 21% over that time.
