The Real Deal New York

Redfin lost $42M in 2018 amid advertising push

CEO Glenn Kelman sees “modest” housing gain ahead
By E.B. Solomont | February 14, 2019 06:00PM

Redfin’s Glenn Kelman (Credit: Redfin)

Redfin’s losses widened to $42 million in 2018, as the discount brokerage invested heavily in direct advertising to fuel its growth.

Despite the slowing housing market, the Seattle-based firm said Thursday that its revenue soared 32 percent year over year in 2018 to $486.9 million.

“We believe the housing market is getting stronger,” CEO Glenn Kelman said during an investor call on Thursday. “Despite regional setbacks — and the many federal workers in the Washington, D.C. area who spent January waiting for a paycheck — homebuyers seem more confident now than they did during the second half of 2018.”

On a quarterly basis, Redfin’s losses widened to $12.2 million during the fourth quarter, compared to $1.8 million in the prior-year period. However, Redfin’s revenue rose 30 percent to $124.1 million.

Redfin projected a net loss between $69.2 million and $67.8 million for the first quarter of 2019 (compared to $36.4 million during 2018’s first quarter.) “Our 2019 ad campaign will increase this year’s losses,” Kelman said. “The ads should accelerate 2019 revenue growth and contribute to profits by 2021.”

During an earnings call, CEO Glenn Kelman said the company is “mainlining” its Redfin Now program, which offers sellers an instant offer to purchase their home, despite fewer deals in late 2018. “During the fourth quarter, a worrisome end-of-year market limited the number of homes we bought and the number we sold.”

Redfin said its discount commission model saved homebuyers and sellers $31 million during the fourth quarter, and $154 million for the full year, compared to the traditional 2.5 percent commission.

Earlier this week, Redfin announced its expansion into Canada, specifically in Vancouver and Toronto. Kelman cited the massive opportunity there, given home prices in those markets and Canada’s lack of a major national real estate portal. “Vancouver and Toronto are big, juicy burgers,” he said.

“We’re excited to get to markets that are lucrative and tasty,” he said. “There’s not a national website that shows the price of homes that are sold — which is what every real estate consumer wants.”