Discount brokerage Redfin Corp. is suspending its instant home-buying program amid economic turmoil sparked by the coronavirus pandemic.
The Seattle-based firm, led by CEO Glenn Kelman, made the announcement Wednesday, according to the Wall Street Journal. It had stopped buying ads for the program earlier this month. Like other iBuyers, RedfinNow used an algorithm to buy homes, before renovating them and quickly selling them for a profit. The growing business represented 42 percent of Redfin’s $233 million in fourth-quarter revenue, according to the company’s financials.
Redfin ventured into iBuying somewhat reluctantly as companies like Opendoor and Offerpad and even Zillow bet big on the space. During the fourth quarter of 2019, RedfinNow generated $99 million in revenue, up from $22 million a year prior.
But during an earnings call last year, Kelman said he was wary of Redfin’s iBuying program growing too quickly. “Growth is easy… We think we have to be really picky about which houses we buy,” he said. He added that the iBuying segment of the market is a “race to the bottom,” and that growth is largely dependent on a willingness to take risks and lose money.
He shifted that position during a February earnings call, when Kelman said he was feeling more aggressive about iBuying because demand is strong and inventory is low. “Redfin’s scrambling to buy homes as fast as we can because we know it’s on like Donkey Kong,” he said.
On Wednesday, Redfin stock dropped 24.54 percent to $10.33 per share, as the Dow Jones Industrial Average slid 6 percent. February housing starts were up, but experts predicted things would get rocky once the market began to feel the impact of the pandemic. [WSJ] — E.B. Solomont