1 Real Estate Growth Share You Can Buy Right Now

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The US housing market has just surpassed $ 36 trillion in total value, following its biggest growth since 2005. Consumer demand has been driven by record low interest rates and aggressive government stimulus programs designed to tackle the pandemic, and high-tech realtors are reaping the benefits.

Redfin (NASDAQ: RDFN) aims to change the way people buy and sell homes, employing an army of hired real estate agents, complemented by a thriving direct buying business. The company claims that it has successfully saved more than $ 1 billion in listing fees for sellers simply by using its size and scale to bypass independent brokers.

Increasingly, home buyers are turning to Redfin, making it a steadily growing share of total US home sales, making it a great bet for the future.

Real estate agent hands over keys to young family in front of signboard

Image source: Getty Images.

Blockbuster second quarter

Redfin announced its second quarter results on August 5, and while you shouldn’t be focusing too much on one quarter, it did some mind blowing results.

Metric

Q2 2020

Q2 2021

Change

Income

USD 213.6 million USA

USD 471.3 million USA

121%

Gross profit

USD 46.0 million USA

USD 126.1 million USA

174%

US market share in value terms

0.94%

1.18%

24 basis points

Data source: Redfin.

The brokerage segment of the company accounts for 63% of the total revenue. It is the service side of the business that focuses on the traditional process of selling real estate with over 2,450 of Redfin’s leading agents.

The product segment is a direct buying business where Redfin buys homes from sellers with the intention of reselling them for a profit. While this is the smallest share of total revenue, it exceeds the trend by 138%, and 40% more real estate was purchased in the second quarter than in all of 2020.

The company is still operating at a loss because it is focused on growth – the lower commission business in real estate, which has traditionally been a labor-intensive industry, only operates on a large scale. but gross profit are growing rapidly, giving Redfin the ability to cut costs in the future to generate positive profits.

Most importantly, his plan is working and his share of total US home sales continues to grow.

Long term game

There was a glitch in the real estate business. Despite the fact that the Internet boom happened several decades ago, it is only now that the model is really shaken. Consumers do not view their homes as disposable items, which is why special attention is often given to sales and purchases.

The thought of striking a deal with a tech company to make such a meaningful life decision might sound far-fetched, but obviously people are enthusiastic about the idea because of its convenience. By selling your home directly to Redfin, you can guarantee cash payment and avoid months of open doors and uncertainty.

Metric

2018 Nov.

Dec 2019

Feb 2020

2021 (estimate)

CAGR

Revenue (in millions)

USD 486.9

US $ 779.7

US $ 886.0

US $ 1,780.0

54%

Sources of data: Redfin, Yahoo! Finance. CAGR = compound annual growth rate

Revenue from the entire real estate brokerage industry is expected to grow by just 0.4% in the US this year, so it’s clear from Redfin’s CAGR that the company is stealing significant market share from incumbent operators.

But this trend is exacerbated by the growing share of Redfin in total US home sales.

Metric

2018 Nov.

Dec 2019

Feb 2020

First half of 2021

Share of Redfin in US home sales

0.81%

0.93%

1.00%

1.18%

Average number of website visitors per month

27.3 million

33.5 million

42.9 million

45.4 million

Data source: Redfin.

The company is likely to soon double its average monthly website visitors from just a few years ago, highlighting the popularity of its modern approach.

But Redfin didn’t stop at buying and selling homes. Its mission has been to dominate the rental business as well, starting with the $ 608 million cash acquisition of RentPath in April. RentPath owns several leading rental websites with 16 million monthly visitors, which will now be brought to the Redfin brand through mutually beneficial integrations.

Why should you buy this

There has never been such a unique way to access the growing real estate market, and Redfin’s technology is highly scalable. Bye Redfin there are key competitors with a similar vision, they tend to be more focused on the direct purchasing segment, and none of them have an agent-centric sales model like Redfin.

Competition in direct purchasing can be fierce, but on the part of brokers, Redfin competes with incumbent operators, which often charge more than double listing fees, giving the company a significant advantage to continue grabbing market share.

And while growth has so far been incredibly high, in 2022, analysts expect revenue to be 31% higher than the high estimates of 2021. With a market capitalization of just $ 5.1 billion, this would more than double the sales of stocks, which could represent significant long-term value.

This article represents the opinion of an author who may disagree with the “official” recommendation position of Motley Fool’s premium consulting service. We are colorful! Bidding on an investment thesis – even our own – helps us all to be critical about investing and make decisions that help us become smarter, happier, and richer.



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