Redfin CEO Glenn Kelman joins us on this GeekWire podcast to discuss the latest developments in the housing market; delays in returning to the office; the role of climate in real estate; how technology is changing home buying; and the impact of teleworking and migration on Seattle and other US cities.
In a sense, “our employees decide where Redfin’s headquarters will be located,” says Kelman. “We now have 1000 head offices. There are people who have moved all over the country. “
Literally, Kelman explains, he intends to keep Redfin’s headquarters in Seattle. But he says employee migration is creating a new dynamic for city officials looking to work with business leaders to close economic inequalities.
We spoke after a tech real estate brokerage. released a second quarter income statement this week.… Redfin’s revenue jumped 121% to $ 471 million, while its net loss increased to $ 27.9 million from $ 6.6 million a year earlier. Kelman also addressed the momentum driving Redfin to focus on growth over profit.
Earlier this week Redfin announced a new feature for house listings: A numerical rating that gives an estimate of the climate for a given home or property by analyzing the risk of heat, fire, drought, and storms over a 30-year period by counties, cities, districts, and zip codes. Redfin partners with Climate Check for features.
Regarding COVID, Redfin planned to reopen its headquarters and field offices on September 6, but this week told staff that the milestone would be postponed indefinitely, promising to notify them of new developments at least 30 days in advance. The date. Those who work in the office must be vaccinated, and the company is asking those who have not been fully vaccinated to work from home.
Listen below, subscribe to GeekWire wherever you listen into the podcasts and keep reading to see edited highlights from Kelman’s comments.
Recent changes in the housing market: It’s just that it has been so difficult to close a deal over the past six months. Betting wars have been crazy, not only in conventional coastal markets, but everywhere. So Tulsa, Oklahoma; In Boise, Idaho, there were 20, 30, 40 real estate offers.
As a result, our real estate agents had a hard time, and our home buying clients really hard. Thus, after Memorial Day, we saw a decrease in demand. In fact, we were a little worried about this. But then, in July, we really saw a rise in sales because it became easier to close deals.
So what the market really needs is it finally got a little inventory and maybe a little less demand. Therefore, I think that the housing market is now on a more stable basis than it was.
What drove the trade wars: The only trend that really made this possible was that so many Californians moved to Ohio with monopoly money. … So, even when prices double in Columbus, Ohio, someone who is used to paying a million dollars for a shack in Los Angeles says, “I love it.” And so I think that this led to some increase in prices, but the people who lived in these cities really found it difficult to buy housing.
What these trends mean for Seattle: I was a supporter of the state income tax to fund science and mathematics. … And even when there was chief of tax hypeI thought that technology should step up and pay some kind of local tax. And now the city has started to make some noise about doing some of the same things and asked me if I would support it, and it really isn’t my business anymore, because our employees decide where the Redfin headquarters will be.
We now have 1000 head offices; there are people who have left for the country. So I think the real estate balloon here in Seattle has run out of steam. But that doesn’t feel like California because we still don’t have a lot of state and local taxes. And now the race to the bottom of the country has just ended.
The future of Redfin in Seattle: I love Seattle. I mean, this is the place that raised me as a child. I love California. There I went to school, to college. And I don’t want to be a turncoat and leave the state that helped us build this great business that educated many of our workers.
So I am very loyal. But what I tried to say to some of the politicians who contacted us about this now depends not only on me. This is also the business of each employee. who says, “Well, I want my headquarters, my loft to be in Missouri or wherever.”
So that gave me a hiatus when I was a pretty staunch supporter of some kind of collaboration between business and government to ensure that we take care of everyone and that the wealth of technology reaches the rest of Seattle.
This is my reaction to the tax hike here. I think this should happen at the federal level, when people are much more mobile than they used to be.
When will Redfin be profitable? I can shy away from this question because, of course, we do not make such forward-looking statements. But I believe that brokerage is a profitable venture that allows us to invest in growing companies that are losing money.
So we bought RentPath as a result of bankruptcywhich was a major obstacle to profit, both due to its losses and due to transaction fees, and in addition, we have many other businesses still in the making.
I want to make money as quickly as possible. But I think it will really stimulate it if you have businesses that stop growing 50% or 100% year on year – the mortgage business, if it grows 30% a year, Redfin, now if it grows 40 %. year after year – then you say, well, show me the money. It’s not a little kid anymore. It is an adult business with a high growth rate. And that should dump profits. But when someone says that we can double every year, and the Street is very lenient with profits, you have to take back the share.
What is really difficult about running a real estate tech company, be it me or [Opendoor CEO] Eric Wu, or [Zillow Group CEO] Rich Barton believes there is so much capital in space. I think we are all sitting at the poker table and want to get our chips back. But when we can all borrow $ 500 million or a billion dollars without a coupon, when there is basically no interest on some of the convertible debt, everyone is just putting a lot of money into the market, playing a winner-take-all game or winner. -took the game itself.
And because of this, it is very difficult to squeeze large profits out of the business. And that makes it really difficult for anything other than to keep pushing more chips into the middle of the table.
Sometimes it seems to me that this is madness. I would rather relax, because growth is stressful. And sometimes I just feel like a great white shark. Let’s eat another surfer!
The housing market is moving towards three technology trends:
- First, more and more people are going on virtual tours. And partly this was because they didn’t really want to step into someone else’s house. But now it’s more, because they move around the country and they don’t have to get on a plane. So, more often than not, they place a bet and actually accept it before you see the house. Sometimes half of our buyers accept their offers, and then they see the house, and the seller is also happy with it, because they don’t necessarily want everyone to walk around the house.
- Secondly, since more crossings are in rough terrain, it really helps a business like ours. You call your local real estate agent, who might be your uncle, buddy, or the person who sold your last home if you move through town, but you Google when you travel around the country because you just don’t know anyone in Montana. … So it helped us improve our Google rankings, have all agent reviews and everything else.
- Third, iBuying recently had a big tailwind where we pay cash for a house and let someone leave. …. In part, it’s just that now is a good time to own a home. The longer we sell them, which used to be a risk that we really worried about, the more money we make because the market is growing. This is partly because people no longer mow their lawn. They don’t do anything complicated anymore. They just pay someone else to figure it out. And this is what they do with the house. So this easy liquidity costs you a little growth … but I think iBuying has skyrocketed more than we could have hoped.
The forces behind the new Redfin climate rating are: This is important because one in five homeowners now feel that the value of their home has been damaged due to the risk of fire, risk of flooding, risk of a hurricane.
This is important because it is asymmetrical. People of color or people with less money are often forced to live in areas that are easily flooded or at risk of fire.
And this is important because in this latest migration, as Americans move across the country, they mostly move to places that have a higher climate risk. They travel to Houston, which is constantly exposed to hurricanes and tropical storms; they go to Florida, where it is even worse; they congregate in a bunch of dry places where the heat is insane.
So they buy a house and then they realize they can’t get fire insurance, or they can’t get flood insurance, or it’s very expensive. And so we just had to incorporate that into their initial search for a home so they could understand what was going on.
This is a good example of a partnership that solved a problem that we were actually trying to solve in a different way, but in a more blunt way.
It was really interesting for me to develop a climate assessment for each home that talked about your contribution to climate change, how much space you use, how long it takes to drive, whether it has solar panels and the like. But it turns out that nobody cares contributing to to climate change. They just worry about whether they will get screwed up climate change! So this idea turned out to be a dead duck.
COVID and return to office: First, Redfin is very diverse politically. So Seattle’s employees are mostly progressive. But now we are hiring real estate agents in almost every state in the country. There are people who voted for Trump and people who voted for Biden; There are people who are in favor of vaccination, there are people who are against the vaccine. What we see as a simple measure to protect the safety of our employees is much more dangerous.
And yet, in the end, it is not. So we acquired RentPath, an Atlanta-based company that has a different audience than our Seattle company. And they initially had a different attitude to this vaccination mandate that we won’t have people in the office who are not vaccinated.
Then the conversation really turned to are you ready to take responsibility for the safety of employees who come into the office and might be infected by an unvaccinated person? I really try to respect everyone’s political views and the independence of your medical decisions. But this is my job. My simplest responsibility is to keep people safe.
Listen to the full conversation above. The podcast was edited and produced by Kurt Milton.