Real estate brokerage Redfin revealed signs of progress in its fourth-quarter 2023 earnings report, signaling a potential turnaround after facing challenges earlier in the year.
Fourth-quarter 2023 revenues at Redfin fell 2% year over year to $218.1 million, down from $222 million in Q4 2022. The company reported a net loss of $23 million in the final quarter of the year, down from a loss of almost $62 million in Q4 2022.
For full-year 2023, revenues fell to $976.7 million, a decrease of 11% year over year. The brokerage’s real estate services division, which serves as its principal source of revenue, dropped to $133 million, a 9% decline compared to last year’s $146 million.
Redfin’s mortgage revenue was $26 million, down 8% from last year’s $28 million figure. Meanwhile, revenue from Redfin’s rentals reached $49 million, up 20% from last year.
“In a dreadful housing market, Redfin got more efficient in the fourth quarter, again improving gross margins and operating margins, even as we laid the foundation for meaningful long-term growth,” Redfin CEO Glenn Kelman said in a statement.
“Our site continued to draw visitors from rivals. And new sales initiatives are driving breakthroughs on fronts where Redfin has been stymied for years. First, our all-variable pay plan is delivering significant revenue growth in major California cities. Second, a commission refund to customers who hire a Redfin agent after the first tour seems likely to increase home-buyer close rates in its first four pilot markets. We expect these projects to pay off throughout 2024 and 2025.”
While Redfin reported a 20% decrease in transactions in the fourth quarter, there was a noteworthy increase in revenue per transaction, which rose by 12% year over year to $12,248. Factors contributing to this increase included adjustments in homebuyer commission refunds, revenue from concierge renovation services and rising home prices.
Redfin maintained its online presence, with 44 million average monthly visitors, and it held a market share of 0.76% of U.S. existing home sales, a slight decline compared to a year ago.
According to Kelman, the housing market is still almost entirely driven by mortgage rates. Buyers entering the housing market in 2024, however, have become more accustomed to the rate volatility, Kelman said.
“Some argue that when rates will ease, the market will become more competitive,” Kelman said.
According to Redfin agents, there is a seasonal resurgence of bidding wars, as observed in California, where a single listing recently attracted 50 offers.
During the call, Kelman also tracked the evolution of two initiatives launched last fall. The company introduced Redfin Next, a program that offers agents splits as high as 75% for self-sourced deals, instead of a base salary. Previously limited to Los Angeles and San Francisco, the program expanded to San Diego and Orange County. The company is planning on expanding to seven more markets in the second quarter of this year.
In September, Redfin also launched “Sign & Save,” a loyalty program that awards homebuyers a refund of 0.25% to 0.5% when they sign an agency agreement before their second tour. So far, the program is available in 10 markets and will be rolled out more broadly in Q1 2024.
