Back in the 1990s, the advent of the internet spawned myriad discount brokers that helped make buying stocks easier and cheaper for the mass consumer. Some 20 years later, the same disruptive forces are just beginning to mount an attack against the real estate industry. Seattle-based technologist Redfin (NASDAQ:RDFN) is helping lead the charge, with the goal of completely changing how Americans buy and sell homes -- with an added dash of tech-enabled customer service.

Real estate cool off? What real estate cool off?

Headed into 2019, many economists have expressed concerns that the near-decade-long recovery in the real estate market would come to an end, especially as the Federal Reserve had hiked interest rates multiple times. But while residential real estate has cooled, that doesn't necessarily mean bad news for an agent of change like Redfin.

In the second quarter of 2019, revenue reaccelerated to 39% year-over-year growth, up from a 38% pace set in Q1. That growth is coming at a cost as the company makes a big push into ancillary services surrounding its online-based, low-cost brokerage model, but it's a cost that should pay off down the road if it can keep fostering top-line expansion. And with half of the year in the books, Redfin says it's doing just fine.

Metric

Six Months Ended June 30, 2019

Six Months Ended June 30, 2018

YOY Change

Revenue

$308 million

$223 million

38%

Cost of revenue

$257 million

$172 million

49%

Operating expenses

$131 million

$85.6 million

53%

Net income (loss)

($79.8 million)

($33.2 million)

N/A

YOY = year over year. Data source: Redfin.

Though losses are never comfortable to look at, especially when red is getting more plentiful rather than less so, Redfin is about to begin reaping the rewards of its investment. Not only did its outlook call for year-over-year revenue growth to jump to at least 59% in the third quarter, Redfin expects to see positive net income of between $3.4 million and $6.4 million. The new services Redfin has been nurturing to support its brokerage are at the heart of this profitable forward outlook. 

A laptop, smartphone, and cup of coffee sitting on a desk in front of a window.

Image source: Getty Images.

Stress less about the market, more about market share

Technology is great, but while the world is all about going digital at the moment, I am a firm believer that eventually the pendulum will swing the other direction and personal relationships and service will come back into the spotlight. It's a business component that some technologists like salesforce.com (NYSE:CRM) and its excitable-but-pragmatic co-CEO Marc Benioff champion, and one that Redfin is pushing as well as competition in the real estate disruption space ramps up. CEO Glenn Kelman stated this:

The second quarter is a turning point for our company. Year-over-year growth in website traffic, brokerage sales, and revenues overall accelerated for the second straight quarter. Our new businesses have built the infrastructure and delivered the results needed for more rapid expansion, with significant margin gains in mortgage and title, and integrated field execution for instant-offers and the brokerage. The years of work we've invested in each of these businesses are now positioning us to be the first to deliver a complete solution at a national scale for people moving from one home to the next.

A slew of offerings, from mortgage and title to renovation services to online brokerage for buyers without agents, are now the primary catalysts for Redfin's growth story. Creating a one-stop shop with tech-enabled competitive pricing is winning over customers. The company reported a 0.94% share of existing home sales by total value in the second quarter, up from 0.83% in the first quarter and year-ago period.

There's obviously plenty more market share gain left for Redfin to tackle, and expanding its platform availability and getting the word out on its high-tech end-customer-centric service suite is now the name of the game. No matter what the real estate market is doing overall, I like Redfin's chances at cutting into the pie.