Shares of real estate company Redfin (NASDAQ:RDFN) fell with the broader markets during the early days of the pandemic, but the stock has rebounded to climb more than 260% off of its late March lows and has more than doubled for the year.

In this Nov. 12 discussion on Motley Fool Live during the recording of the Industry Focus podcast, Motley Fool analyst Tim Beyers and Industry Focus host Nick Sciple talk about the factors that caused the stock to surge higher over the last six months. 



Nick Sciple: Some other numbers, customer inquiries for Redfin agents or their partners increased 38% in July to 58% in October, they are back to hiring agents. So, really significant change throughout the year. What led to that turnaround in the market that really spiked demand?

Tim Beyers: I mean, there's a couple of things, but I think the primary thing is that we just don't have enough homes. And Nick, you and I have talked about this, and I don't have the specific stat, but I think you have it in some of the notes that you brought to today's session here, that we have a real shortage of housing inventory in the United States and so when [laughs] supply does not match demand, prices go through the roof, and demand is really, really high.

And there's a couple of things here, there is a flee, you know, fleeing of cities into suburbs, certainly that's true. There's also a fleeing into the interior; you know, the work-at-home, this idea of like, look, hey, you know what, we are now in an environment where anybody can work anywhere, there are people that have just pulled up stakes, and we probably both have friends, Nick, I would guess, who have pulled up stakes and said, like, you know what, I like New York, I like San Francisco, but I'm out, you know, I'm going to Denver, or I'm going to Salt Lake or I'm going to, you know, Billings, Montana. I mean, just name the state and we're getting an influx of people that are coming from urban areas. And that is a good thing for -- I mean, we had always, sort of, thought this would be part of the Redfin story, but it has accelerated dramatically.

Sciple: Right. So, some of those stats, like you mentioned, Tim, on the last episode, really got me excited or thinking about there's got to be this increase in home buying demand, is if you look back going 20 years or so, even longer, the median age of first-time homebuyers is about 32 years old. Last time we did the episode, the median age for millennials was 30.5. Now, we're probably about 32, right on that number, that would be the long-term median age for first-time home buying. And we had this idea that millennials had been delaying home purchases because of the cost of living in places like New York, San Francisco, large coastal cities.

Well, you kind of had two things that hit at the same time with the pandemic that really, really pulled forward. So, you had this demographic aspect of, listen, if you want to have kids and have the white picket fence and all those sorts of things, there's a certain time in your life where you have to buy a home; structurally it's a life stage thing. And then on top of that, we had this huge surge in remote work this year that, kind of, took the shackles out of a lot of these folks in cities who weren't able to move out to a place where homes are more affordable, etc. And so, you've seen basically this trend we expected to happen, really, gasoline got poured on that.

And just to give you some numbers. So, online searches for home listings with suburban zip codes grew 13% during the Spring compared to a year ago. You look at big cities like San Francisco and New York City, inventory in the third quarter was up 51% in San Francisco, up 20% in New York City; just they can't sell all the homes that are located there. And then you look at, there's limited supply on the market right now, massive amounts of purchasing going into the market, however, there isn't a lot of "for selling," there's been a forbearance put in place on lots of mortgages, those sorts of things.

So, just to give you some numbers on demand. So, August existing home sales are the highest level since 2006. According to the National Association of Realtors, there are 1.49 million homes for sale at the end of August; that's down almost 19% annually. Redfin has some stats from September. So, the number of homes for sale in September was down 23% to a record low. So, you're in these circumstances where, because of some of these trends that have been latent in the market that are really getting pulled forward, there's this massive surge in buying demand, but there's just not enough homes for sale, which really puts Redfin in a tough spot, given that they need to find homes for folks to buy.

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