Tech-powered residential real estate broker Redfin (RDFN -1.96%) said its fourth-quarter 2020 revenue increased 5% year over year to $244.5 million -- well ahead of its estimate for $226 million to $233 million provided a few months ago. Full-year 2020 revenue ended 14% higher to $886.1 million as Americans moved out of the densest cities and into the suburbs during the pandemic.
A stubborn housing shortage
Redfin's results in the second half of 2020 were held in check because of a nationwide shortage in homes for sale. CEO Glenn Kelman said on the quarterly conference call that RedfinNow -- its segment that buys and sells homes directly from homeowners versus acting as a broker, and which competes with Opendoor Technologies (OPEN 0.78%) -- was primarily responsible for holding back growth. Redfin has also been dealing with a shortage of agents to assist home buyers and is in an ongoing effort to recruit. This agent shortfall is expected to last until summer 2021.
However, the company sees a return to double-digit sales growth to kick off the new year as RedfinNow activity increases again. Management expects Q1 revenue to be $249 million to $255 million, up 30% to 34% from the same period last year. RedfinNow will expand to new cities, its in-house mortgage business is growing by a triple-digit rate, and marketing of Redfin's website and tech-enabled agents will continue in the new year and help offset challenges related to housing supply.
A few days before the Q4 earnings announcement, Redfin said it entered an agreement to acquire RentPath for $608 million. The parent of ApartmentGuide.com, Rent.com, and Rentals.com, RentPath's sites will slowly be integrated into Redfin's leading brokerage and property search platform. This pending purchase hasn't been included in guidance yet.
Redfin is saving consumers money and making the home buying and selling process more easy and transparent. The company's results will fluctuate with the cyclical nature of the residential real estate industry, but this growing real estate broker remains a promising long-term fintech stock.