What happened
Shares of Redfin (RDFN +0.00%) jumped 17.8% this past week, according to data from S&P Global Market Intelligence, after CEO Glenn Kelman provided some encouraging commentary on the state of the housing market.
NASDAQ: RDFN
Key Data Points
So what
After correctly warning last March that the residential real estate industry was peaking, Kelman explained in a series of tweets on Wednesday why the housing market appeared to be strengthening.
1 of 16: On 3.15.22, we said housing was "cresting," and that it was "crazy for demand to be so strong in the midst of war, market volatility & inflation." The market worsened each month through November. Now we believe the market, while still fragile, is recovering. Here's why!
-- Glenn Kelman (@glennkelman) January 25, 2023
Kelman went on to state that several indicators of buyer demand -- such as the number of people attending home tours, requesting meetings, and making offers -- though still down from their pandemic highs, were improving significantly from their recent lows in November.
Kelman also noted that the real estate market is currently much healthier than it was during previous downturns, with inventory levels still low by historical standards, and with less than 2% of homeowners owing more money on their mortgages than their homes are worth. For context, more than 30% of homeowners were underwater on their mortgages during the housing crisis in 2008.
Moreover, Kelman said that Redfin's agents were surprised by how quickly the market turned -- so much so that they're now encouraging their customers to move faster when making offers.
7 of 16: Their Redfin agent, Shoshana Godwin, said "some of us saw this coming, but we didn't see how fast. We whiplashed 6 months ago, and now we're whiplashing back. Last month, we were telling clients, 'take your time.' No more."
-- Glenn Kelman (@glennkelman) January 25, 2023
"The market could still easily falter, Kelman said. "But housing in January has been stronger than anyone could've hoped."
Now what
A continued recovery in the housing market would be a boon for Redfin. After shuttering its money-losing RedfinNow home-flipping business, the company is now squarely focused on its highly regarded real estate brokerage operations. A stronger housing market would likely mean more home sale transactions and a corresponding boost in profits for Redfin, as well as further gains for its shareholders.
