To say that Redfin (RDFN 8.49%) has been a top performer in 2023 would be an understatement. After the real estate disruptor was essentially left for dead by experts in late 2022 as the real estate market ground to a halt, management has done an excellent job of renewing its focus on Redfin's core competencies, and of emphasizing efficiency.

In fact, despite a 12% decline in revenue in the third quarter, Redfin's net loss narrowed from $90 million in the third quarter of last year to just $19 million, and the company was profitable on an adjusted basis.

Due to its (so far) effective turnaround strategy, Redfin's stock has performed well this year. While it's been quite a roller-coaster ride for investors, the stock has gained 81% year to date through Dec. 5.

Despite this year's outperformance, Redfin could be just getting started (after all, it's still about 90% below its 2021 high). There are some clear catalysts that could help Redfin's business in 2024 and beyond, and while I don't exactly think the ride will be a smooth one, Redfin looks extremely attractive from a risk-reward perspective as we head into 2024.

Why I'm adding shares of Redfin in December

I invested rather heavily in Redfin in late 2022 and early 2023, but I'm planning to add to my position significantly before the end of the year. It isn't just because of management's excellent execution of its turnaround plan -- there are three big reasons why I think 2024 could be a big year for Redfin.

First is the real estate market in general. We're finally seeing signs of normalization. Mortgage rates are well off their October highs, new listings increased by 6% year over year in November, and home prices seem to have stabilized.

Redfin itself has projected mortgage rates will decline in 2024 and existing home inventories will increase. This would be a major catalyst for the real estate industry as a whole.

Second, Redfin has said that it plans to be profitable in 2024 -- if it can achieve that goal (which seemed outlandish about a year ago), it would go a long way toward showing investors that the business model is indeed viable long term.

Third, and perhaps most significant, is the ongoing legal saga in the real estate industry regarding brokerage fees. In a high-profile lawsuit accusing the National Association of Realtors (NAR) and several major brokerages of keeping commissions artificially high, a judge ruled against them.

Make no mistake -- this is good news for Redfin. Essentially, the argument is that by requiring the sellers to pay both the listing agent and buyer's agent, it is keeping the antiquated 6% selling commission structure in place. On the other hand, if buyers had to hire and pay their own agents, prices would likely fall, and in many cases, buyers wouldn't use an agent at all.

Redfin has been saying for more than a decade that real estate commissions were too high, and the main idea behind its platform is that by automating as much of the process as possible, agents can sell more homes and still make more money while keeping commissions low. Redfin recently introduced its Redfin Max compensation structure that is very agent-friendly, and an efficient real estate platform will be an extremely valuable tool to agents as costs get more attention and fewer buyers hire agents. Plus, Redfin's platform will be a natural fit as fewer buyers use agents, as it makes the home search and touring process very easy.

A great buy for the real estate-minded

The real estate market is not only starting to thaw, but there is (finally) clear momentum toward more awareness of the fees and commissions that are paid as part of the homebuying process. Redfin is well ahead of the curve when it comes to adapting to a lower-fee real estate world and could be the best-positioned brokerage to thrive as the market evolves.