Redfin CEO Says If Mortgage Rates Don't Fall, Plan B Is To 'Drink Own Urine Or Competitors Blood'
Mortgage rates dropped to a 15-month low this week
![Glenn Kelman](https://d.ibtimes.co.uk/en/full/1727605/glenn-kelman.png?w=736&f=f3ebf2927709cdd088fd6eeb3bfa6df2)
Longtime Redfin CEO Glenn Kelman said in the latest company Q2 earnings call with analysts that if mortgage rates don't keep falling, Redfin's "Plan B is to drink our own urine or our competitors' blood, stay in the foxhole."
Redfin's revenues for the quarter ended June 30 beat analyst estimates, jumping 7% year-over-year (YoY) to $295.2 million. The stock price climbed over 12% yesterday to close at $7.55 per share. However, analysts focused on mortgage rates, which continued its decline to reach a 15-month low this week. Kelman highlighted that it is pretty confusing that homebuyers are not reacting to the relatively lower mortgage rates as pending home sales and mortgage applications fell YoY by 5.7% and 14%, respectively. Meanwhile, housing affordability remained at a 40-year low while inventory is 30% below pre-pandemic levels.
Redfin's monthly average visitors and real estate services transactions also fell marginally in Q2. When asked about his housing market outlook for Q3, Kelman described the situation as the "Twilight Zone." He said: "I can't remember a time when rates came down this far, this fast, and the market has been so muted in its response." Kelman hopes the market sentiment will improve henceforth.
Last week, Redfin published a report attributing the muted real estate market activity to elevated home prices, political volatility, and a lack of attractive listings. However, Redfin is managing to lower its dependence on the for-sale market as its Q2 rental business revenues increased 12% YoY to $50.9 million. Overall, Redfin can avoid its drastic Plan B if mortgage rates keep falling, which many think will do. "We expect rates will stay low through the winter and into next spring, which should lead to a much stronger housing market in 2025," Kelman added.
Redfin Deploys AI For Market Edge
Several macroeconomic factors, like US recession fears and the upcoming changes from the National Association of Realtors settlement around practice changes, could affect the real estate market in 2024. Redfin cancelled its iBuying program and trimmed its workforce during the 2022 real estate slump and in 2023. However, the company rolled out the "Redfin Next" compensation program for its agents to help them capitalise on a commission-based structure that offers "competitive splits as high as 70%."
Kelman said during the call that Redfin is leveraging artificial intelligence (AI) to display the most meaningful apartment photos to potential buyers and enable them to visualise how their home would appear after redecoration. Furthermore, Redfin launched an AI assistant to resolve homebuyer queries and plans to launch a new self-service tool for rental owners to post property listings on its online platform.
"The last earnings call ended with me singing a line from a Who song, 'Won't Get Fooled Again,' where I had said we're not banking on low rates when other people had thought they might come down [...] We're ready to take share if the market grows, we're ready to take share if it doesn't, but we're not going to ease off," said Kelman before expressing regret over his choice of word during the call.
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