Redfin is ramping up for a rebound 

"Terrible" — that was Redfin CEO Glenn Kelman's succinct assessment of the current housing market, but the company is preparing for better days, he said during an earnings call on Tuesday.

And he has reason to feel optimistic about the direction Redfin is headed. Revenue was up 7% year-over-year, and other measures were also on the higher end of expectations. Net income is still in the red, but the Q2 loss was similar to a year ago, suggesting the company is holding steady after much more substantial losses throughout 2022 and into early 2023.

Kelman said Redfin is continuing to lay the groundwork for what he believes will be a housing market rebound, with a focus on expanding the Redfin Next agent pay plan to more markets and ramping up recruitment efforts.

He also discussed how the NAR settlement is impacting agent pay, noting that buyer agent commissions have dipped to around 2.5% — something he attributes in part to more awareness among consumers that commissions are negotiable. But he believes that with the slow shift toward a buyer's market, sellers will remain willing to compensate buyer agents. 

What Redfin had to say

During a call with investors, Kelman said it's "inconceivable" to him that the mortgage rate decline in recent weeks and the big drop following the most recent jobs report won't provoke a reaction from homebuyers who have been waiting on the sidelines.

The consumer response has been slow, he acknowledged, but he believes that could be due to a combination of summer vacations and fatigue related to the uncertain economy and the presidential election cycle. 

"The actual physics of how much you pay every month has significantly changed," Kelman said.

Once buyer activity picks up, greater consumer awareness about commissions could be a boon for Redfin, Kelman said, given the company's lower fee structure. He expects they can make up for any declines in commissions through higher volume.

"We've tried in the past to recruit buyers by offering them a better deal, and mostly they've been confused by that because they haven't been the ones paying their agent. (Now) we think we can use price as a weapon to gain share," Kelman said.

Key numbers

Revenue: $295.2 million, up 7% compared to the second quarter of 2023 and in the high range of the company's guidance for the quarter.

Cash and cash equivalents: $201.8 million, up from $149.8 million at the end of 2023.

Net income/loss: A loss of $27.9 million, similar to a year ago when the net loss was $27.4 million. Redfin estimates a net loss of between $22 million and $30 million in Q3.

Adjusted EBITDA (earnings before income, taxes, depreciation and amortization): Relatively flat, with a small loss of $28,000 in the second quarter, compared to a loss of $6.9 million a year ago.

Average number of lead agents: 1,719 at the end of the second quarter, down from 1,792 a year ago but up from 1,658 in the first quarter. The average number of lead agents at the end of 2022 was 2,426. 

Transactions: 14,178 for the second quarter, up 3.4% compared to a year ago.

Site traffic: Nearly 52 million average monthly users, about the same as a year ago.

Notable moves

The company has been expanding its Redfin Next agent pay plan and announced it will add 25 new markets in August. Following that expansion, the program will be live in markets accounting for about 74% of brokerage revenues. Redfin Next has a 75% split on every sale an agent closes with a previous client and up to a 40% split on Redfin-generated sales.

Redfin also said it has recently partnered with five more MLSs to make Redfin Redesign, an AI-powered tool which allows users to redesign spaces using listing photos, available on more than 240,000 for-sale listings.

In May, Redfin reached a settlement in the commissions cases, agreeing to pay $9.25 million.