Redfin CEO Glenn Kelman (left) and Zillow Group CEO Rich Barton (right). (Redfin and Zillow Photos)
Redfin and Zillow Group‘s second-quarter earnings reports point to more pain in the real estate market as limited housing supply and climbing mortgage rates throttle transaction volume.
Both real estate tech companies this week reported reduced revenue in crucial business segments due to the prolonged housing market slowdown.
Redfin’s total revenue was $275.6 million, a 21% decline from the previous year’s $349 million, falling short of Wall Street’s expectations for the three months ended June 30. The company’s real estate services division, its primary source of revenue, dropped more than 28% to $180.6 million.
Redfin stock fell more than 20% on Friday following its earnings release Thursday afternoon.
Zillow’s total second quarter revenue exceeded expectations at $506 million, but revenue in its residential category, which includes Premier Agent advertising services, declined 3% year-over-year to $380 million.
“Sales volume is near rock bottom,” Redfin CEO Glenn Kelman said on a call with analysts Thursday.
The downward trend may persist. Zillow CEO Rich Barton wrote in a second-quarter letter to shareholders that the company expects a 15-to-20% year-over-year decline in industry transaction dollar volume for the third quarter.
Few available U.S. properties for sale have nudged home prices slightly higher, but many homeowners are not selling their homes and holding onto their low mortgage rates. Pending home sales were down 15% in the four-week period ended July 23, while median sale prices were up 2.6%, according to a recent Redfin report.
Thirty-year fixed mortgage rates were hovering around 6.9% this week, up from around 4.99% during the same point last year. The higher rates pushed mortgage demand to its lowest level in almost two months for the week ended July 28, according to data from Mortgage Bankers Association. Demand is down 26% compared to the same week last year.
Redfin mortgages revenue fell by 28% to $38.4 million, while Zillow’s mortgage revenue dropped 17% to $24 million.
Traffic to both Redfin and Zillow platforms are declining. Redfin’s mobile apps and website had 52 million average monthly users, slightly down from 53 million in Q2 2022. Zillow Group reported a 3% decrease in average monthly unique visitors, totaling 226 million, and a decline of 8% in visits compared to the previous year.
Zillow expects Premier Agent revenue to decline between 4-to-9% year-over-year in Q3. Redfin expects total revenue to decline between 9-to-13%.
“The housing market outlook continues to be frustratingly foggy and we can only plan for it to take time to normalize,” Barton said on the earnings call with analysts.
Kelman said Redfin maintains its budgeting assumption of 4.3 million existing U.S. home sales in 2023, which is down from roughly 5 million in 2022. Zillow economists’ forecasts are in line with Redfin’s projection.
One overlapping bright spot for the companies: rentals. Redfin’s rental revenue increased 19% to $45.3 million, while Zillow’s rental revenues surged 28% to $91 million.
Barton wrote that the rental market is “adding record levels of new supply which has lowered occupancy rates and driven landlord demand for rental advertising.” Through the first half of the year, the U.S. market added 376,000 apartment units, the most in at least three decades. This has pushed some rental prices to come down.
Meanwhile, the Federal Reserve’s recent prediction that the economy will largely avoid a recession in 2024 has brought renewed optimism for a housing market rebound.
“Most economists once viewed a recession as unavoidable, and now see it as unlikely,” Kelman said. “When rates come down, the housing market will be poised to grow again.”
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
