After Redfin CEO Glenn Kelman predicted a national slowdown in housing could continue, his company’s stock suffered an immediate setback. The markets punished Kelman for his prediction and Redfin stock fell more than 22% last Friday.
Redfin, a technology-based real estate firm engaging in traditional brokerage activities, has only been publicly traded for about a year. The company itself has been in operation since 2004. Last Thursday, Redfin reported Q2 numbers that indicated revenues were up 35.9% over the same time a year earlier. However, Kelman’s commentary along with starkly low predictions about Q3 revenue sent stock values plummeting.
“For the first time in years, we are getting reports from managers of some markets that home-buyer demand is waving, especially in some of Redfin’s largest markets,” Kelman said. He also mentioned “an unexpected drop in Redfin’s booking growth in the past three weeks” and “slowing traffic growth in a weakening real estate market.”
What Does this Mean for Investors?
In addition to stock values, Kelman’s analysis of Redfin contributed to a negatively-affected media coverage of national housing markets.
In reality, real estate investors should not view this as a disaster scenario. But, as media coverage changes public perception about the state of the national housing market, local and regional markets are likely to start adjusting. Will there be another real estate crash, as many headlines predict? Not necessarily, but with housing affordability creating a serious challenge in many markets, and housing inventory loosening up in some of the nation’s most expensive markets, there will likely be a number of shifts and corrections happening on a local level over the next 12-18 months.
This is not bad news for real estate investors. However, investors may want to wrap up deals requiring selling on a short timeline at an elevated value (i.e. flipping). Looking into alternative strategies, such as renting the property or short-term income (i.e. AirBnB), are other options worth a thought.
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