Redfin CEO Glenn Kelman watched this episode of the GeekWire podcast with us to discuss the latest changes in the real estate market; delays in returning to the office; the role of climate in real estate; how technology is changing home purchases; and The impact of remote work and immigration on Seattle and other American cities.
In some ways, “it is our employees who determine the location of Redfin’s headquarters,” Kelman said. “We now have 1,000 headquarters. People are moving across the country.”
Kelman explained that, literally, he is committed to keeping Redfin’s headquarters in Seattle. But he said that the relocation of employees has created a new impetus for city officials seeking to work with business leaders to resolve economic inequality.
We talk after the technology-oriented real estate agency Released the second quarter earnings report this weekRedfin’s revenue increased by 121% to $471 million, and its net loss expanded to $27.9 million from $6.6 million a year ago. Kelman also talked about the driving force that prompted Redfin to focus on growth rather than profit.
Earlier this week, Redfin announced a new feature for house listings: a digital rating, which provides a climate score for a given house or property, analyzes the risk of high temperature, fire, drought, and storms by county over a 30-year period, and city , Community, and postal code. Redfin is working with Climate check Functionally.
In terms of COVID, Redfin plans to reopen its headquarters and field offices on September 6, but told employees this week that this milestone will be postponed indefinitely and promised to notify them of the new date at least 30 days in advance. Those who work in the office must be vaccinated, and the company requires those who are not fully vaccinated to work from home.
Microsoft said that the full reopening of its US workplaces will not be earlier than October 4. Amazon went further and delayed its return until January 2022.
Listen below, subscribe to GeekWire wherever you listen to the podcast, and continue to read the editorial highlights in the Kelman review.
Recent changes in the property market: In the past six months, closing a deal has been too difficult. The bidding war has been crazy, not only in the usual coastal markets, but everywhere. So there are 20, 30, 40 bids for a property in Tulsa, Oklahoma; Boise, Idaho.
As a result, this is really difficult for our real estate agents and home buyers. Therefore, we have seen demand drop after Memorial Day. We are actually a little worried. But by July, we did see an increase in sales because it became easier to put transactions together.
So what the market really needs, it finally got, that is a little inventory, maybe a little less demand. So I think the foundation of the real estate market is more sustainable than before.
What drives the bidding war: The only trend that really made this possible was that so many Californians moved to Ohio with monopoly funds. …So even if the house price in Columbus, Ohio doubles, people who are used to paying $1 million for a cabin in Los Angeles will say, “It looks good to me.” So I think it must To a certain extent, the price increase has been maintained, but it is really difficult for people living in these towns to buy a house.
What the trends mean for Seattle: I have always advocated the funding of science and mathematics education through state income taxes. …Even if there is a head tax turmoil, I think the technology should be strengthened and pay some kind of local tax. Now, the city is starting to speak out about doing the same thing and asking me if I will support it. It really is no longer up to me to decide, because it is our employees who decide where the Redfin headquarters is.
We now have 1,000 headquarters; some have moved all over the country. So I think the real estate hot air balloon in Seattle has dissipated a bit. But it’s not like California, because we still don’t have many state and local taxes. Therefore, this kind of race to the bottom is going on all over the country.
Redfin’s future in Seattle: I love Seattle. I mean, this is where I was educated when I was a kid. I love California. That’s where I go to school, go to university. I don’t want to be a traitor and leave the state that helped us build this great enterprise that has educated so many workers.
So I am very involved. But I tried to tell some politicians who have contacted us that it no longer depends on me. It also depends on each employee. Who is saying,’Well, I hope my headquarters, my attic, in Missouri, or elsewhere.
Therefore, it gave me a moment’s pause. At that time, I had been a staunch supporter of some kind of cooperation between business and government to ensure that we took care of everyone and made the technological wealth reach other parts of Seattle.
This is my retribution for increasing taxes here. I think when people’s mobility is much greater than in the past, it must happen at the federal level.
When will Redfin be profitable? I can avoid this question, because of course, we will not make such forward-looking statements. But in my opinion, the brokerage business is a profitable entity that allows us to invest in growing entities that continue to lose money.
Therefore, we acquired RentPath from bankruptcy, which caused a significant drag on earnings, not only because of its losses, but also because of transaction costs, and then we have many other businesses that are still in their infancy.
I want to make money as soon as possible. But I think what really drives it is that if your business stops growing 50% or 100% year-on-year-mortgage business, if it grows 30% year-on-year Redfin, now, if it grows 40% year after year-then you Say, okay, show me the money. This is no longer a baby. This is a mature company with a mature growth rate. It should abandon profits. But when someone says that we can double every year and Wall Street is very tolerant of profits, you have to share.
What is the difficulty of running a real estate technology company, whether it is me or [Opendoor CEO] Eric Wu, or [Zillow Group CEO] Rich Barton believes that there is too much capital in this area. I think we are all sitting at the poker table and want to get some back chips. But when all of us can borrow 500 million US dollars or 1 billion US dollars without interest, basically some convertible bonds have no interest, everyone just puts a lot of money into the market, playing a winner-takes-all game, or winner- The most games.
This makes it very difficult to squeeze a lot of profits from the business. In addition to constantly pushing more chips into the middle of the table, this makes it very difficult to do anything.
So sometimes I think, man, this is crazy. I would rather relax, because growth is stressful. Other times I just feel like a great white shark. “Let’s eat another surfer!”
Three technological trends driving the housing market:
- The first is that more people are actually on tour. Some of them are because they don’t actually want to step into other people’s houses. But now it’s more because they are moving across the country, and they don’t necessarily want to fly. So it is more common to bid and actually accept it before you see the house. Sometimes, half of our buyers accept their offer, and then see the house, the seller is also very good, because they don’t necessarily want everyone to walk through this place.
- The second is that because more mobile is transnational, it actually helps companies like us. You call your local real estate agent, they may be your uncle or your friend, or if you move to another city, it may be the person who sold your last place, but when you move across the country At that time, you would Google because you didn’t know anyone in Montana. Therefore, as long as you rank higher in Google, having all the proxy comments and all other content is helpful to us.
- The third thing is that there is a huge tailwind on iBuying, we buy a house with cash, and then let someone move on. … Some of them are simply because now is a good time to own a house. The longer it takes us to sell them, which was a risk we were really worried about, the more money we make because the market is rising. Some of it is because people no longer mow the lawn. They really don’t do any difficult things anymore. They just pay others to deal with it. This is what they did to the house. Therefore, the easy liquidity cost you a little bit of upside…but I think iBuying’s performance exceeded our expectations.
The forces driving Redfin’s new climate score: This is important because one in five homeowners now believe that their home value is damaged by fire risk, flood risk, and hurricane risk.
This is important because it is asymmetric. People of color or with less money are often forced to live in communities that are prone to flooding or fire hazards.
This is important because in recent migrations, Americans are migrating across the country, and most of them are migrating to places with greater climate-related risks. They are going to Houston, where it is often hit by hurricanes and tropical storms; they are going to Florida, where the situation is worse; they are going to a bunch of dry places where the heat is crazy.
So they bought a house, and then they realized that they could not get fire insurance, or they could not get flood insurance, or it was very expensive. So we just need to incorporate it into their initial family search, so they realize what happened.
This is a good example of a partner solving a problem. We are actually trying to solve the problem in another way, but only in a more stupid way.
I really want to develop a climate score for each house. These scores talk about your contribution to climate change, whether you use a lot of space, whether you need a lot of driving, whether you have solar panels, etc.But it turns out that no one cares whether they contribute To climate change.They just worry about whether they will get screw Due to climate change! So this idea is a dead duck.
COVID and return to the office: First, Redfin is very politically diverse. So Seattle employees are mostly progressive. But we now employ real estate agents in almost every state in the country. Someone voted for Trump, somebody voted for Biden; somebody voted for the vaccine, somebody opposed the vaccine. What we think of as simple measures to protect employees’ safety is more worrying than this.
However, in the final analysis, this is not the case. Therefore, we acquired RentPath, an Atlanta-based company whose constituency is different from our Seattle-based company. They initially had different views on this vaccine regulation, and we will not let people who have not been vaccinated return to the office.
Then the topic really turned to, well, are you willing to take responsibility for the safety of employees entering the office? I really do my best to respect everyone’s political views and the independence of your medical decisions. But this is my job. My simplest responsibility is to protect people’s safety.
Listen to the complete conversation above. The podcast is edited and produced by Curt Milton.