Nov 9, 2022 - Economy

Redfin shutters home-flipping operations and announces layoffs

Illustration of a real estate sale sign shaped like a downward point arrow

Illustration: Annelise Capossela/Axios

Home flipping is starting to flip out.

Driving the news: Redfin announced Wednesday that it's shutting down its home-flipping business and laying off 13% of its workforce, saying it's bracing for impact as the housing market rapidly decelerates.

  • “To prosper in a housing downturn that could last at least through 2023, we have to simplify our business," Redfin CEO Glenn Kelman said in a statement. "We're closing our iBuying business, RedfinNow, because maintaining a profit with rising interest rates would make our offers on homes insultingly low."

Why it matters: It's another sign that the housing market is losing the frothy edge that drove huge price increases and record sales over the last several years.

Zoom in: The move marks a further rollback of tech-savvy real estate companies' position as big players in the home-flipping business.

  • Zillow shut down its own home-flipping business in November 2021, well ahead of the housing market's broader pullback, and cutting 25% of its workforce.
  • The company ended up posting an $881 million loss on its home-flipping operations in 2021.

The big picture: Active home listings soared 33.5% in October, compared with a year earlier, hitting the highest point since 2020, according to Realtor.com.

  • That means more competition for home flippers, who had been taking advantage of depressed inventory.
  • Kelman predicted a 30% contraction in housing sales in 2023.
  • "Hello, Adversity," Kelman wrote in his memo, adding that the company should expected to be "ridiculed for thinking they could’ve succeeded."

The intrigue: It's a rapid descent for home flipping, which represented nearly 1 in 10 home sales in the first quarter, the highest level since 2000, according to ATTOM.

  • "Home flips as a portion of all home sales decreased from the first quarter of 2022 to the second quarter of 2022" in 80% of local markets, ATTOM recently reported.

Yes, but: Resale prices of flipped homes hit a record high of $328,000 in the second quarter, up 21.5% from a year earlier.

The bottom line: Home flipping, which had ascended to high heights, is losing beginning to lose altitude.

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