Redfin shutters home-flipping operations and announces layoffs
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."
- "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.