There is no denying that 2022 was a rough one for Redfin. In June, the firm laid off 470 employees, or roughly 8% of its workforce, and in November, it shut down its struggling iBuying business and cut an additional 860 positions.
These challenges, combined with the rapidly cooling housing market and volatile mortgage rate environment, resulted in the firm’s full year 2022 net loss increasing to $321.1 million — with losses of $61.9 million in Q4 alone — up from $109.6 million in 2021. However, at $2.284 billion, the firm did record 19% higher revenue in 2022 than in 2021, despite recording just $749.7 million in revenue in Q4 2022. The fourth quarter revenue was down 25% year over year.
Despite the headwinds and challenges, Redfin executives are optimistic about the year ahead.
“2022 was a challenging year, but we’ve taken the right actions to position Redfin for long-term profitable growth,” Chris Nielsen, Redfin’s CFO, told analysts and investors on the firm’s fourth-quarter earnings call Thursday afternoon. “We are entering 2023 with appropriately conservative plans and the knowledge that the recovery may be touch and go, but it is comforting to see the start of the year tracking in line to slightly better than our expectations.
At the top of that list for CEO Glenn Kelman was the fact that Redfin lost just 2.0% of its average monthly website and mobile application visitors year over year in the fourth quarter, while the number of searches on Google for homes for sale declined 33%. In addition, Comscore data shows that Redfin visitor traffic kept pace with Zillow in December.
“To improve our long-term competitive position, we know we have to draw visitors away from all out major rivals, not just one, and we believe that we can,” Kelman told investors.
Executives are also optimistic about the rising attach rates for ancillary services offered by Redfin. Prior to Redfin’s acquisition of Bay Equity in early 2022, the firm’s highest recorded attach rate was 8%. In Q4, the attach rate was 17%, holding steady from Q3.
At Title Forward, Redfin’s title service, the share of eligible brokerage customers who used the service jumped from 12% in the fourth quarter of 2021 to 44% in the fourth quarter of 2022.
“As the lending industry completes its adjustment to lower volume, price competition may ease, and as the housing market recovers, our brokerage lending and title businesses will be well positioned for growth,” Kelman said.
Kelman also sees future growth potential in Rent., a firm Redfin “acquired out of bankruptcy” in April 2021.
“In every quarter of 2021, net bookings, a measure of the annualized revenue Rent. added through sales to new customers, had been negative $4 million to $5 million, and we were barely positive in the first half of 2022,” Kelman said. “Rent.’s fourth quarter revenue grew year over year for the first time since 2017 by 5%. Compared to the third quarter of 2022, revenue grew by 6%. We expect Rent.’s revenue gains to accelerate in 2023.”
Looking ahead, Kelman is looking to Redfin’s employee and partner agents for continued growth. A bright spot for Kelman in this is the increase in the number of repeat or referral business transactions Redfin agents closed in the fourth quarter. According to the firm, these types of transactions accounted for 34% of sales in Q4, up from 32% a year ago.
“More than ever, the agents Redfin employs today are capable of driving loyalty sales,” Kelman said.