After a year of slowing growth, there are signs of life in residential real estate; home sales are perking back up and mortgage rates have dipped after the Fed’s dovish comments, both of which have caused some buying in real estate- and building-related stocks, notes Mike Cintolo, editor of Cabot Growth Investor.
One that we’re keeping an eye on is Redfin (RDFN), which is best known for its rich listings website (which gets 27 million monthly visitors on average), but it’s not a clone of Zillow (ZG).
Instead, Redfin is thriving as a full-service brokerage, attracting sellers thanks to its lower commissions (1% to 1.5%), and getting top agents because they close three times as many sales per year as the average broker (partially due to faster sales times, a boon for sellers, too) and, hence, make more money.
The company is moving into add-on services as well: its Concierge service charges a 2% listing fee in exchange for cleaning, staging and repairing services prior to sale; its “Now” service (available in a handful of cities but being rolled out nationally) has Redfin itself buying a home (for the right price) from a customer, which it can then resell using its agents down the road; and it’s moving into mortgage and title offerings, too.
In Q4, Redfin closed 0.81% of all homes sold in the U.S. (up from 0.71% a year ago), with revenues lifting 30% (though part of that is revenue from home sales through RedfinNow) and customer satisfaction levels far higher than the competition.
Earnings are still in the red and margins are a worry, but after a long time in the doghouse, Redfin has been acting better so far this year with some bullish volume clues, including its above-average spike last week. It’s worth keeping an eye on.
