Redfin IPO Raises $138 Million, Share Prices Climb

Disclosure: Tim worked at Redfin from 2010 through 2013, and owns a modest amount of Redfin stock.
Disclaimer: Nothing in this post should be construed as investment advice.

Redfin’s long-awaited IPO went well for the Seattle-based technology-powered real estate brokerage this morning. They priced the IPO at $15 per share last night, raising $138 million for the company. When shares started trading on the open market this morning under the ticker symbol RDFN they opened at $19.56.

Redfin in Times Square, photo by Arthur Patterson
Redfin in Times Square, photo by Arthur Patterson
My friends over at GeekWire have been publishing great coverage this morning and last night in a series of articles (updated with two more links):

As of 11:00 AM this morning, RDFN has climbed to over $21 per share, which gives the company a market cap of about $1.67 billion.

Here’s hoping that Redfin goes on to do great things with the new cash infusion, bringing much-needed change to the industry. I’m rooting for them, and not just because I’m a shareholder.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

54 comments:

  1. 1
    ARDELL DellaLoggia says:

    I have considered buying this for my grandchildren, but will wait for the crash.

  2. 2
    The Tim says:

    RE: ARDELL DellaLoggia @ 1 – I am definitely nervous about the timing. I feel like the whole stock market / economy are on the edge of another big bust. I hope I am wrong.

  3. 3
    ARDELL DellaLoggia says:

    RE: The Tim @ 2

    Just a matter of when…

  4. 4
    Marc says:

    RE: The Tim @ 2 – I was thinking the same as Ardell. I think Redfin will succeed long term and I’d like to own some stock but not at today’s QE inflated equity prices. A crash should happen in the next year or two and I’ll like their stock even more at 20% to 50% of the IPO price.

    This isn’t a knock on Redfin, it’s just my opinion of the larger stock market.

  5. 5

    RE: Marc @ 4

    Yes…and I would add to that that I believe Redfin has more room to expand profit-wise in a Buyer’s or Balanced market than a Seller’s market. I would expect the market (basically all of the stock market) to crash immediately preceding a housing downturn. So even more reason to buy Redfin after a stock market crash and maybe into the initial phase of a housing crash, as I believe Redfin’s largest profit expansion will happen immediately thereafter.

  6. 6
    Marc says:

    RE: Ardell DellaLoggia @ 5 – Yes, that’s my thinking as well. Hopefully, they will remember the experience in 2008 when they had to lay people off (thus run a tight ship) but balance it with taking care of their staff and clientele.

    They have lost a lot of good lead agents because they are overworking them and, to a lesser extent, underpaying them. I expect that to continue as they seem to not be overly concerned by it. Actually makes me wonder if they are actively trying to cull their higher paid agents.

    As for clientele, I have had first hand conversations with sellers in primo locations who reached out to Redfin to list their homes and were so put off by the response or lack thereof that they now won’t even consider them. That really blew me away because in a seller’s market like this, I would think their highest priority would be sellers. I know it’s mine.

    I think these issues are a byproduct of their fascination with “on demand” service. In my opinion, that is just a race to the bottom in hopes of being the lowest cost “full service” provider. It means they have to fight even lower cost firms on the low end (see Trelora and its ilk) while also fighting more traditional firms on the higher end. Yes, they can do that and yes they might do ok. But I think they could do far better by sticking to a middle ground that neither of those groups are trying very hard to win. 1% listing fee for sellers is way too low for a sustainable business and free tours and unlimited offers for any random “buyer” is just going to wear out and demoralize the staff.

    Of course, my opinion doesn’t mean jack.

  7. 7
    Marc says:

    RE: Marc @ 5 – Correction, I agree with you Ardell as to a stock market correction preceding a real estate downturn. I don’t think I share the same opinion about the Redfin having “more room to expand profit-wise in a Buyer’s or Balanced market than a Seller’s market.”

    I actually think they have a crap ton of room to expand in any kind of a market if they’re smart about it. The reality is the quality of their competition doesn’t change all that much as the balance of market power shifts between sellers and buyers. As you well know, the overwhelming majority of agents are morons and a small percentage do the very large bulk of transactions. I would bet that the size of that smaller group is relatively steady through market transitions and that they are Redfin’s real competition.

    I think if they stayed at 1.5% or maybe even 2% listing commission but put a greater emphasis on delivering better service to sellers (by lightening the load on their lead agents), they could continue to take market share.

    The one thing they absolutely have right is that those “For Sale” signs in peoples’ yards are like gold.

    As for buyers, I think their website will provide them all the buyers they can handle for years to come and they have much more room for error on that side. They were smart to jack up their fee for buyers.

  8. 8
    toad37 says:

    I hope this means we’re close to a top! I need a fixer upper in Bellevue, behind Crossroads! But for a correction to happen doesn’t the QE need to stop?

  9. 9
    ARDELL DellaLoggia says:

    RE: toad37 @ 8

    Did you have an offer on that one that just listed and closed in 8 days? Not went pending, actually closed escrow that fast. I heard there were almost fist fights in the driveway. :)

  10. 10
    toad37 says:

    RE: ARDELL DellaLoggia @ 9

    Wow, no. That is a crazy fast close!

  11. 11
    ARDELL DellaLoggia says:

    RE: toad37 @ 10

    I’m having drinks with the agent tomorrow night to get the full scoop. :)

  12. 12
    toad37 says:

    RE: ARDELL DellaLoggia @ 11 – Are you expecting a pull back soon or just a general slowing from the madness with no big price drop?

  13. 13

    RE: toad37 @ 12

    The topic of this post is about all of the markets that will impact Redfin and their stock price and not about our local market specifically, especially “our” as in popular Eastside neighborhoods like your specific target market. Expect big stories elsewhere before you see impact in Bellevue. The bigger picture will determine timing on buying and selling Redfin stock.

    Locally there is weakness showing in lesser areas. I’m hearing some grumbling from Tacoma for instance. I hear similar grumbling from weaker markets around the Country.

    As for your QE question, I expect a more dramatic event than that to be the cause. An unexpected but bound to happen crisis, and I expect it to hit most all other areas of the Country before it shakes up Bellevue specifically, so it won’t be a surprise when it finally hits the strongest of our local markets.

  14. 14

    RE: Marc @ 7

    I expect they will alter their fees in differing markets, just as they have been doing since they opened. When it is harder to get a house sold, then I expect that fee to increase. When it is easier for a buyer to get an offer accepted, I expect to see that decrease. In fact I don’t think their fees are uniform now from one City to the next.

    Betting on how they will do in the future is not based on their current fee schedule as we know it to be here. That is the one thing that has changed freely as needed.

  15. 15

    By Marc @ 6:

    They have lost a lot of good lead agents because they are overworking them and, to a lesser extent, underpaying them. I expect that to continue as they seem to not be overly concerned by it. Actually makes me wonder if they are actively trying to cull their higher paid agents.

    They used to be consistent, maintaining oversight over their agents’ practices better than other firms, or so I thought. That has seemingly disappeared. I too have noticed good Redfin agents I’ve dealt with no longer being with Redfin. I haven’t asked any of them why they left.

  16. 16
    wreckingbull says:

    That was a funny photo, Tim. That being said, I would imagine Redfin is not spending 19x their gross revenue on advertising. I worked for a company that dissolved about $70,000,000 in a year and half during that period of insanity. I accumulated some pretty good “you can’t make this sh*t up” stories which I still tell from time to time.

    Redfin did not disrupt the dysfunctional RE market as they initially hoped, but I think they will continue to slowly steer it in a better direction.

  17. 17
    N says:

    By Ardell DellaLoggia @ 13:

    RE: toad37 @ 12

    Locally there is weakness showing in lesser areas. I’m hearing some grumbling from Tacoma for instance. I hear similar grumbling from weaker markets around the Country.

    As for your QE question, I expect a more dramatic event than that to be the cause. An unexpected but bound to happen crisis, and I expect it to hit most all other areas of the Country before it shakes up Bellevue specifically, so it won’t be a surprise when it finally hits the strongest of our local markets.

    Interesting. Is this weakness in markets more substantial then the usual summer slowdown?

  18. 18
    Drone says:

    My biggest question is where Tim got that fantastic mug. Is it an original, or an ironic reproduction?

  19. 19
    The Tim says:

    RE: Drone @ 18 – It is so great. It’s original. I picked it up at a liquidation store in Kenmore sometime around 2007 I think. Who knows how long they were sitting around in some warehouse.

  20. 20

    RE: The Tim @ 19

    I’m holding on to the original Redfin sign panel signed by Glenn. :)

  21. 21

    RE: N @ 17

    See my comment 9. I don’t do stats for the areas where the agents are griping because I don’t work there, but note that in the areas where I work I am not seeing a summer slowdown. The new batch this week appears to be positioned to sell quickly as well. (Sammamish – Issaquah) I have one I’m getting ready for market to go on about the same time as Deerhawke’s new one i n Seattle. Mine in Kirkland. If those two both sell quickly along with others then we may not have a slowdown period this year.

    So even if it is “normal” summer slowdown, given not all areas are having one this year, it’s still a market weakness relatively speaking.

    What surprises me is many agents in many States are griping about low inventory. So our blaming it on local particulars does not seem to ring true.

  22. 22
    Bubble Trouble says:

    Love the pets.com reference.

  23. 23
    Bubble Trouble says:

    RE: Ardell DellaLoggia @ 21

    A r/e agent who thinks there is no slowdown? Snort.

    In the history of real estate has any agent ever said no when asked that question? It always amazes me how people seek advice on whether to buy or not, from someone whose livelihood is dependent upon homes selling. It’s like asking a car salesman if buying a car is better than taking the bus.

  24. 24
    ess says:

    ST’s view of the situation…….

    http://www.seattletimes.com/business/real-estate/in-seattles-first-ipo-of-the-year-redfin-stock-quickly-takes-off/

    CEO is worried that Seattle will become like the Bay Area. Of course by doubling his office space and “recruiting on every front”, his company will bring in more workers that will compete for the scarce housing that is still available.

  25. 25

    By Bubble Trouble @ 23:

    RE: Ardell DellaLoggia @ 21

    A r/e agent who thinks there is no slowdown? Snort.

    In the history of real estate has any agent ever said no when asked that question? It always amazes me how people seek advice on whether to buy or not, from someone whose livelihood is dependent upon homes selling. It’s like asking a car salesman if buying a car is better than taking the bus.

    Well, Ardell’s opinion is just as good as that other opinion that you didn’t attack, based on having spoken to one or two people.

    But to a great extent I agree with you. I’ve frequently said that no one agent has a big enough view of the market beyond just the stats to really know what is going on, and I’ve also said it should be an ethical or licensing violation for agents to make predictions on where the market is headed. Unfortunately though, people really want that sort of opinion information. They seek it out. It’s very odd. I don’t walk up to doctors and ask them “When do you think they will have a cure for ______.” I’m not sure there’s another industry, besides maybe weather forecasting and the stock market, where people ask for so many opinions of the future unknown.

    However I wouldn’t agree with you that it’s dependent on our livelihood. This should be rather obvious, but agents make money when people buy and when they sell. So their opinion of the future should be neutral (assuming it doesn’t change when asked by a buyer or a seller). The exception to that would be my advice that people should always consider the application of the tax free sale of personal residence, but that’s because that’s one of the best tax deals around (the best being step up in basis of community property on death of spouse which can also affect the decision to sell a house) and because I’m very aware of tax issues.

  26. 26

    RE: Kary L. Krismer @ 25 – BTW, this topic should also have brought up Ray’s repeated advice here: “They’re all coming back!” :-D You might have liked that advice because it was negative, but it was clearly off base.

  27. 27
    N says:

    By Ardell DellaLoggia @ 21:

    RE: N @ 17

    What surprises me is many agents in many States are griping about low inventory. So our blaming it on local particulars does not seem to ring true.

    Its not what ppl here believe or want to hear but I am not surprised because the lack of inventory has been going on in many other markets for a while. I view it like this, many other markets have the same trend lines we have (jobs, lack of inventory, price increases), we just started a little sooner than some and those factors are more intense in Seattle than other places. Of course at some point we might not be #1.

  28. 28

    RE: N @ 27 – It would be interesting to know how many areas have only about 1 month of inventory. I suspect it’s very few and that people in those other areas are complaining about a situation that is much different (better depending on your point of view).

  29. 29
    N says:

    By Kary L. Krismer @ 28:

    RE: N @ 27 – It would be interesting to know how many areas have only about 1 month of inventory. I suspect it’s very few and that people in those other areas are complaining about a situation that is much different (better depending on your point of view).

    Oh, absolutely not many areas have 1 month of inventory. Spokane for instance as of the end of June has 1.9 months of inventory but having 2 or 3 months of inventory still feels very low in most markets. But certainly not like Seattle and the same with the job front and as a result price increases have been greater here. Earlier this year Minneapolis had 3.2 months of inventory, but that was still a 14 year low…its all perspective based on what you’ve experienced in the past.

  30. 30

    By N @ 29:

    Earlier this year Minneapolis had 3.2 months of inventory, but that was still a 14 year low…its all perspective based on what you’ve experienced in the past.

    You need to look no further than our inventory numbers. Remember how bad we thought inventory was in 2012, 2013 and 2014? Those years would be a significant improvement now!

  31. 31
    Doug says:

    RE: The Tim @ 2 – Follow the yield curve, Tim! Smooth sailing ahead.

    https://fred.stlouisfed.org/series/T10Y3M

  32. 32
    Doug says:

    RE: toad37 @ 8 – Why do people still think QE is taking place? Bond purchases stopped in October 2014. The Fed is now tightening interest rate policy and (attempting to) shrinking their balance sheet.

  33. 33
    StupidLifeDecisions says:

    By The Tim @ 2:

    RE: ARDELL DellaLoggia @ 1 – I am definitely nervous about the timing. I feel like the whole stock market / economy are on the edge of another big bust. I hope I am wrong.

    Well, this probably isn’t worth much, but I don’t think you are wrong. I’m right there with you. I’ve never seen such gross overvaluations in my lifetime. The arguements being made in support of “this is not a bubble” are scary and poorly formed.

  34. 34
    ARDELL DellaLoggia says:

    RE: Bubble Trouble @ 23

    A fixer in Medina just went for about a half million over asking. It may be Summer, but slowdown? Sure, a bunch of agents are on vacation., but…

    I do agree that I am somewhat cautious about what I say publicly vs to clients. Not because it’s my livelihood but because I can’t say anything that would negatively impact my clients. I don’t lie, but I do have to refrain from speaking at times.

  35. 35
    Erik says:

    All that has to happen for redfin to be worth nothing is a real company like Amazon or google decides it’s worth entering the real estate market. They will crush these other dog and pony shows.

  36. 36
    QA Observer says:

    I don’t know why, but this clock stresses me out! Anyone else feel this way?

    http://www.usdebtclock.org

  37. 37
    jon says:

    By Erik @ 35:

    All that has to happen for redfin to be worth nothing is a real company like Amazon or google decides it’s worth entering the real estate market. They will crush these other dog and pony shows.

    Well they could certainly start targeted advertising to buyers and sellers before real estate companies know what is happening.

    https://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/#7ddb0cad6668

  38. 38
    The Tim says:

    By Erik @ 35:

    All that has to happen for redfin to be worth nothing is a real company like Amazon or google decides it’s worth entering the real estate market. They will crush these other dog and pony shows.

    Google tried the real estate thing and gave up: https://maps.googleblog.com/2011/01/retiring-real-estate-on-google-maps.html

    Amazon is apparently getting into the real estate game, but their service is more of a direct threat to Zillow than it would be to Redfin: https://www.geekwire.com/2017/zillow-shares-slump-amazon-webpage-hints-expansion-real-estate-referrals/

  39. 39
    ESS says:

    http://www.marketwatch.com/story/the-no-1-thing-americans-hate-about-their-homes-2017-07-13

    A recent interesting article about the concerns and wishes of both American homeowners and renters.

  40. 40
    redmondjp says:

    RE: The Tim @ 38 – Yes, I shudder to think of the size of box and gigantic air pillows that Amazon Prime Location would use to ship a house to you ;)

  41. 41
    Anonymous Coward says:

    RE: redmondjp @ 40 – Well, Sears used to sell houses mail order, and Amazon is just the new Sears…

  42. 42
    justme says:

    Congratulations, Tim. Good luck with your stock holdings. I think Redfin has a good website, and it is better than most. In the aftermath of the IPO, I expect Redfin will be laser-focused on commissions, but I also have hope that they will keep improving the website.

    In case any of the redfin people are reading this: Some functionality has been lost recently. It used to be that a user’s favorite’d properties would maintain the user notes on the favorites page. Now gone. Instead we got a new image-happy format that is not as good and compact as the old one.

    Some other suggestions for improvement:

    1. click-through of taxID to county website, like zillow does, when county website supports it.

    2. when you share favorites with co-buyer, co-buyer sees some watered-down version of the property listing, and without the buyer notes. Should be the same, with option to share all-or-none notes.

    3. buyer notes should not disappear just because the property got sold.

    4. price and offer history should remain after a property sells

  43. 43
    The Tim says:

    By justme @ 42:

    Price and offer history should remain after a property sells

    I can speak to that one even though I don’t work at Redfin anymore. The way Redfin has the most complete and up-to-date listings is by being a member of the MLS. Unfortuately most MLSs have very particular rules about what you can and can’t show in the listing price history. In general, while it is on the market you can show things like listing date, price drops, pending date, etc. Once it sells you’re often only allowed to show listing date, pending date, and sale date with price. If it goes off-market without selling, the MLS won’t let you show anything other than dates. No price information at all.

    As for the property notes thing, I’ve noticed that functionality becoming more difficult to use as well. It’s frustrating and I hope they fix it.

  44. 44
    Erik says:

    RE: The Tim @ 38
    Thank you for the links. It will be interesting to watch which company wins out.

  45. 45
    ARDELL DellaLoggia says:

    RE: The Tim @ 43

    Also, the interior photos disappear, all photos except the main photo, if the new owner requests they be removed.

    Historically the interior photos were removed from public vs member access at time of sale. I believe most brokerage sites still do that, as the permissions to see inside the home came from the former owner.

    Did you leave your interior photos on Redfin after you bought your house? How long before they were removed from public view on Redfin if you didn’t request they be removed?

  46. 46
    Bubble Trouble says:

    By Doug @ 32:

    RE: toad37 @ 8 – Why do people still think QE is taking place? Bond purchases stopped in October 2014. The Fed is now tightening interest rate policy and (attempting to) shrinking their balance sheet.

    It may not be officially QE, but interest rates are still at practically 0. Same effect by a different name. And I’ll believe they are serious about tightening when I stop seeing car commercials advertizing 0% financing for 72 months.

  47. 47
    Bubble Trouble says:

    Anyone catch this from north of the border? I’ve always been told how prudent Canadians are with their money and it’s only us eeeevil Yankees who squander it. You know because Americans are dumb and stupid and everyone else in the world is uber smart. Yeah bout that…..

    http://www.msn.com/en-ca/money/topstories/canadian-economys-addiction-to-real-estate-fees-is-stunning-says-analyst/ar-AAp95Ca

    “Real estate commissions, land transfer taxes, legal costs and fees for inspecting and surveying homes make up almost two per cent of Canada’s economy.”This is a stunning 1.9 per cent of GDP,” said Macquarie analyst David Doyle. “It’s really concerning, it’s really unhealthy.” By comparison, agriculture, forestry, fishing and hunting account for 1.6 per cent of GDP, Statistics Canada reports.

    Doyle points out that the U.S. was relying big time on home ownership transfer fees in 2005, when its real estate market peaked. But even then, those fees made up only about 1.5 per cent of U.S. GDP. Now, years after the U.S. housing market crash, transfer fees make up less than one per cent.”

    On the upside I’ve always wanted a condo at Red Mountain, in BC. Next year there will be screaming bargains to be had, I might just pick one up.

  48. 48
    Bubble Trouble says:

    By N @ 29:

    By Kary L. Krismer @ 28:

    RE: N @ 27 – It would be interesting to know how many areas have only about 1 month of inventory. I suspect it’s very few and that people in those other areas are complaining about a situation that is much different (better depending on your point of view).

    Oh, absolutely not many areas have 1 month of inventory. Spokane for instance as of the end of June has 1.9 months of inventory but having 2 or 3 months of inventory still feels very low in most markets..

    It was not uncommon for a house to be put on the market at 6pm on a Monday and have a contract signed at 12pm on Tuesday with 4 backup offers, in Spokane/CDA this summer. It has slowed down from that mania, but May-July, it was just insane how quick houses were selling. I was interested in buying something myself, but I didn’t want to start getting into bidding wars or have to make a snap decision in 5 minutes.

    This applied to the $200-250K market. Higher end homes, as far as I know from anectodal evidence, are still selling but it’s taking weeks not days. And yes in Spokane or Coeur D’alene, $250K still gets you a pretty decent 4 bedroom home in a nice neighborhood. However the $250K house of today was under $200K 5 years ago.

  49. 49
    justme says:

    RE: Doug @ 32
    RE:
    Bubble Trouble @ 46

    While QE has not expanded since 2014, FRB still as of Aug 2017 is rolling over ALL the proceeds from maturing bonds into new bond purchases, thereby both supporting the bond markets AND keeping the money supply in the form of bank reserves at record levels, at about 4.3T (trillion). Reserves are as good as cash currency for payment purposes, hence the rampant asset inflation.

  50. 50
    justme says:

    RE: The Tim @ 43

    Tim, got it, MLS restrictions apply. Another feature I have been missing from Redfin is

    5. show my saved favorites (sold or active alike) that happen to be inside the current search area/map

  51. 51

    By Bubble Trouble @ 48:

    By N @ 29:

    By Kary L. Krismer @ 28:

    RE: N @ 27 – It would be interesting to know how many areas have only about 1 month of inventory. I suspect it’s very few and that people in those other areas are complaining about a situation that is much different (better depending on your point of view).

    Oh, absolutely not many areas have 1 month of inventory. Spokane for instance as of the end of June has 1.9 months of inventory but having 2 or 3 months of inventory still feels very low in most markets..

    It was not uncommon for a house to be put on the market at 6pm on a Monday and have a contract signed at 12pm on Tuesday with 4 backup offers, in Spokane/CDA this summer.

    Odd that they wouldn’t do something to keep the house on the market at least a few days. I’m not a big fan of the offer review date system, but you really need to do something on the seller’s behalf.

  52. 52
    uwp says:

    Every so often I get invited to the usability testing at Redfin.
    A fun chance to give your opinions and get paid (in Amazon giftcards).

  53. 53
    Brendan says:

    Good for you Tim.

    Just a general comment though: never ever buy stock at IPO.

    IPO’s are built around hype and pumping up the stock. They are also typically happen in a window where early investors are not yet allowed to sell off their shares.

    A few months after a stock does it’s IPO and makes a big splash in the news, there is almost always a dip as the hype fades, bad news that was papered over for the IPO finally ends up in the news, and pre-IPO investors start taking their profits.

    It doesn’t mean the stock won’t go up past IPO price in the long run, but if you are taking the risk on a new company you shouldn’t pay a premium for it.

  54. 54

    RE: Brendan @ 53 – I think it depends on your timeframe! ;-)

    But you do raise an interesting point that has always bothered me about these money-losing IPO entities. Let’s say you’re one of a group of venture capitalists, and you and other venture capitalists have put $500M into a company. But the time has come to say no. What’s to stop them from making sure the IPO sells out, putting in $50M more, just to be able to have a chance to get back part of their initial investment? They might not get it all back, if if the IPO allows the company to function another year that would give them a long time to sell small bits here and there. It’s certainly a better option than just letting the company fail within a month or two.

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