Redfin Stock Crashes 22% – Redfin CEO “significant slowdown” in home sales.

via marketwatch:

Redfin stock dives after top exec says sudden downfall is expected to continue in August and September

The housing market hit a sudden and “significant” slowdown in the past few weeks that could continue in coming months, Redfin Corp.’s chief executive said Thursday afternoon.

The real-estate brokerage and website company announced second-quarter earnings Thursday afternoon that beat expectations, but the company’s third-quarter forecast came in short of what Wall Street was projecting. On a conference call to discuss the results, Chief Executive Glenn Kelman reported that Redfin had pulled down its forecast after “an unexpected drop in Redfin’s bookings growth in the past three weeks, slowing traffic growth in a weakening real-estate market.”

Redfin RDFN, -22.39%  stock, which fell in extended trading after the forecast was made public, saw that decline accelerate to a loss of almost 10% after Kelman spoke Thursday afternoon, but he did not hold back. He said a decline in U.S. home sales in June was expected to reappear in August and September after a slight relief in July, specifically calling out difficulties in markets on the West Coast that have driven home sales higher in the past few years.

“For the first time in years, we are getting reports from managers of some markets that home buyer demand is waning, especially in some of Redfin’s largest markets,” Kelman said, specifically calling out Seattle, Portland and San Jose as areas where inventory was still tight but did not seem to be pushing prices higher still.

“June sales were down in these markets by double-digits and inventory was up also by double-digits,” he said of the West Coast cities. “The trend is continuing in July and reports are now coming in from Washington, D.C.; Boston; Virginia and parts of Chicago as well that homes there are getting harder to sell.”

Both existing-home sales and new-home sales declined in June, but price gains on the homes that did sell actually accelerated, according to CoreLogic’s Home Price Index for June, which was released earlier this week. Other trackers like the S&P/Case-Shiller national index show decelerating price increases, but were still reflecting double-digit price increases in the San Francisco and Seattle areas. Pending-home sales were also lower than the previous year in June, according to the National Association of Realtors, the sixth consecutive month that metric trailed the previous year.

 

I think the writing is on the wall and there are quite a few people who are holding their heads in the sand on this one.

YoY changes doesn’t matter because we are looking MoM changes now. Sales stalling out during the peak summer home buying months is a pretty big red flag.

IMO, the slowdown in sales makes sense because macro trends are pushing against home buyers. Interest rates rising, tax environment is changing to be less in favor of real estate and wages are mostly stagnant relative to home price appreciation, home affordability is declining. With these odds stacked against buyers, the potential market for home buyers is declining. Also, I see foreign buyers getting pushed out as well due to tariff issues, currency controls in china etc.

I think we will see a correction within the next 3 years.

If the prices do continue higher it will be a short-term bump followed by a bigger correction.

 

h/t JasonMckennan

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