Real-estate brokerage Redfin announced on Wednesday that they would be sunsetting their home-flipping business, RedfinNow, and joining the long list of companies with layoffs, cutting 13% of their workforce.
If you binge-watched home-renovation TV shows during the pandemic, you might have been tempted to get into home-flipping. The idea, of course, is simple enough: buy, renovate and then sell — hopefully for more than you paid.
Redfin launched their home-flipping venture in 2017, buying and selling thousands of homes over the last few years, competing with the likes of Opendoor and Zillow. The model worked — to varying extents — thanks to rock-bottom interest rates and the hot US housing market. In fact, data from ATTOM shows that home flipping sales represented 9.6% of all home sales in the first quarter of this year.
But now, with mortgage rates hitting 7%, the market is starting to turn. An increasing number of home-sellers are dropping prices, leaving Redfin and others with considerable inventory on their books that they can’t shift, and that they’ve likely already spent thousands on fixing up.
Since their respective peaks in Feb '21, Opendoor shares are down 94%, Zillow's have shed 83% and Redfin stock is down 95%. Even with access to millions of data points on what makes houses valuable, home-flipping is really, really hard.