The growing uncertainty in the housing market has claimed its first iBuyer victim.
Redfin announced Wednesday that it is hitting the pause button on its homebuying efforts, which it calls RedfinNow.
“On March 18, 2020, we announced that RedfinNow, our business that buys homes directly from homeowners and resells them to homebuyers, will temporarily pause making offers on homes,” the company disclosed Wednesday in a filing with the Securities and Exchange Commission.
In a statement, Redfin CEO Glenn Kelman said that the decision was made in response to the ambiguous nature of the housing business right now.
“From the beginning — repeatedly, insistently and despite growth pressure from all sides — Redfin has said that we aspire to be the most disciplined iBuyer,” Kelman said.
“In every earnings call and press interview about iBuying, we’ve said that we see iBuying as part of a portfolio of options we give homeowners, reserving for ourselves the flexibility to feature different options at different times,” Kelman continued.
“Nothing has changed about this position. We remain as committed as ever to giving homeowners the option of an instant offer, but only when we can know what a fair price for an offer would be,” Kelman added.
“With whole cities shutting down nearly all commerce, no one can say what a fair price is right now, so we’re not making any instant offers. We expect to be making instant offers again soon, but only when the market becomes more predictable,” Kelman concluded. “Our discipline today is the discipline we’ve always had, and that we’ve always said we would have.”
This is the second big change for Redfin this week. Earlier this week, Redfin said that it will no longer allow its agents to host open houses as part of an effort to limit the spread of the virus.
A new blog from Kelman also noted that the “coronavirus’s impact on housing is now nearly nationwide.”
According to Kelman, there’s been a decline in homebuying demand in recent days. And that’s a problem for Redfin’s homebuying efforts.
Redfin did not get into the homebuying business to become a landlord. Rather, the company seeks to resell the homes it buys back into the market. So, with less demand for homes, Redfin may be stuck holding onto homes it buys, which it doesn’t want to do.
Redfin launched its direct homebuying program in the first quarter of 2017, but did not make the program public until later in that same year.
RedfinNow began as an experiment, launching in the Inland Empire region of Southern California in January 2017 before expanding to San Diego in June 2017. Redfin later expanded the direct buying program to Orange County.
Then, in 2018, Redfin said that it was “deepening its investment” in the program and planned a “long-term” expansion of the program beyond those first few markets. The company later expanded its homebuying operations to Dallas and Denver.
But now, Redfin’s homebuying is on hold. For how long remains to be seen.
