Considering opening a position in $RDFN Redfin? The analysts at Pericror believe this stock is set for one of its best quarters with the coming Spring 2021 housing season. Considering that Redfin financially benefits from higher volume of home sales as well as higher prices by taking a commission from sales as well as partnering with local agents, the stage is set for a great quarter. Low interests rates that the fed has stated will remain in effect for years offer low interest rate mortgages to potential home owners, increasing demand. At the same time, sellers are coming out for multiple reasons:
- High real estate prices are encouraging sellers to take advantage of the historic price rise as a result of low rates and sell their home
- Mortgage forbearance programs end in 2021 – this means of the 30% of home owners who lost jobs or wages as a result of the pandemic, those that cannot find new employment and risk falling behind on mortgage payments will likely sell. The key distinction between this and the housing crash of 2009 is that home prices are at all time highs, meaning almost everyone with a mortgage will be able to sell their home for more than their mortgage is worth. This means rather than seeing foreclosures after mortgage forbearance ends, we will see owner owned sales.
- Selling volume has been historically low as potential Spring 2020 sellers postponed moving due to the pandemic. The keyword here is postponed, they will return to the market when they feel safe, and with the coming vaccines, we can assume vaccinated home owners will be ready to sell. In October alone, there were 500,000 less homes for sale compared to October 2019.
- Increased volume of homes for sale is a feedback loop – as more homes enter the market, more potential buyers find the home that’s right for them, often then listing their existing residence for sale, which would potentially attract another buyer (who in turn sells their existing property) and so forth. 38% of buyers report using proceeds from a previous home sale to help them purchase a new home.
The environment has never been more accommodative for real estate based companies such as Redfin to pose jaw dropping results, and we rate it a solid BUY.
We note the author of this post holds long call options in $RDFN