by Eli Segall, Las Vegas Review-Journal, November 12, 2022
With home purchases down, sellers cutting their prices and inventory soaring, it’s not exactly a ripe time to flip houses.
This week, one big company bailed on the business.
Redfin Corp., a national real estate brokerage that also bought and sold homes, announced Wednesday that it’s laying off 862 people and closing its home-flipping business.
In an email to staff, posted on its website, CEO Glenn Kelman said the home-flipping sector Redfin and other firms entered in recent years — known as “iBuying,” or instant buying — “is a staggering amount of money and risk for a now-uncertain benefit.”
“We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now,” he wrote.
Kelman also indicated that even before its overhead expenses, the company’s buy-and-sell-fast segment, RedfinNow, “will likely lose” $22 million to $26 million this year.
Southern Nevada, with its high-volume housing market, transient population and get-rich-quick image, has long been a popular place to flip houses. But locally and nationally, house hunters have been largely pumping the brakes for months amid a sharp jump in mortgage rates, creating big headwinds for sellers.
Seattle-based Redfin has offices around the country, including one in Las Vegas, and nearly 20 agents in Southern Nevada, its website indicated this week. It expanded its house-flipping business to Las Vegas in 2019, saying the service would let people get an all-cash offer in a “convenient and fast way to sell a home.”
Under a typical iBuying model, firms make cash offers to people who upload information about their homes online. The company closes the purchase, makes some upgrades to the house and then quickly tries to sell it.
Housing markets across the U.S. have seen dramatic changes lately. Fueled by rock-bottom mortgage rates that let buyers stretch their budgets, Las Vegas’ market accelerated to its most frenzied pace in years in 2021. Homes sold rapidly, prices hit new all-time highs practically every month, and builders put house hunters on waiting lists, as fierce demand created an extreme seller’s market.
But this year, the Federal Reserve has been fighting inflation with higher interest rates, and homebuyers have pulled back.
On the resale side in Southern Nevada, 1,724 single-family homes traded hands in October, down 44 percent from the same month last year, and 7,906 houses were on the market without offers at the end of October, up 140.5 percent year-over-year, according to trade association Las Vegas Realtors.
Amid the slowdown, price cuts have become increasingly common. According to Zillow, 42 percent of Las Vegas-area home listings had a price drop in September, up from just 9.3 percent in February.
Las Vegas is far from alone in seeing buyers back out. Across the U.S., the pace of resales fell for the eighth consecutive month in September, the National Association of Realtors reported.
Housing markets are prone to ups and downs, especially in Las Vegas, and there’s no telling how long the market will keep slowing or when it will shift course again.
But this being Vegas, where gambling extends far beyond the casino floors, don’t be surprised if more flippers lay money on the housing market at some point.