Q2 2023 Redfin Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the Redfin Corporation.
Quarter 2023 earnings conference call our hosts for todays call is Meg mentally head of Investor Relations.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
I would now like to turn the call over to your host Meg you may begin.
Good afternoon, and welcome to read todays financial results conference call for the second quarter ended June 32023.
Our next mentally and head of Investor Relations joining me on the call today is Glenn Kelman, our CEO and Chris Carlson our CFO .
Before we start note that some.
Our statements on today's call are forward looking.
Bolivar assumptions and expectations related to these forward looking statements are reasonable, but our actual results may turn out to be materially different please read and consider the risk factors in our SEC filings together with the content of today's call.
Any forward looking statements are based on our assumptions today and we undertake to update these statements in light of new information or future events.
On this call we will present non-GAAP measures when discussing our financial results I encourage you to review today's earnings release, which is available on our website at investors Redfin Dot com.
More information regarding our non-GAAP measures, including the most directly comparable GAAP financial measure and related reconciliation.
All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated.
Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call and a full transcript and audio replay will also be available soon after the call with that I'll turn the call over to Glenn.
Thanks, Mike and hi, everyone.
The second quarter of 2023 rental generated $276 million in revenue and an adjusted EBITDA loss of $7 million.
Both within the range as we had forecast in our last earnings call.
Our net loss of $27 million was better than our forecasted loss between 35 and $44 million due to a $20 million from purchasing our 2025 notes at a discount.
But even as our share of online demand has increased sharply we're unlikely to get at our second half sales to earn the full year adjusted EBITA profit that we had forecast coming into 2023.
We now expect 2020, three's adjusted EBITDA loss to be about $45 million.
This is an improvement of more than $140 million over 2020, twos adjusted EBITDA losses with similar gains planned for future years from.
From July 2023 to June 2024, we plan to generate a full year adjusted EBITDA profit.
We still expect between $4, two and $4 3 million existing homes to sell in 2023 the.
The red since market share has been lower than expected.
After year over year share gains in every corner since our 2017 public offering we lost two basis points of share in the fourth quarter of 2022, and one point in the first quarter of 2023.
In the second quarter of 2023, our year over year share loss widened to eight basis points, mainly due to onetime setbacks agent layoffs forced us to reassign about a third of our active customers and the closure of redfin now eliminated about 12% of our listing demand.
We expect market share to improve from quarter to quarter by the fourth quarter and perhaps as early as the third quarter.
Throughout the year demand largely met or exceeded our expectations, but closed sales happen.
From 2017 to 2022 between six 3% and seven 2% of the people, who contacted redfin or our partner agents at close to sail with us by at this point in the year in.
In 2023 that number is five 5%.
We expect close rates to return to historical norms for two reasons.
As customers adjust to higher mortgage rates, our sales will become more predictable.
And our plan to recruit and retain a more sales driven agent, which we'll discuss later in this call will help us compete better against brokers, who are bit hungrier than ever before.
Our real estate gross margins have improved from 29% in the second quarter of 2022% to 31% in the second quarter of 2023.
Once we start hosting tours for so many people who canceled the home buying plants gross margins will go up more.
Eliminating the Homebuyer Commission refund, it's one source of margin gain but we have also lowered the ratios of managers and support staff to agents and switched from employees to contractors for listing photography, improving our long term unit economics.
One factor that will keep lifting margins, but at the expense of share is the shift of partners.
We estimate that in 2020 for as many as 55% of our customer inquiries will be served by a partner agents up from 45%. So far this year and 37% in 2022.
Our sale whether from a partner or an employee has sustained contribution to share, but our employees yield 40 plus percent more sales from our same home bank traffic.
Since the sales are shifting to partners are only marginally profitable for employees to handle we can't worry about how many more closings and employees could have gotten.
The share we're focused on is our share of significantly profitable sales.
And regardless of how much demand, we shipped to partners or how much we limit spending our growth can continue because its primary sources never been low cost capital.
<unk>, a better listing search site and then using that offer online visitors better service.
Even with a drastic reduction in advertising redfin dot com has been drawing visitors away from rival.
According to Comscore, which we use to compare our traffic growth to others.
Second quarter visitors to redfin dot com increase year over year by 9% compared to a 5% decline for the largest for sale search site and a 13% decline for the second largest the gap in year over year visitor growth between redfin and these competitors averaged 12 points in the first quarter and 17 in the <unk>.
<unk>.
We know that this online traffic growth gives our sales force more bona fide opportunities to gain share because we track the demand from our side all the way through to a sale whether the customer close a threat.
Switch to another broker.
Comparing the first half of 2023 into the first half of 2022.
A higher proportion of the people who bought home had contacted a redfin agent 12 months prior to their purchase.
Our investment in artificial intelligence is one reason, we're confident restaurants traffic can keep growing this.
Software, we've already built for estimating a home's value are recommending a listing is based on artificial intelligence artificial intelligence as wire engineers don't have to update that software to recognize the growing importance of air conditioning in Seattle, where the increasing likelihood that post pandemic homebuyers aren't looking further afield.
Software updates itself, we're now extending this software from for sale listings to rental listings in October 2022 for estimating the amount of home will rent for and in the third quarter of 2023 for recommending apartments that we think are visitors will like.
We've also been at the forefront of conversational real estate search by open AI, Google and Microsoft Technologies.
But since our company spent so much on labor to interact with customers prepare offers and underwrite closing the larger opportunity maybe in helping homebuyers, who have contacted us for service.
We have explored uses of this technology to make the redfin employees super calm towards more efficient or to host conversations with customers years away from a purchased letting our agents spend more time with the people about to complete a sale.
We believe the efficiency gains that are technology powered brokerage can get through the engineers, we already have accessing low cost generative artificial intelligence via the internet.
Over time give us a competitive advantage commensurate with the first disruption in real estate when redfin first public listings on an online map.
Even as we expect increasing yields from our technology investments sales performance should also improved.
We expect that our low listing fees, coupled with our unrivaled ability to get online real estate shoppers out for in person Homesource can drive share gains for years to come and most U S markets.
But at higher priced coastal markets, starting with a pilot in San Francisco and L. A we're entering 2024 with a different approach to hiring agents and the San Francisco Bay area. Our share is below 2%, but the share of people, who bought a home and who had earlier contacted our agents for service is nearly 30%.
It's even higher for purchases above $1 million.
Anyone launching a brokerage today with that much demand would have a massive advantage in recruiting and retaining the best agents entering 2024, we plan to give San Francisco and La agents. The lion's share of the commission on self source sales.
Keeping for ourselves the high margins on <unk> sales.
Our goal is to hire and keep agents, who can deliver better service and higher close rates for red hat source customers buying homes above $1 million and incremental profits from their own sales too.
This model works in California, we will extend it to other coastal cities with higher home prices driving share gains on our largest most profitable markets coupling. These changes with a normalizing housing market whether it happens in 2024 beyond could have a transformative impact on revenues gross margins and net income.
Beyond the improvements in our core brokerage business, we're making progress at broadening our online marketplace with for sale and for rent listings.
And at broadening the products, we sell to the people using that marketplace with mortgage entitled service, it's hard to be expansive through a downturn, but the result will be a more valuable company able to compete at the scale needed to win.
The rental listings, we've added the red Dot com or one reason overall traffic growth has accelerated.
June 2022 to June 2023, the number of Red Dot Com assessments and that included a visit to a rental property nearly doubled all with virtually no ads promoting red hat's rental search.
Aided in part by this new source of consumer demand and even more so by an expanded product offering strong value proposition and rejuvenated salesforce.
Second quarter revenues increased 19% year over year.
More growth is ahead rents second quarter net bookings, which are the annualized revenues rent added through sales to new customers less the annualized revenues lost departing customers increased more than tenfold from 2022 to 2023 and also grew from the first quarter to the second.
Since the price increase boosted first quarter bookings topping that number in the second quarter has been especially impressed though from quarter to quarter rent adjusted EBITDA losses narrowed from $9 7 million to $8 7 million keeping us on track to breakeven in the fourth quarter.
But our investment in a larger vision isn't just limited to our online presence. We also want to offer our customers more service risks and can more can earn more income from visitor than any other real estate company.
This will take time to pay off just because the equity the lender. We acquired in April 2022 is the red cell business most affected by rising rates the percentage of redfin homebuyers, who used to be equity to finance their purchase increased from 8% in the second quarter of 2022% to 20% in the first quarter of 2023.
But that attach rate dipped to 19% in the second quarter of 2023.
We've now entered a second slower stage and the integration between pay equity in redfin, requiring us to address problems market by market to get attach rates to the 28% to 32% level for places like Atlanta, Salt Lake City or Maryland.
Redfin in Bay equity exacts or visiting low attach rate markets and bay equity is hiring loan officers some capacity gated areas.
Will take time to increase attach rates from here, but we believe we'll keep making progress.
Pay equity sales through brokers other than redfin are projected to increase from the first half to the second the Bay equity is now likely to report a small adjusted EBITDA loss for the year.
We feel good about its long term future. The equities leaders are disciplined and entrepreneurial in its services excellent. So this business will earn significant profits in all but the most severe rate environment.
Our title business as one reason, we're confident that as pricing pressure eases on lenders.
Can keep lifting attach rates for ancillary services from the second quarter of 2022 in the second quarter of 2023 title revenues grew 54% with attach rate exceeding 60% in markets launched prior to 2023.
Beyond title service the second major component of our other segment as digital revenue, which in the second quarter grew more than 150% year over year validating our plan to make more money from our online audience.
About half of this money came from the ads, we ran address <unk> dot com much of the rest came from our mortgage marketplace for connecting homebuyers to lenders other than the equity which doesn't have the national sales center to handle online demand.
By the end of the year, we expect a significant increase of the revenue we get from builders to want to promote their listings on redfin dot com.
Rather than hiring our own sales force to sign up builders, we formed a zillow partnership to tens of thousands of new construction listings to our online marketplace.
And we will get only a portion of the revenues generated from the addition of these listings to our site, but that revenue will be almost pure profit.
Over several years Red said, we'll continue to prioritize digital revenue projects, we expect our digital revenue grow faster than any of our other businesses.
Proving overall margins and reducing earnings volatility.
Before turning the call over to Chris let's discuss the housing market, we should be careful in the months ahead about claiming victory from any year over year gains. This will now be comparing the second half of 2023 to a period in 2022 when the market was in full flight sales.
Sales volume is near rock bottom home prices are stable or even rising due to low inventory, which is likely to remain low July year over year drop in active listings was the largest in nearly 18 months.
There is enough inflation risks that the federal reserve will have to maintain the possibility of another high through the fall keeping mortgage rates near 7%.
But the almost miraculously good news is this most economists wants you to recession is unavoidable and now see it is unlikely.
When rates come down housing market, we will be poised to grow again for now the only way resident plans to grow is by returning to our long history of methodical glorious share gains.
Take it away Chris.
Thanks, Glenn we're pleased with our second quarter results, which were in line with our expectations. We sold our last redfin now houses in the second quarter and moved our properties business to discontinued operations to.
To simplify comparisons to prior periods I'll be discussing results for our continuing operations unless otherwise noted.
First quarter revenue was $276 million down 21% from a year ago.
Gross profit was $100 million down 10% year over year.
Total gross margins expanded by 450 basis points from 31, 9% to 36, 4%. This expansion was driven by a mix shift to higher margin businesses as well as fundamental improvements and real estate services gross margin.
Real estate services revenue, which includes our brokerage and partner businesses generated $181 million in revenue down 28% year over year.
Brokerage revenue or revenue from home sales closed by our own agents was down 29% on a 33% decrease in brokerage transactions and a 6% increase in brokerage revenue per transaction.
The increase in revenue per transaction was driven by the elimination of our Homebuyer Commission refund as well as revenue from concierge renovations, which more than offset a 6% decrease in average home prices for brokerage transactions.
Revenue from our partners decreased 4% on a 1% decrease in transactions and a mix shift to lower value houses.
Real estate services gross margin was 31, 1% up 170 basis points year over year. This.
This was primarily driven by a 410 basis point decrease in personnel costs and transaction bonuses.
Set by 110 basis point increase.
In seller home improvement expenses 40 basis points in mileage and fleet costs and 40 basis points in listing expenses.
Total net loss for the real estate services in the second quarter was $9 million up from a net loss of $19 million in the prior year and adjusted EBITDA income was $9 million.
From a loss of $5 million in the prior year.
The increase was primarily attributable to higher gross margins and lower operating expenses, which more than offset lower revenues.
Our rental segment posted its third straight quarter of growth with revenue of $45 million and growth of 19% <unk>.
Total net loss for rentals was $23 million slightly worse than that lots of $19 million in the prior year as higher gross profit was offset by higher operating expenses.
Total adjusted EBITDA for the second quarter was negative $9 million and we still expect our rentals business to generate positive adjusted EBITDA by the fourth quarter of 2023.
Our mortgage segment generated $38 million in revenue down 28% year over year.
This result was within our guidance range and better than industry wide contraction of approximately 32%, indicating share gains against the market.
Mortgage gross margin was 10, 8% down from 12, 8% a year ago as cost reductions have not fully offset the impact of lower volumes.
Total net loss for mortgage was $4 million an improvement from a net loss of $6 million in the prior year.
Total adjusted EBITDA loss was $2 million in.
An improvement from a $6 million loss in the prior year.
Our other segment generated.
$11 million of revenue in the second quarter compared to $6 million in the prior year.
Both our title and digital revenue business group.
Other segment gross margin was 44, 1% up from a negative <unk>.
0.1% a year ago.
Total net income was $3 million compared to a net loss of $2 million in the prior year and adjusted EBITDA was positive $4 million.
<unk> to negative $1 million in the prior year.
Glenn noted, we see an opportunity to continue to grow our digital revenue business, which should be nicely accretive to the profitability of redfin overall.
Turning back to consolidated results total operating expenses from continuing operations were $148 million.
Down $36 million year over year.
The decrease was primarily attributable to $23 million.
Lower marketing expenses $11 million in legal acquisition and restructuring expenses in the prior year that did not repeat in the current year and $2 million and lower personnel expenses.
Net loss from continuing operations was $27 million compared to a net loss of $75 million in the prior year.
The impact from discontinued operations was negligible. So total net loss was also $27 million.
This was better than our $44 million to $35 million guidance range due to.
$20 million gain on the extinguishment of notes.
Only $4 million of this gain was anticipated in our guidance.
Our adjusted EBITDA from continuing operations of negative $7 million was in line with our guidance range of negative $9 million to positive $1 billion.
Diluted loss per share from continuing operations attributable to common stock was 25 compared with 71 year ago.
Now turning to our financial expectations for the third quarter as well as longer range profitability targets.
Starting with the profitability targets I wanted to underscore what Glen said earlier, given the challenging market conditions, we no longer expect to reach our target of being adjusted EBITDA positive in 2023.
While our top of the funnel activity remains strong our close rates and market share have been lower than we expected.
Against this backdrop, we don't think it would be wise to cut our way into breakeven.
Consumer demand for houses remains strong we want to make sure that redfin is positioned to capitalize on market recovery. When it happens. So we're pushing out our timeline to achieve this goal, but still remain focused on running the business for profitability.
Now expect to achieve adjusted EBITDA breakeven on a trailing 12 month basis in the first half of 2024.
Furthermore, we still expect to achieve net income profitability in 2024.
For the full year 2023, we expect adjusted EBITDA loss from continuing operations to be closer to $45 million.
And we expect real estate services gross margin to be roughly 27% with the potential for further expansion in future years.
Turning to our expectations for the third quarter of 2023.
We expect total revenue between $265 million.
200.
And $79 million, representing a year over year decline between 13% to 9% compared to revenue from continuing operations in the third quarter of 2022.
Included within total revenue, our real estate services revenue between $172 million and $182 million.
Rentals revenue between $46 million $47 million mortgage revenue between $35 million and $38 million in other revenue of approximately $12 million for real estate services. We expect gross margins to increase by 400 600 basis points compared to the third quarter of 2022.
Total net loss in creating both continuing and discontinued operations is expected to be $30 million.
$21 million compared to a net loss of $90 million in the third quarter of 2022.
This guidance includes approximately $25 million in total marketing expenses $18 million of stock based compensation and $17 million of depreciation and amortization.
Adjusted EBITDA from continuing operations.
As expected to be between $4 million and $14 million.
Compared to an adjusted EBITDA loss from continuing operations of $51 million in the third.
Third quarter of 2022.
Furthermore, we expect to pay a quarterly dividend of 30640 shares of common stock to our preferred shareholders.
This guidance assumes among other things that no additional business acquisitions investments restructurings convertible note for either stock repurchases or legal settlements are concluded that there are no further revisions to stock based compensation estimates and now let's take your questions.
At this time, we will conduct a question and answer session.
If you would like to ask a question. Please press Star then the number one on your telephone keypad now and you will be placed in the queue in the order received.
Once again to ask a question press Star then the number one on your telephone keypad now.
Your first question comes from Yigal <unk> of Citi. Your line is open.
Hey, guys good afternoon.
I have two questions and I think they are.
Pretty related I'll, just I'll ask them together so.
First.
On the overall market.
Glenn and Chris you guys I think are alright, no are much smarter on this.
On the housing world than I am right, you live and breathe it.
And.
You talked about a recovery youre talking about.
Not seeing a recession, but at the same time talking about rates coming down.
This is something we've been kind of hearing from around the ecosystem customers learning to adapt some higher rates and all that but at the same time you guys.
<unk> put out a lot of things about affordability. There is no real incentive for people to move in the near term.
The rates that they have.
I just struggled to find like where where the logjam breaks.
Calvary other than waiting for everyones rates to just kind of go.
<unk>, especially on the adjustable side and then.
There's not that much more of a.
But incentive to not move although you still have the affordability problem and then tying that into.
Maybe expanding a little bit on.
On the agent strategy, so with some of the shifts we're making here.
Are you going after more partner agents, then are you continuing to kind of freeze.
Your your full time agents, but not.
So, but not laying people off and then I'm not sure I fully caught how the new structure.
L a and Seattle, San Francisco helps kind of improves the financials. The way you were talking about so I know, there's a lot in there but.
Hopefully two pretty important topics. Thanks.
Great question. So first of all on the housing market.
We do not anticipate any significant change to the housing market through the second half of 2023, Youre absolutely right that high rates are going to limit the amount of inventory available.
For sellers and for buyers.
Affordability is just going to be a huge issue so.
We expect $4 2 million units to trade in 2023, which is unchanged. We did say that we want to be prepared for a market recovery, but.
But we also expect to be able to grow in this market just by gaining share which should start in Q3 or Q4 of 2023, we just have to lap some onetime setbacks like the closer of redfin now and laying off about a third of our sales force.
That is our basic take on the housing market, which is.
In a jam is unlikely to change anytime soon the only good news is that the rate increase is not the whole U S economy into a tailspin so housing should be in a good place as rates.
Probably in the first half of 2024, who knows what that's always hard to guess.
So the second issue.
There are two elements to our strategy one we've already discussed one is absolutely near so the first element is that we're moving more of our demand partners to make the business more resilient, so a year and a half ago about 37% of our demand went to partners.
By 2024, we expect 55% of demand to go to partners Thats part of our long standing strategy that we've amply discussed in previous calls.
It will affect our market share just because our employees yield about 40% more sales than our partners from the same home buying traffic.
But those incremental sales would have been very profitable anyway, and we don't want to carry the fixed cost. So we are shifting to partners here's what's new this is what we talked about for the first time today, which is that we're hiring a more traditional type of Asia. So usually the tradeoff at red hat when we.
Approach agencies, Youll get more redfin customers.
But at a lower split so you have to close more sales to make the same amount of income or more income.
Now we are trying to offer agents the best of both worlds, where we allow agents to close sales from their personal network at a split with redfin that similar to what they would get as a traditional broker while retaining the high margins on line 10 store sales, so, let's say an agent's closing.
<unk>, <unk> sales and California above $1 million that could come over in a redfin and earn about the same income, but we can help them meet.
Customers to close another 10, or 15 sales and that would be incremental and that would be at the redfin margin. This is what our competitors fear, we would do and just wonder if they have always hoped we would not do.
And we think it's going to lead us closed sales at significantly higher rates, where you can go out and compete for an agent who has been very successful in the market, who still want some larger business and that will increase close rates in these coastal markets, where we're seeing about a third of all the customers who end up buying a house about a third of that contract right.
And for service, even though our share is one 5% or something like that and so we can do much better.
We can increase close rates by hiring a better Asia. We think this is going to unlock a lot of growth.
So youre hiring just a follow up on that Youre hiring. These agents are of the agents that you currently have switching them over to this model I'm not clear if you're if this means you are hiring.
People.
We're doing both so.
We are announcing the plan, we need to do better in coastal markets, where the most lucrative home sales happen.
So we have open requisitions in San Francisco that we're going to aggressively start filling in the fourth quarter, especially.
And we're going to start hiring a different profile of agent.
With lower fixed costs more variable pay.
Just a more traditional sales person who wants to augment his or her income with redfin store sales.
And we're switching our existing agents in those pilot markets to this pay plan.
Got it.
Really interesting.
Because I can see how that works out thank you.
Me too.
Your next question comes from John Campbell with Stephens. Your line is open.
Hey, guys. This is AJ stepping in for John Thanks for taking our questions.
You, obviously changed your adjusted EBITDA profit target here, but can you just talk to me about your confidence in hitting this new target of hitting adjusted EBITDA profitability over the next 12 months.
Then if things play out as industry forecasters are currently expecting are there additional cost levers that need to be pulled or you.
To achieve this target without any further cost reduction efforts can you just generally just help bridge us to this new target.
We've assumed there will be no further cost reductions.
In setting this target and we've been careful about the revenue projections that we make.
At some point, we do need to return to share gains, but we have a basis for believing that will happen in part by looking at pending sales.
Trends are already positive.
But also just based on some.
Some of those onetime step back to you already discussed the closer of Redfin now accounts for 12% of our listing so we need the laptop.
We put our sales force by a third that disrupts the sales cycle for about six months, we're about to get beyond that effect.
And then we just have really strong traffic growth powering US right now in terms of the top of the funnel.
So all of those factors combine to make us believe that we can take share.
And we're not expecting aggressive share gain.
When we made this earnings forecast so Chris I don't know if you want to add any color, but it's not a rosy forecast when you have to take the number down do you want to give yourself a margin there.
Two other comments I'd make for the rest of this year and into the first part of next year also and that's that our rentals business continues to make profit.
<unk> towards profits in the fourth quarter of this year, we expect to be adjusted EBITDA positive.
And we expect continued growth into next year, So that's a place where that.
Bottomline is changing for redfin, and that's making a difference and I expect it to continue to make a difference into next year and then the second is something else. So we talked about on the call today.
That is that our digital revenue.
Has been increasingly expect it to continue to increase so that becomes an even more important contributor to growth contributor in the process as we move forward.
The final thing to say about 2023 is that it is half over.
So you always have more confidence in.
Your projections when you have six months on the com instead of 12.
Specialty win.
<unk> got about 40 days of visibility on revenue of perfect visibility on revenue.
At least in real estate services mortgages, a little bit.
Got it great. Thanks for the color there and then Chris you touched on digital AD revenue can I, just want to explore that a little bit further.
Is the introduction of advertisements at all influence the consumer experience from what you've heard and then looking more long term should we expect this to continue when housing starts.
It's a per back up and you might not need this additional high margin revenue stream.
Just essentially trying to gauge is it safe to assume that this is kind of part of the long term plan and here to stay.
It is.
So if we run video apps on the side I think it will affect our standing with Google and other search engines and.
And that's a trade off that we're going to be very careful about just because.
It's been Buttering, our bread for so long getting traffic from Google.
In other places like that.
So I don't know that were going to be the absolute most aggressive about monetizing every single webpage with display ads, we have other ways to monetize that customer that can be very lucrative.
But it's a long term.
Ponant of our strategy.
Real estate services, so cyclical margins really get compressed in a down environment and obviously digital revenues can be a little bit cyclical, but not nearly as much.
So just having that green money come in month after month, and it's been really good for our P&L.
Thanks, Glenn and good luck the rest of the year.
Thanks.
Once again, if you have a question. Please press Star then the number one on your telephone keypad.
Our next question comes from Bernie Mcternan with Needham <unk> Company. Your line is open.
Hey, this is stefanos crist, calling in for Bernie Thanks for taking our questions.
Just a quick one on the mortgage attach rates.
So any more detail, there and puts and takes and maybe expectations for the rest of the year.
Mostly what was in the prepared remarks so.
Okay.
We think we can move that number up just because we've seen some markets is that a sustainable rate of 30%.
But.
It is going to be hard.
So in some areas the equity just doesn't have enough loan officers they need to recruit more.
And other areas.
We need to make sure that we just have really good sales execution by having executives visit those offices, but it's.
The challenge, we're taking personally I'm flying to markets that have low attach rates.
To make sure that I understand exactly what's wrong from the equity side and the redfin side.
And just showing up makes a statement all by itself.
So I don't think we're going to see a seven point jump in attach rates from quarter to quarter.
But I do think we're going to keep moving up.
There is just incredible price pressure on lenders to right now.
Yes.
So that's the final issue is that there are still lenders willing to buy the business willing to loan money.
No profit.
At a loss.
Just because they're still trying to keep their underwriters busy.
So as the market normalizes, I think it'll be easier to drive attach rate to we just can't wait for that so we're rolling up our sleeves, and citing hand to hand door to door.
No that's great. Thank you.
Your next question comes from John <unk> of Jefferies. Your line is open.
Hey, guys. This is Ben on for John .
Yeah.
So on web traffic, you're clearly, making some nice strides there.
Can you help us think about where that growth is coming from whether it's you know folks looking for rentals or new homes you are financing.
Really just largely the core portal and then.
As a follow up if you could share with us how you expect the partnership with Zillow to contribute on that front and then any other thoughts you have on what that partnership means for your business that would be appreciated as well thanks guys.
Sure well.
The main reason, we're getting more traffic is that we're competing as a national scale portal at some level rents and had been a regional site where we.
We had very strong traffic in coastal markets, but because of our retail model. We had been slow to launch in places like Cleveland or Kansas City.
So expanding across the United States offering a better listing search experience, making sure the site loads very quickly and just being at the center of every real estate conversation in terms of our link building efforts public relations. All of that has helped establish redfin dot com. That's one of the top places to go for for sale list.
Things and then adding rental listings.
<unk> broadened our authority so that when people are searching for housing generally on Google we are relevant not just for people looking for for sale listings, but rental listings, so I'd say expansion.
Of inventory on two different fronts geographic and then inventory type core sale and rental have been a big part of this.
And then just offering a better listing search site is another big part of it.
It's always been outrageous to me that we're the number three site for sale traffic.
When.
We think our search experience is so good.
That's why we're just going to continue.
To take.
Search share we hope.
And then as far as the Zillow partnership is just very consistent with that whole thesis that one of the ways to compete for traffic is just to have more listings and working with Zillow, let us get more lifting fast or we could have hired our own sales force approach to build a stronger listing so that they don't put in multiple listing services. It would have taken years.
<unk>.
The industrial logic of working with Zillow.
It was really strong we have to split the park.
They will get some of the revenue that we help them generate and assured because they've helped us.
Sign up those builders with their sales force.
But we think it gives us better digital revenue now in EBIT.
Over five years this is a deal.
It's more profitable to building our own sales force so.
Even though sometimes slugged it out with them for traffic.
We're glad to be working with them on this it's been a good partnership.
In its first.
24 hours.
Thanks I appreciate it.
Once again to ask a question. Please press Star then the number one on your telephone keypad.
Alrighty, everyone I think thats it we.
Kate you tune it and we're going to work our tails off to make as much money as we possibly can.
Thanks for everyone's support and we'll talk to you in a quarter.
This does conclude today's Redfin Corporation second quarter 2023 earnings conference call. Thank you everyone for attending have a wonderful rest of your day.
Okay.
Yes.