Redfin's stock is performing real well today after the company
announced that it would be firing nearly 1000 of its workers.
Because this is how capitalism works, you fire workers,
the value of your shares goes up, that's how it happens.
Well, the reason why they fired a bunch of their workers is because the housing
market has slowed down due to the Federal Reserve increasing interest rates.
And that means that a huge portion of Redfin's business model is
also getting axed.
Now, Redfin missed its third quarter earnings expectations.
And earlier Wednesday announced that it would lay off employees for
a second time this year eliminating 862 positions or 13% of its workforce.
Now, keep in mind that this isn't the first round of layoffs.
In June, they had another round of layoffs where they fired
about 8% of their workforce.
And altogether with this round of layoffs in June,
they have cut or reduced 27% of their employees, okay?
Now, as part of their restructuring, Redfin will follow the lead of the real
estate marketplace, Zillow, and this is the part that's super relevant.
And get out of the high-tech house flipping business known as iBuying,
in which companies buy houses for as little as possible, fix them up, and
then flip them ideally for a profit.
But the company said it expects to lose at least 22 million
on that project this year alone.
>> Yeah, they'll lose a lot more.
So the reason Ana loves it is because institutional investors including
startups like this are buying houses all across the country, driving up prices.
>> Yeah. >> So if you're a regular person,
this affects you tremendously, because when you go to buy a house, especially if
you're young God help you, you got a student that already weighing you down,
house prices are through the roof.
And now, you have to compete with Wall Street, and Redfin, and
all these different things, right?
So that's the phenomenon that's been hurting the entire country.
Of course, no one on TV talks about it because they're also giant,
multi billion dollar corporations.
And a lot of these guys are their advertisers, so
they purposely keep this stuff from you, okay?
So now, the reason they're in trouble is Redfin had a perfectly good service, so
did Zillow, right?
You go look up the house prices and
it's a service for, that house is worth this much.
I'm going home shopping, I can see the comparative price is actually really good,
it just makes sense, right?
But investors want more, they always want more, okay?
So they basically told Redfern give us some money Lebowski.
So they had to invent a new scheme on top of their perfectly good business, right?
>> Yeah, and by the way though that new scheme,
which is the iBuying house flipping model was messed up.
Because think about what Redfin and
Zillow also do as you go on their websites and you search for
homes that you might wanna buy, they're harvesting your data, right?
And they're using that data to their advantage in that whole iBuying
scheme as well.
>> So part of how they do that is they then have all the information and
they know how they can lowball you.
And now,
the guys who run the company in this article admit that they were doing that.
>> Yes.
>> And he says part of the reason they're stopping the business because he
feels bad.
Notice he didn't feel bad when they were making a profit, but now all
of a sudden he's found his morals now that they're losing $22 million a year.
Okay, so that is important to be very clear about it,
cuz I don't know what he said on more ways than one.
Yeah, go ahead.
>> Now, I wanna go to a statement from the CEO Glenn Kellman,
he says this graphic four.
We plan to keep increasing our share of the market, but that market in 2023
meaning the housing market is likely to be 30% smaller than it was in 2021.
The June layoff was a response to our expectation that we'd sell fewer houses
in 2022, this layoff assumes the downturn will last at least through 2023.
So if you've been keeping an eye on the housing market, you've probably noticed
that depending on where you're looking, home prices have either plateau owed or
they've already started going down as much as 20%.
The Federal Reserve, which continues to raise interest rates, says that
it has no plans to stop, they plan on continuing to raise interest rates.
And that is obviously slowing down the economy overall and
this is their response to inflation, right?
But it's having, I think the biggest impact on asset bubbles, right?
And the housing market in my opinion is a massive asset bubble.
So for all the people who already own homes and they're like super excited
because they saw the value of their homes go up significantly during the pandemic,
I hope you don't get too excited because that was based on really nothing.
It was based on the easy access to printed money from the Federal Reserve and
the institutional investors buying up entire neighborhoods of single family
homes, which is not a good thing, it's a bad thing.
All of these things artificially inflated the value of these homes.
>> So now, when the market turns interest rates are higher and
all of a sudden people don't wanna buy a house as much because they're
gonna pay a lot more in interest.
>> Yes. >> So now,
when they're doing the flipping business, and remember when you're flipping a house,
you have to buy it as low as possible and sell it as high as possible.
Then now, they're trying to screw over their own customers by lowballing them.
But even with that, even with the data advantage,
the housing market downturn made it unprofitable.
So now, they're stuck with all these houses and they can't sell them.
And guys, my family's worked in real estate before,
so I can tell you the number one problem when
that happens is then their interest rate starts to pile up.
Because they use borrowed money to buy all those houses, and
they got that from investors.
Now, that investors are getting antsy because you're losing money and
you're having to hold that asset as you're paying out more and more and
more on debt and interest.
So now, that's a double whammy, so it's a hot potato,
they got to get rid of it, okay?
But to the investors of Redfin,
I guarantee you pressured them into doing that business.
So now, you're probably yelling at them because they're losing money, but
it's your fault.
You asked them, you pressured them, they had a good business and
you said no I want more, I want more.
Now, why don't you just make money from selling the houses and
screw over customers by gathering their data?
And that's CEO I don't know them at all obviously personally, but come on brother,
like I said before, when you were making a profit, you had no moral qualms at all.
>> Of course.
>> And now all of a sudden, it's a hot potato you're trying to get rid of.
Well, I was worried about what was happening.
>> All right, yes, I'm sure you're very worried, very concerned,
sorry about that 22 million you lost this year.