Redfin (RDFN) has been seeing a lot of red lately.
The tech-powered real estate brokerage’s stock dropped on March 3 after analysts cut their price targets for the shares due to concern about the economy.
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It is a tough market out there — as Redfin can attest.
One in 7 pending home sales were canceled in January, according to Redfin, representing 14.3% of all contracts signed that month, up from 13.4% a year earlier, and the highest cancellation rate for this time of year since at least 2017.
Housing inventory has risen to its highest level since 2020, giving homebuyers more options, the company said on Feb. 28.
In addition, Redfin agents reported that some deals are falling through because buyers — and sometimes sellers — are getting cold feet due to widespread economic and political uncertainty, while mortgage rates and home prices remain high.
Redfin said a record number of pending home sales were canceled in January
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Redfin cites economic uncertainty
Combined with economic uncertainty, high housing costs are causing some would-be buyers to change their minds, the company said.
President Donald Trump said the U.S. will proceed with its planned 25% tariff on nearly all goods from Mexico and Canada, including steel, lumber and concrete, on March 4,
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Redfin’s stock is down 10.3% from a year ago and off nearly 24% this year.
The company recently missed Wall Street’s fourth-quarter bottom-line expectations.
Redfin posted a loss of 29 cents a share, wider than the loss of 20 cents a share a year earlier and missing Wall Street’s call for a loss of 23 cents per share.
Revenue totaled $244.3 million, up 12% from a year earlier and exceeding the consensus estimate of $242.5 million.
“Our fourth-quarter profits were lower due to Redfin Next, which pays our agents entirely on commissions,” Chief Executive Glenn Kelman told analysts, referring to the commission-based pay structure for the company’s real estate agents.
“Onetime transition costs were higher than expected, but our sales force has also grown faster than expected,” he said.
Analyst: Redfin has a lot on its plate
Last month, the company signed a rentals partnership with real estate marketplace Zillow (Z) . The deal will double the number of apartment listings on Redfin sites.
“The $100 million payment Redfin got via the partnership strengthens our balance sheet and partly funds a 38% increase in 2025 advertising,” Kelman said.
Related: Home buyers may see a major spring housing market change soon
Susquehanna slashed its price target on Redfin to $7 from $10, while affirming a neutral rating on the shares.
The investment firm said Redfin continued to face a challenging macroeconomy in the fourth quarter, and it expects this to persist in 2025.
The company also plans to significantly increase marketing spending in the first quarter to drive share gains, and this is expected to hurt near-term profitability.
JP Morgan lowered its price target on Redfin to $7 from $8, also maintaining a neutral rating on the shares.
The firm updated the company’s model after the Q4 report. Redfin “has a lot on its plate” in 2025, including the transition to the Redfin Next program and Zillow partnership, marketing ramp, and navigating through the housing market challenges.
Bank of America Securities lowered its price target on Redfin to $6.30 from $7.75 and reiterated an underperform rating on the shares after what it called a mixed fourth quarter and outlook that came in below the Wall Street estimate.
Following the report and guidance, the investment firm is lowering its 2025 revenue forecast by 17% and remains cautious on the long-term profitability prospects.
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