T3 Insight

Latest investment trends, data-backed homebuyer demand + the true real estate giants

Articles in this Edition

In this edition of T3 Insight, T3 Sixty's latest monthly analysis of the residential real estate brokerage industry includes articles on Latest investment trends, data-backed homebuyer demand + the true real estate giants. Take a deep dive below.

Released April 22, 2021

2021 trends in real estate investment

by: Michele Conn

A data-backed way to assess homebuyer demand

by: Mark Lesswing

The true giants of residential real estate brokerage – The Enterprise 20

by: Paul Hagey

What We're Reading

In addition to the articles, here are a few items we are reading from across the internet.

CoStar, the latest heir apparent

Costar Group, already the dominant force in commercial real estate data with some 30 acquisitions, including Lands of America, STR, LoopNet, and Apartments.com, has now turned its attention to residential real estate. CoStar, still consider an “outsider” by most everyone, is rapidly becoming an “insider” with its second significant acquisition in the industry -- Homes.com for $156 million in April 2021 and Homesnap for $250 million in December. Two high-profile acquisition RentPath and CoreLogic did not proceed but expect more strategic acquisitions to continue.

The Motley Fool

Compass goes public and surpasses a $7b market cap

For the past eight years, the industry has been both scared of, and admired Compass. Its off-the-chart $7.4B valuation, four times that of Realogy – the industry’s giant and largest enterprise by a large margin (see latest 2020 study by T3 Sixty in their annual RealEstate Alamance) – is still deemed by many as a disappointment due to its expensive earlier funding rounds. Going forward, the now public company, with quarterly earnings reports, will face more scrutiny. The industry will see if it does have the secret sauce or is simply the existing brokerage model packaged with some new technology and branding. That said, Compass, at least for now, continues grabs the imagination of the industry even post IPO.

Curbed

Digital closing provider notarize raises $130m

Notarize, which provides a platform that helps real estate professionals and others execute transactions with remote, digital notary services, raised $130 million in late March. The digital real estate transaction has become a hot commodity in recent years as everything become more remote and the needs for digital solutions to support physically distant activities have increased. The all-digital real estate transaction is not here yet, but companies such as Notarize, and their investors, are pushing hard to realize important segments of it.

Forbes

The alarm of runaway home prices

Home prices continue to reach record highs, the U.S. government is beginning to face increasing pressure around its monetary policy that has kept mortgage rates very low, and helped fuel the blazing housing market. The median existing home price rose 15.8 percent year over year in February to $313,000. In many markets, the prices continue to rise. With the Great Recession still in many leaders’ minds, advocates are encouraging the government to take a careful approach to how it handles mortgage-backed securities this round. With signs pointing toward a conclusion to the pandemic sometime in the summer, the tight inventory that has served as the limiting reagent to the housing market may increase and mortgage rates along with it, which will dampen home price appreciation and lead to a more balanced market.

CNBC

Second home co-ownership startup pacaso raises $75m

Real estate found two more unicorns (startups with valuations above $1 billion) in March with a $75 million funding round by second home co-ownership startup Pacaso and a $150 million funding round by tech-focused brokerage Side, which provides a platform that puts agents and their branding front and center. Pacaso, which offers a platform that allows homeowners to purchase shares in second homes, has reportedly hit unicorn status faster than any other U.S. company has. The startup, run by dotloop founder Austin Allison as CEO and former Zillow Group CEO Spencer Rascoff as chairman, provides an innovative twist on the housing market with its model. Side, which launched in 2017, is a bit older, but represents, too, the newer models catching the attention of investors. These companies’ fast rise and rapid growth reveal the financial sophistication that now exists in the tech-age wing of the residential real estate industry.

Bloomberg

NAR-DOJ rule change not coming for months

In November 2020, the U.S. Department of Justice filed an antitrust suit against NAR alleging its rules hamper competition. At the same time, it filed a proposed settlement that NAR said it would work with the DOJ on complying with. That proposed settlement would repeal rules that prohibit MLS participants from sharing compensation information to consumers, require MLS participants to display buyer’s agent compensation to consumers, preventing MLS participants from advertising that their services are free, prevent MLSs allowing agents to filter listings by buyer’s agent commissions, and require all MLSs to allow lockbox access to all participants. In November, the public display of buyer broker commissions and lockbox access for all agents were planned to be in place at the end of March. These changes will not take place until May at the earliest, Inman reports. The realm of commissions remains a scrutinized subject for NAR and the industry. This settlement is may just be the first of industry changes around how the industry has traditionally handled commissions.

Inman

Knock preparing to go public

Knock, which launched in 2015 as an iBuyer but pivoted to an alternative financer that partners with agents to help pre-fund mortgages for homebuyers, has hired Goldman Sachs to explore a run at going public. A $2 billion valuation is being considered. This comes as other iBuyers race to go public - Opendoor, which went public via a SPAC in December 2020 and Offerpad, which Spencer Rascoff’s SPAC stated in March it intends to take public soon. These companies are seeking access to the vast amounts of money made available in the public markets to compete for market share.

The Real Deal