What We're Reading
T3 Insight Monthly Digest Readings
- Reading for: May 2021
- From: The Orange County Register
- Commentary
After 43 years with the California Association of Realtors, including 32 years as CEO, Singer has announced he’s retiring at the end of the year. Singer led the nation’s largest state association with savvy and an aggressive, innovative bent. He played a key role in the development of popular real estate form software zipLogix, which CAR’s for-profit subsidiary Real Estate Business Services developed (Singer led REBS as CEO as well for many years). In the annual ranking of the industry’s most powerful leaders, the SP 200, ranked Singer among the most powerful association execs in the industry since it launched.
- Reading for: May 2021
- From: Inman
- Commentary
Cairn Real Estate, run by Chairman and CEO Rick Davidson, and backed by private equity firm Aperion Management has a goal to acquire brokerages companies and build a new national real estate enterprise. Its first major acquisition occurred in May when Cairns acquired the brokerage JP and Associates Realtors together with the fast-growing JPAR franchise. Davidson previously served as president and CEO of Century 21 from 2010 to 2017.
- Reading for: May 2021
- From: Street Insider
- Commentary
Another example of the power that the public markets gives companies – Fathom Holdings, public company parent of agent flat-fee brokerage Fathom Realty, acquired E4:9 Holdings, which has mortgage, insurance and marketing subsidiaries. Fathom will use the acquisition to build out its ancillary services.
- Reading for: May 2021
- From: The Real Deal
- Commentary
As Robert Reffkin said during the T3 Summit, going public is just a financing event, one that gives a companies the resources to invest in growth and scale. Acquisitions such as the one Compass made in digital transaction management startup Glide Labs in April represent an example of this. Compass has long marketed itself as a tech company, and it has leveraged its financing to make that story a reality with acquisitions of promising real estate tech startups like Glide, title startup Modus and popular CRM provider Contactually.
- Reading for: May 2021
- From: New York Times
- Commentary
An analysis by the New York Times of U.S. migration patterns reveals that most of the pandemic’s effect on moving had to do with movements from large metros to smaller ones. Aside from this trend, migration patterns in 2020 resembled those that had been forming over the last several years: namely that cities largely in the South and Southeast continued seeing net growth while more expensive metros in the West and Northeast saw an outflux. The pandemic undeniably changed how people work and live, which will have long-lasting impacts on communities throughout the country. As remote work has made some areas more accessible to workers, real estate demand has also spread out, which should create a more dispersed, geographically balanced industry.
- Reading for: May 2021
- From: Inman
- Commentary
In the latest industry lawsuit, RE/MAX uses eXp Realty, alleging the company improperly recruits agent and broker affiliates and alleges the company advertises “false and misleading information” about RE/MAX commission structure. These types of suits are not uncommon but they industry has begun to see a flurry of them as competition heats up among the giant companies at the top of the industry. A host of brokerages have sued Compass, discount brokerage REX has sued Zillow Group, the U.S. Department of Justice sued NAR, and the industry class-action antitrust commission-related lawsuits are still in court.
- Reading for: May 2021
- From: Vendor Alley
- Commentary
After acquiring forms software provider zipLogix in 2019 and CMA developer W+R Studios in December 2020, Lone Wolf continued its real estate tech acquisition spree with the acquisition of both CRM Lion Desk and real estate digital marketing tech company HomeSpotter in May. Lone Wolf represents the increasing tech consolidation trend occurring in real estate, which is giving brokers and agents fewer tech providers to choose from but the ones they do have, now offer deep, well-rounded tech platforms that provider richer functionality.
- Reading for: May 2021
- From: Inman
- Commentary
The nation’s 1,000 largest brokerages increased their market share to 52.2 percent by 2020 sales volume, according to the 2021 Mega 1000. That represents a growth of 16.2 percent from their 2017 share. The U.S.’s 10 largest brokerages grew share at an even higher rate over that time period – increasing it 34.8 percent to 31.0 percent total share. T3 Sixty data continues to show, again and again, the largest companies in real estate are getting larger, and doing more business. The industry is in an arms race as the big aim to get bigger.
- Reading for: May 2021
- From: CNBC
- Commentary
The pandemic forced lumber providers and suppliers to prepare for a construction freeze, but the subsequent torrent of activity after a brief pause surpassed expectations and left the building industry with much more demand than it could handle, and prices have risen accordingly, an estimated additional $36,000 cost for building a single-family home. Constructing new homes is one of the most direct ways the industry can balance the current strong sellers’ market, but this relief valve is hampered at the moment.
- Reading for: May 2021
- From: Inman
- Commentary
Realogy announced an all-time high revenue of $1.5 billion in its first quarter earnings report; this represents a jump of 32 percent from the first quarter 2020 for the firm. But Realogy wasn’t alone in having a strong first quarter among the many now-public real estate companies. Zillow Group beat its outlook with $1.2 billion in revenue, Redfin grew revenue 40 percent year over year, eXp World Holdings more than doubled revenue year over year and Compass grew revenue 80 percent from a year ago.
- Reading for: May 2021
- From: CNN
- Commentary
NAR data shows that the median sale price for U.S. homes reached a record $341,600 in April, a 19 percent jump from April 2020. Homes also sold at record speed, with just a median of 17 days on the market. Low inventory and relatively low interest rates are helping push prices higher, as is the increasing number of all-cash buyers, according to NAR. This is creating tough conditions for lower-income and first-time buyers. While interest rates remain low, and construction stagnates with higher costs and fees, the industry looks poised to live with these conditions for at least the next year or two.
- Reading for: April 2021
- From: The Motley Fool
- Commentary
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.
- Reading for: April 2021
- From: Curbed
- Commentary
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.
- Reading for: April 2021
- From: Forbes
- Commentary
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.
- Reading for: April 2021
- From: CNBC
- Commentary
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.
- Reading for: April 2021
- From: Bloomberg
- Commentary
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.
- Reading for: April 2021
- From: Inman
- Commentary
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.
- Reading for: April 2021
- From: The Real Deal
- Commentary
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.
- Reading for: March 2021
- From: Freddie Mac
- Commentary
Freddie Mac studied U.S. migration trends in the decade from 2010-2019 and found that the populations of the South and West are growing fastest in the U.S. Over that period, the metros of Austin, Texas, and Raleigh, North Carolina, grew the fastest and second fastest, respectively, followed by Orlando, Florida, Houston and San Antonio. The study also finds that these growths occurred predominantly in the suburbs of those metros versus the city centers, and that population growth doesn’t correlate directly with home price increases. Home price increases, Freddie Mac found, increase more based on per-capita income. As the nation undergoes a great reshuffling in response to the pandemic, and the increased work flexibility it provides, these trends appear likely to continue. House prices, warmer weather and suburban space will continue to pull buyers.
- Reading for: March 2021
- From: Opendoor
- Commentary
Opendoor, which pioneered iBuying when it launched in Phoenix in 2014, has introduced cash-backed offers to buyers in 13 of its markets, joining other iFunders who have jumped in with two feet into the alternative real estate financing world. Like iBuying, cash-backed offers adds a bit more risk for the company, but secures it valuable mortgage business, something it, many other brokerage companies, covet as key parts of their business models. In an inventory-starved market, as exist today in most areas of the U.S., cash-backed offers free of financing and other contingencies give buyers a leg up, and, Opendoor a seller, if the buyer also has a home to sell. These continued innovations around alternative financing in real estate are upping consumer competition for brokerages and lenders.
- Reading for: March 2021
- From: Redfin
- Commentary
In the interest of building out the extreme top-of-funnel in home sales, real estate companies have been building out rental strategies, with increasing force. Zillow Group has increased its focuse on this in recent years, and now Redfin dives into rentals with its pending acquisition of RentPath. CoStar Group, which just jumped into the residential real estate sales arena with its December acquisition of Homesnap, had tried to acquire RentPath in 2020, but the U.S. Federal Trade Commission, citing its anticompetitive outcome, sued to block it from going through. CoStar owns Apartments.com, which it acquired in 2014 for $585 million. As the residential real estate space deepens and broadens with consolidation and massive outside investment, all parts of the residential ecosystem will be increasingly mined. The dive into rentals by these companies is an example.
- Reading for: March 2021
- From: The Real Deal
- Commentary
The real estate money train keeps chugging along as another residential real estate tech startup is set to go public via SPAC. Opendoor was the first to usher in this popular go-public route when it went public in December 2020. Doma, which streamlined and digitized the title process and founded in late 2016, posted a net loss of $35.1 million in 2020 with expected 2021 losses of $103.1 million. Closing services and other services ancillary to brokerage continue to get swept up in the momentum as the brokerage industry consolidates and matures.
- Reading for: March 2021
- From: Bloomberg
- Commentary
Compass filed its long-awaited financial registration statement on March 1 as it prepares for its IPO. In it, the company revealed staggering revenue, and losses. The company pulled in $3.7 billion in revenue in 2020 with a net loss of $270 million, and also reported nearly $152 billion in 2020 sales volume, which puts it solidly in the running for the nation’s second largest brokerage by annual sales volume, in competition with HomeServices of America (both likely behind Realogy Brokerage Group, when audited numbers come out in the 2021 Mega 1000 in a few weeks).
- Reading for: March 2021
- From: Notorious Rob
- Commentary
On the heels of a standout fourth quarter 2020 earnings release, in which it reported a net income of $46 million on $789 million in revenue, Zillow Group announced that it is turning the Zestimate into a live offer in 20 of the markets where it operates its iBuying service Zillow Offers. The live offer is contingent on Zillow reviewing more details about the house and inspecting it, but the move brings real estate one step closer to pricing transparency in these markets. In theory, these “live offers,” would create price floors for these homes, and listing agents looking to earn sellers’ business, would have to say they could feasibly list and sell the home for at least as much as the offer.
- Reading for: March 2021
- From: Inman
- Commentary
With Zillow Group’s switch to displaying listings via IDX as a brokerage participant in MLSs across the country earlier this year, it began displaying IDX listings on Zillow and Trulia more prominently than those from other sources, such as FSBOs and other extra-MLS locations. And startup brokerage REX – which does not list its homes for sale in MLSs – has sued Zillow Group and NAR, alleging that the change on Zillow and Trulia disproportionately benefits MLS participants and that NAR rules that govern IDX policy create an anticompetitive environment. REX has been aggressive in advocating for changes that would benefit its business model, which centers on buying and selling homes outside of the MLS. It played a role in the U.S. Department of Justice’s lawsuit against NAR that led to a settlement in which NAR agreed to allow MLSs to publicly display buyer-broker commissions. The company also sued Oregon in December, alleging that a law that blocks homebuyer-rebate violates antitrust statutes. The increased scrutiny around the industry’s commission practices, and aggressive action from companies like REX, will drive increased conversation around long-time industry norms, as finance and technology continue to evolve the industry.
- Reading for: February 2021
- From: FINMES
- Summary
Matterport, maker of the popular 3D, immersive virtual home tour software has announced plans to go public via a merger with a special purpose acquisition company (SPAC) at a valuation of $2.9 billion at closing. The company intends to remain listed on Nasdaq under the ticker symbol “MTTR.”
- Commentary
In 2011, the company began focusing on providing 3D tours for homes, but has since expanded to other industries, currently claiming the largest spatial data library in the world with over 10 billion square feet of space mapped. All parts of the real estate ecosystem are moving toward public markets to effectively compete as the industry matures. With IPOs and the relatively new SPAC route, companies have increasing options. Read the lead article in this Insight “Real Estate Goes Public,” for more details.
- Reading for: February 2021
- From: GeekWire
- Summary
On the heels of posting its most profitable quarter ever ($46 million in the fourth quarter 2020), Zillow Group announced it has entered an agreement to acquire real estate’s predominant showing system, ShowingTime, for $500 million. Used by 370 MLSs, the software powered 50 million showings in 2020.
- Commentary
Zillow Group continues to acquire components that power real estate’s infrastructure, and ShowingTime is another example; previous transactions include the MLS software platform Bridge Interactive, which it acquired in 2016, and digital transaction management platform dotloop, which it acquired in 2015. ShowingTime is Zillow Group’s 17th acquisition and its second largest by acquisition price, behind its $2.5 billion Trulia acquisition in 2015.
- Reading for: February 2021
- From: Harvard Business Review
- Summary
As the country begins to warm back up after its Covid freeze, companies and employees face the challenge of reopening physical offices, including convincing knowledge workers to return to their commutes and a tighter work schedule. This article outlines ways companies can streamline the return to physical presence in offices by listening and adapting to worker needs and wants, employing office rituals to bring a sense of normalcy and flexibility around communication styles and timing.
- Commentary
The return to physical offices will be one of the biggest challenges companies will have to make coming out of the pandemic. Leaders need to think carefully how to implement the transition of reintegrating their workforce into offices.
- Reading for: February 2021
- From: Realtor Magazine
- Summary
RESO CEO Sam DeBord lays out some thought-provoking strategic insight into how MLSs can best respond to the heightened scrutiny they now face. DeBord raises some key questions MLS and association leaders should debate answers to when it comes to transparency of their services.
- Commentary
The first of a five-part series on MLS is a must-read for MLS decision makers. The focus is on transparency and data with a great mix of actionable and strategic items.
- Reading for: February 2021
- From: PR Newswire
- Summary
IntelliAgent, the subsidiary of Fathom Holdings that provides automated client- and consumer-engagement tools to agents, has signed an agreement to acquire the CRM and IDX website provider Naberly Solutions. Fathom Holdings, which went public in 2020, is the parent company of agent flat-fee brokerage Fathom Realty.
- Commentary
Fathom’s tech acquisition underscores the trend of large brokerage companies looking to bring more technology in house. This push to arm themselves with technology accents the brokerage trend of going public, which gives firms the access to capital to invest in their own platforms. T3 M&A (a division of T3 Sixty) facilitated this transaction.
- Reading for: February 2021
- From: Inman
- Summary
: A judge has thrown out the antitrust suit against NAR and three MLSs by pocket listing service The PLS. The suit alleged that NAR’s Clear Cooperation Policy, which requires all MLS participants to enter listings into the MLS when marketing properties publicly, violates the federal Sherman Antitrust Act. In his ruling, the judge pointed out that The PLS failed to provide sufficient arguments about how the policy restricted competition or harmed consumers.
- Commentary
The Clear Cooperation Policy has rocked the industry boat, but the allegations of anticompetitive outcomes from the PLS and other pocket listing services always appeared to be a stretch. Organized Real Estate faces some compelling litigation – primarily that centered on the industry’s prevailing commission structure – but this is not in that class.
- Reading for: February 2021
- From: CoreLogic
- Summary
The ownership of CoreLogic (NYSE: CLGX) changed hands at an equity value of around $6 billion. New owners are Stone Point Capital, a financial services-focused private equity firm who have raised and managed eight private equity funds with aggregate committed capital of more than $25 billion and Insight Partners, a global venture capital and private equity firm investing in high-growth technology. They have raised more than $30 billion in capital commitments and have invested in more than 400 companies worldwide.
- Commentary
Hit the pause button before getting worked up about this sale. It is way too early to understand what the real impact, if any, will be on real estate brokers and agents. Stone Point Capital is also a major stakeholder in Lone Wolf Technologies so this acquisition may actually create some opportunity for synergies.
- Reading for: January 2021
- From: Inman
- Summary
Zillow Group begins charging for advertising rentals on its network, which includes Zillow, Trulia and HotPads, at a clip of $9.99 per week, per listing.
- Commentary
As companies expand their purview of the residential real estate industry, rentals are a valuable opportunity both as a tool for small landlords but also as connection with consumers who may grow into homebuyers. Zillow shows it’s building out a strong, multifaceted residential real estate ecosystem service.
- Reading for: January 2021
- From: Inman
- Summary
The industry has another commission-related lawsuit from a homeseller. This one, filed in December, challenges the practice of sellers paying buyer’s agents’ commissions. It names Realogy, RE/MAX, Keller Williams Realty and HomeServices of America and Massachusetts-based MLS Property Information Network as defendants.
- Commentary
The heat is turning up on the way homebuyers and homesellers pay commissions to their agents. Stiff competition from discount brokerages, the recent lawsuit and settlement between the U.S. Department of Justice and NAR around commissions and the other pending large class-action antitrust lawsuits related to commission are not only contributing to a downward trend in commission rates consumers pay agents, but could shake up the long-standing tradition of sellers (and their agent) setting and paying buyer’s agent commission.
- Reading for: January 2021
- From: The Real Deal
- Summary
After months of speculation, Compass has filed to go public with an apparent IPO. The company has yet to release an S-1 financial statement, which disclose details about the business including financial performance going back several years. The company was last valued at $6.4 billion when it raised a Series G round of $370 million in July 2019.
- Commentary
The company will join a crowded field of large public brokerage companies when it officially lists. The industry is waiting anxiously to peak into the company’s performance when it files its S-1 as this document will reveal more details about the finances behind one of the fastest-growing companies in the industry’s history.
- Reading for: January 2021
- From: Realtor.com
- Summary
The number of homes for sale in December dipped below 700,000 for the first time in realtor.com’s records. The number represents a 39.6 percent drop from a year ago.
- Commentary
Already a years’ long trend before the pandemic, low inventory remains one of the driving factors in real estate throughout the country. It is pushing prices to all-time highs,forcing average days on market down and, overall, acting as the limiting reagent on a housing market ready to explode with activity.
- Reading for: January 2021
- From: Businesswire
- Summary
Windermere Real Estate, the nation’s 15th largest franchise brand, which operates company-owned offices as well, has acquired Sacramento, California-based Lyon Real Estate, a top-100 brokerage with an annual sales volume of over $2.7 billion, according to the 2020 Real Estate Almanac.
- Commentary
The consolidation trend in real estate continues. The great influx of capital into the industry over the last decade has forced a professionalism, an economy of scale and a sophistication that makes it harder for regional brokerages to compete on brand, technology and services.
- Reading for: January 2021
- From: Inman
- Summary
Based on increased demand, Realogy raised its senior note offering from $400 to $600 million. The company says it plans to use the proceeds, in part, to pay down portions of two loans.
- Commentary
This is the second bump in a money-raise to increased demand in 2020. In June, it raised $550 million after initially hunting for $400 million. Based on a strong 2020, as profiled in the 2021 Swanepoel Trends Report chapter (read this now on T3 Intel here) that analyzes the company in depth, the firm’s performance has improved and investor demand has consequently gone up.
- Reading for: January 2021
- From: RISMedia
- Summary
After a productive and effective 2020, which saw the NAR legislative team help secure access to the Paycheck Protection Program and direct stimulus payments for members, NAR Chief Advocacy Officer Shannon McGahn and her team outline what’s in store for 2021. NAR will advocate will advocate for homeownership tax incentives, preserve the 1031 exception (which obviates a capital gains tax when related to purchasing and reselling homes), and advocating for more inclusive housing policies.
- Commentary
NAR came up big for members in 2020 and McGhahn, who took over from Bill Malkasian in 2020 as NAR chief advocacy officer, has her team ready to roll this year.
- Reading for: January 2021
- From: United Real Estate
- Summary
The nation’s 20th largest franchise brand by 2019 transaction sides (last audited numbers available), United Real Estate, continues its merger spree with a merger with Atlanta-based Virtual Properties Realty in December. Just prior, the company had merged with Tennessee-based Benchmark Realty.
- Commentary
Large companies continue to get bigger as the industry continues to mature. While the releases did not make clear (nor the companies), these were acquisitions by the look of it. United Real Estate operates an agent flat-fee brokerage model in which it charges agents set fees in lieu of a commission split.