What We're Reading
T3 Insight Monthly Digest Readings
- Article available on Inman
Some former members of California-based Corcoran Global Living, which had been Corcoran Group’s largest affiliate and suddenly and surprisingly announced the shuttering of the company in late 2022, have banded together to form a new Corcoran affiliate Corcoran Icon Properties. Corcoran Global Living was one of the nation’s largest brokerages with over $8.1 billion in annual sales, so this transition is notable for the industry.
- Article available on Fortune
From February 2012 to June 2022 – 124 consecutive months – the Case-Shiller National Home Price Index reported month-over-month home price appreciation. July through October 2022 saw four consecutive months of monthly home price drops, down 2.4 percent from June’s peak. The correction is here. After years of accelerating growth and heat, home prices are readjusting as the Fed raises interest rates and the country works to stem inflation. This readjustment period could last for all of 2023 and then settle somewhat into a new normal. We’ll be tracking the data closely.
- Article available on New York Times
Approximately 6 percent of US real estate agents are Black and earn about a third of their white counterparts, according to U.S. Bureau and NAR data cited in this New York Times article. The article provide valuable insight on life as a Black real estate agent, who grapple with supporting clients and operating in a market marked with the legacy of discrimination and segregation. As the industry works to become more diverse, insight into some of the many different groups working in the space helps all of us better work to make this a more inclusive space.
- Article available on New York Times
The West is facing massive water-shortage issues. Lake Powell and Lake Mead, two key portions of the dammed Colorado River, provide water for millions of residents and businesses in the West, are drying up. This New York Times feature profiles a housing development of 500 to 700 homes in Arizona that is left without water service as neighboring Scottsdale, which had provided service, cut it off citing the need to conserve its allotment. This is just the beginning of a major readjustment to life and growth in the West as it confronts increasing populations and decreasing water reserves.
- Article available on Inman
The US Supreme Court denied NAR’s appeal to review a lower court’s ruling that a lawsuit the private listing firm The NLS (National Listing Service) filed against NAR and three large MLSs could proceed. The NLS alleges that NAR’s Clear Cooperation Policy, which requires brokerages to input listings into MLSs within one day of marketing publicly, and its application by MLSs violates antitrust provisions as the policy limits competition from listing databases not affiliated with NAR. In addition to this litigation, NAR faces significant legal challenges with the federal government and class-action suits challenging the industry’s traditional brokerage compensation model.
- Article available on Real Estate News
In a continued blow to the once-hot alternative financing trend, in which companies provided innovative financial products to consumers to streamline the selling and buying process, such as iBuying, Anywhere has announced it is winding down its division that offered those services RealSure. The company will focus on its stitching its digital offerings into a single platform for consumers. This refocus comes amid a lot of companies battening down the hatches for a tougher 2023 and focusing on more core business activities.
- Article available on Real Estate News
Effective January 1, Canada has begun a two-year ban on most international homebuyers in an effort to support affordability and availability of homes for Canadian citizens. The country has experienced outsized price appreciation in recent years, especially in some of its larger metros, which has attracted billions of dollars of real estate investment from foreign buyers and investors. The Canadian government has recently been more aggressive of a regulator of its real estate business, but should inventory remain an issue for US homebuyers, especially those with lower incomes and wealth, it could look to introduce policies to support citizen homeownership.
- Article available on The Wall Street Journal
Existing home sales dropped 7.7 percent from October to November, according to NAR’s latest existing home sales report. That marks the 10th consecutive month of month-over-month declines. The housing market has definitely turned. This stat reflects the new reality brokerages face as they confront 2023 – fewer home sales, which means fewer transactions and less revenue. This is the year when the validity of sharp business practices and profitable models reveal themselves.
- Article available on Inman
Houwzer, launched in 2015 and which provides discount brokerage services to consumers (such as a flat $5,000 listing fee to sellers), has acquired Trelora, a discount broker headquartered in Denver. Discount brokers have come and gone in the industry, and the promise remains big to those who attempt it. Philadelphia-based Houwzer has slowly gained traction over the years, while adding alternative financing services. It is showing promise as it continues to grow.
- Article available on The Wall Street Journal
Vacation-rental owners across the U.S. report dropping demand for their properties, as the supply of these rentals have skyrocketed. According to data from firm AirDNA, the number of available short-term rentals jumped 23.3 percent from October 2021 to October 2022. This has caused an average of 6 percent fewer nights booked per property in October 2022 compared the month a year previous. With interest rates at all-time lows as the pandemic began to wane, more buyers purchased homes with the intent of renting them as short-term rentals. The market has experienced a flood of supply. In addition, those looking to rent have begun looking farther afield as long-range travel has picked up after the pandemic.
- Article available on Inman
MLSs are getting more sophisticated and Bright MLS, the nation’s second largest MLS, has hired a chief data officer, a first for any MLS. In 2022, it also hired a chief economist, another first for an MLS. Data and research present to valuable revenue opportunities for MLSs – we expect more news like this to come out of the MLS world, especially among the nation’s largest and savviest.
- Article available on Inman
With the acquisition of VRX Media, Zillow Group reveals the shape of how its much talked about “Super App” will work for agents. VRX provides marketing technology that helps listing agents build marketing for their listings, revealing how Zillow’s ShowingTime+ offering will include block-and-tackle marketing tools and services for agents.
- Article available on Real Estate News
Ryan Gorman, who has been CEO of Coldwell Banker and the nation’s second largest brokerage Anywhere Advisors since 2019, is stepping down from his role. Sue Yannaccone, who oversees Anywhere Real Estate’s brands, will take over his duties. Gorman was a fast-rising leader at the large real estate holding company. He has not indicated his next move, but, as he is in the prime of his career, we expect to see him again. As for Anywhere, it continues its steady track record of solid performance in recent quarters under CEO Ryan Schneider.
- Article available on Real Estate News
CoStar Group has merged Homesnap into Homes.com, and relaunched the latter portal as its real estate retail marketplace. The move establishes CoStar’s play as a competitor in the real estate portal space. It will compete by focusing on advertising properties, rather than agents, says CEO Andy Florance. It will feature listing agents prominently with each listing. The firm has not announced how agents will be able to advertise on Homes.com yet, but its well-trod playbook provides a potential playbook. See the 2022 Swanepoel Trends Report chapter on CoStar Group: “Inside Residential Real Estate’s New Heavyweight.”
- Article available on Real Estate News
With its stock trading below $1 for over 30 days, Offerpad, the nation’s second largest iBuyer, was warned by the New York Stock Exchange that it was in danger of being delisted from the exchange. The company says it is taking steps to increase its share value, which has plummeted from nearly $7 per share in January to approximately 60 cents in mid-December. IBuying is on trial, and may be on its last legs.
- Article available on Real Estate News
Opendoor, the nation’s largest iBuyer who lost $928 million in the third quarter, has announced a significant leadership reshuffle. Co-Founder and CEO Eric Wu, the seventh most powerful person in real estate (according to the 2022 SP 200), transitioned to president of the company’s marketplace division. President Andrew Low Ah Kee is leaving the company. Carrie Wheeler, the firm’s chief financial officer, will take over as Opendoor CEO. This news along with Redfin backing out of iBuying and Offerpad potentially getting delisted, reveals the extent to which the iBuying business model is taking a hit. If any company will make it through, it will likely be Opendoor, as it is the closest to achieving the scale at which iBuying benefits really show.
- Article available on The Wall Street Journal
Venture firm Fifth Wall, an investor in alternative finance companies Opendoor and Flyhomes among other residential real estate tech firm, has raised an $886 million fund, its third. Investment has cooled relatively in recent months in real estate, but as the market turns, investors looking for a deal will have ample opportunities to investigate. Investors and acquirers are on the hunt.
- Article available on The Hill
The Housing Market Index, which gauges economists’ outlook on the housing market, dropped to 33 (out of 100) in November, lower than it has been since the early 2010s. Rising interest rates have contributed to the slowdown, which reduces buyer demand and lowers transaction counts. Data suggest that the market could stabilize be the end of 2023 and housing settle into a new normal: not too hot, not too cool.
- Article available on The Real Deal
Christie’s International Real Estate, the luxury real estate brand owned by At World that became an official franchisor this year, has added a new affiliate in Southern California, Aaron Kirman Group (AKG). AKG had become a mega team with Compass before becoming a brokerage and signing with Christie’s. The move shows reveals how the newer luxury franchisor is looking to spread its wings and expand within the US.
- Article available on Real Estate News
Opendoor reported a net loss of $928 million in the third quarter, which presents some serious questions for one of the last iBuyers standing at scale. The company still has cash reserves on hand, and responded quickly to the changing market, but net losses approaching a $1 billion in a quarter while Redfin shuts its iBuying operation down, leaves questions about the sustainability of its core model. The company will cut 550 staff, an 18 percent reduction, as it looks to weather the storm and keeps up the hunt for the scale its model requires to succeed. All eyes will be on its next several quarters.
- Article available on Real Estate News
Redfin reported a $90.2 million third quarter loss, a significant increase from the $18.9 million loss one year earlier. In addition citing elevated risk, the company also announced the closure of RedfinNow, its iBuying operation, resulting in staff cuts of 862. Since April, the number of Redfin employees has been reduced by 27 percent. The company is facing significant scrutiny after an Oppenheimer analyst downgraded its stock, saying the company’s model of employee agents was fundamentally flawed. Its stock is currently trading near an all-time low. Regardless, the company has a strong national brand and leading tech, so after adjusting with the market, it could rebound.
- Article available on Real Estate News
With a third quarter loss of $154.1 million, Compass faces a continued profit challenge. It has lost $443.5 million in 2022 through September. Like many other real estate firms looking to weather a slowing market, the company has reduced its workforce and is restructuring to adjust to a changing market and to pursue profitability. Compass cut 10 percent of its staff earlier this year and announced a second round of cuts in September that were heavily focused on the tech area. The company is still standing but staggered. CEO Robert Reffkin says he’s focused on trimming costs and focused on profitability, as the fastest-growing real estate firm in real estate history looks to stabilize its operations.
- Article available on Real Estate News
EXp World Holdings, parent company of eXp Realty, reported a 12 percent increase in revenue, to $1.2 billion, in the third quarter. Net income of $4.4 million was down from $23.8 million a year earlier, as the company adjusted to a cooler market. Agent count rose to just under 85,000 in the third quarter of 2022. EXp’s innovative model has remained profitable as the market shifts. The next few quarters will reveal just how resilient it may be.
- Article available on Real Estate News
Anywhere reported third quarter revenue of $1.8 billion, down 17 percent from one year earlier. Net income, at $55 million, represents a drop of 51.7 percent from the third quarter of 2021. The company attributed the drop in revenue and net income to lower home sales and forecast that sales will decline by 25 percent in the fourth quarter compared with the year-earlier level. The company indicated that it will reduce costs by $140 million by year-end, as it looks to adapt to the changing market.
- Article available on Inman
Park City, Utah’s City Council approved a measure that would restrict where Pacaso, a fractional ownership company that buys luxury homes in popular vacation markets, can purchase homes. While the company is not prevented from operating in the city, the restrictions block the company from buying homes in the most desirable areas. The council left open the possibility of expanding restrictions to other areas. Pacaso is being challenged in other communities as well. The battles in Park City and elsewhere are part of a larger confrontation with opponents of short-term rental and fractional ownership companies who want to prevent or sharply restrict where these companies can operate in their communities.
- Article available on S&P Case-Shiller
The S&P CoreLogic Case-Shiller home price index rose 13 percent in August compared with one year earlier. The increase was slower than the previous month’s 15.6 percent rise. Each of the 20 cities tracked reported lower home price gains in August compared with July. The deceleration is consistent with other home prices indices that show prices have softened as the housing market adjusts to a higher interest rate environment and lower demand from homebuyers.
- Article available on New York Times
First-time home buyers, who have struggled to purchase homes as prices rose during the past two years, are now faced with the additional hurdle of higher mortgage rates which has priced some would-be buyers out of the market. Data from NAR’s annual survey of homebuyers shows that share of first-time buyers, usually around 40 percent, was just 26 percent, lower than at any time since at least 1981.
- Article available on Real Estate News
CoStar Group, the commercial real estate giant who’s the relatively new owner of Homes.com and Homesnap, reported $557 million in third quarter revenue, up 12 percent from the same period in 2021. The industry is anticipating announcements from CoStar about how it is developing and plans to deploy Homes.com and Homesnap. Recently, Homesnap and the Broker Public Portal parted ways from the joint venture they had formed in which the tech company powered the initiatives national public-facing real estate portal.
- Article available on Yahoo Finance
Rates on 30-year fixed-rate mortgages hit 6.7 percent in October, approaching a two-decade peak. Last year at the same time, rates were at 3.1 percent, which reveals the significant change the market has experienced. Of course, brokerages, agents and consumers across the country have been feeling this change acutely for months as the market shifts from an extremely hot seller’s market to one that is more balanced.
- Article available on Bloomberg
In an effort to weather its current financial turmoil, Compass initiated another round of layoffs in late September, cutting 10 percent of its staff, many of whom were on the tech team. The company still has 700 employees in the tech division, down from approximately 1,500 in February. The company has made big bets on its tech vision for real estate. As brokerage leaders know, implementing a tech strategy is an extremely difficult exercise, but one that can bring many rewards. Compass is still betting big on its vision.
- Article available on Inman
The Broker Public Portal, the initiative from brokers and MLSs envisioned as a national consumer-facing portal, and Homesnap, the tech company the group partnered with to execute the vision, have split. The 50-50 joint venture will dissolve at the end of October. Homesnap’s new owner, CoStar Group, which acquired the firm in mid-2021, had proposed some new terms that the BPP board could not sign on to. CoStar has a well-defined playbook for operating portals, which includes charging brokers and agents for premium placement on its sites. This reportedly was one of the sticking points for the two groups as CoStar explored applying a similar approach to Homesnap. For more on CoStar’s vision and operation, see the 2022 Swanepoel Trends Report chapter, “CoStar Group: Inside Residential Real Estate’s New Heavyweight.”
- Article available on NewsDirect
A startup looking to apply a twist on the classic agent-matching vision for tech companies has raised $15 million. BidMyListing allows homesellers to field “bids” from listing agents looking to win their business. The bids from listing agents can include offers of cash to sellers, commission details, listing term, details on why the potential client should work with them, and more. Sellers then choose from the agents that bid to represent them in their sale.
- Article available on Inman
A court hearing the Nosalek commission lawsuit has ordered Anywhere Real Estate to hand over documents related to its nationwide implementation of NAR’s compensation rule. This latest development shows the scope and potential wide-ranging impact this and other investigations into real estate’s compensation structure could have. Read the chapter “Evaluating Real Estate’s Compensation Structure and Its Future,” in the upcoming 2023 Swanepoel Trends Report.
- Article available on Multi-Housing News
The US is on pace to construct over 400,000 new multifamily units in 2022, the most built in any year since 1972. New York, Dallas, Miami, Austin, Texas, and Houston, are among the cities with the most multifamily construction activity through September. Multifamily, of course, reflects ongoing rental demand, which ties into larger trends within the residential real estate brokerage industry, including the growing presence of single-family investors. Learn more about how these connect in the chapter “Analyzing the Increasing Presence of Single-Family Home Investors,” in the upcoming 2023 Swanepoel Trends Report.
- Article available on NPR
The head of JPMorgan Chase & Co., Jamie Dimon, shared in early October he believes the US is heading for a recession. He’s not alone. A recent survey of CEOs found that the majority are preparing for a downturn. Brokerage leaders have been sensing a market shift for months as larger, macro-economic developments, like the US Federal Reserve’s interest rate hikes, impact all parts of the US economy. Time will tell how this unfolds, but caution is the watchword for now.
- Article available on Inman
Perchwell, the MLS tech provider, has signed REcolorado, Colorado’s largest MLS, as a customer and as an equity investor. Perchwell received venture funding from CRMLS earlier in 2022. It is rolling out its platform to CRMLS in the first part of 2023 and with CincyMLS and REcolorado in 2023. MLSs are increasingly looking to own their technology future by operating key technology themselves or by taking equity stakes in technology as CRMLS and REcolorado have done with Perchwell.
- Article available on Inman
Southwest Florida-based brokerage John R. Wood Properties, the nation’s 57th largest brokerage by 2021 sales volume, has become an affiliate of Christie’s International Real Estate. Since At World Properties – the parent company of @properties – acquired the Christie’s brand in December 2021, the company has welcomed notable new brokerage affiliates including Christie’s International Real Estate Sereno in the San Francisco Bay Area.
- Article available on Real Trends
Tulsa, Oklahoma-based Coldwell Banker Select, the nation’s 14th largest Coldwell Banker affiliate by 2021 sales volume, has acquired Wichita Kansas- based Coldwell Banker Plaza Real Estate. Combined, the two firms’ sales would break the firm into one of the 10 largest U.S. affiliates of the brand, according to the 2022 Real Estate Almanac.
- Article available on Inman
A new class-action lawsuit filed in federal court accuses Zillow of illegally monitoring visitor actions on its website. The plaintiffs accuse Zillow of using code to record user activity, alleging that that violates a federal wiretapping law.
- Article available on Bloomberg
After losing $101 million in the second quarter 2022, Compass continued its cost-cutting by parting ways with its chief technology officer Joseph Sirosh, a highly touted addition to the team when he came to the company in late 2018. Compass has spent a reported $900 million on its technology platform. The company, which became the largest brokerage in America in 2022, is reeling at the moment as it looks to solidify its operations and work toward profitability.