What We're Reading
T3 Insight Monthly Digest Readings
- 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.
- Reading for: January 2021
- From: Business Insider
- Summary
EXp World Holdings, the parent company of eXp Realty, the nation’s fourth largest brokerage by annual sales volume, is doubling its shares. Every shareholder will receive one additional share for each they hold on January 29 when the split takes place
- Commentary
The fast-growing company says the split — which will reduce the cost of each share — will make owning shares more accessible for more agents and investors. EXPI shares rocketed from a $7 last March to over $100 last week. An analysis of eXp was included in the 2021 Swanepoel Trends Report chapter (now available online at T3 Intel).
- Reading for: December 2020
- From: Freddie Mac
- Summary
30-year fixed-rate mortgage rates dropped to 2.71 percent for the week ended December 3, and 15-year fixed to 2.26 percent, marking yet another record low, nearly the lowest in half a century.
- Commentary
While mortgage rates remain at all-time lows, house prices have continued to rise as inventory across the U.S. is low. Rates likely will not drop much lower if at all, so buyers remain active and refinances common. A more balanced market will likely emerge when Covid-19 uncertainty settles.
- Reading for: December 2020
- From: Vendor Alley
- Summary
W+R Studios, makers of the popular comparative market analysis Cloud CMA, Cloud Agent Suite and many other industry tools, has been acquired by Lone Wolf Technologies.
- Commentary
Founders Greg Robertson and Dan Woolley believe merging with a larger tech company is a good move given real estate’s increasingly higher financial and tech stakes. Since company founder Lorne Wallace sold his interest in the company in 2015, Lone Wolf acquired zipLogix in 2019 while its institutional investor Stone Point Capital bought out fellow investor Vista Equity Partners just last month. The residential real estate technology space is undergoing significant consolidation – Constellation has already acquired some 20 brands, MoxiWorks acquired Imprev last year and now there are even talks about giant CoreLogic fending of acquisition interest from credible players.
- Reading for: December 2020
- From: NAR
- Summary
Sales, and prices, of existing homes continue to rise throughout the U.S., as the real estate market sustains its comeback after the Covid-19 freeze in spring. Sales in October jumped 4.3 percent from September and 26.6 percent from a year ago, while median prices jumped to an all-time high of $313,000.
- Commentary
The real estate market continues to be blazing hot, which gives real estate brokers and agents ample opportunity to invest, innovate and grow their businesses into 2021. While uncertainty looms, the bold have immense opportunities.
- Reading for: December 2020
- From: Crunchbase
- Summary
Just four months after raising $150 million, home insurance startup Hippo, which insures homeowners’ homes and their possessions as well as helping them manage them digitally, comes back for $350 million more at a valuation of $1.5 billion.
- Commentary
The residential real estate brokerage ancillary business space remains a huge opportunity as these services represent a critical component to the end-to-end home transaction. Many large brokerage companies are pursuing the incorporation of ancillary services and, if you haven’t yet done so, take the first step in 2021.
- Reading for: December 2020
- From: HousingWire
- Summary
HW Media will now own and operate media brands HousingWire, FinLedger and Real Trends. The company will reach over 11 million real estate, mortgage and fintech professionals each year. Steve Murray will continue consulting work under a separate company.
- Commentary
HousingWire, already a respected media name in housing, construction, and mortgage news, now expands its news, rankings and events capabilities into residential real estate brokerage. Inman, the residential real estate brokerage industry’s leading media company, has a strong, new formidable competitor.
- Reading for: December 2020
- From: Yahoo Finance
- Summary
On December 21, Opendoor will begin trading on the Nasdaq stock exchange under the “OPEN” ticker.
- Commentary
The move to Nasdaq trading brings yet another public company to the real estate fold. It also will now allow more transparency into the iBuyer business model, providing an accurate, real-time look at the model’s evolution and its financial challenges and successes.
- Reading for: November 2020
- From: Inman
- Summary
Zillow Group has appointed Claire Cormier Thielke to its board of directors. She is the company’s first Black board member. In September, Zillow pledged to increase diversity on its board.
- Commentary
2020 has presented many challenges, but a renewed focus on increasing diversity is one bright spot. We expect to see similar moves by other companies in the real estate space, including T3 Sixty’s own Real Estate Apprentice, which aims to help increase diversity in the real estate profession.
- Reading for: November 2020
- From: GeekWire
- Summary
Greg Schwartz and Carey Armstrong, former chief business officer and former vice president at Zillow Group, respectively, have raised $40 million for a new agent- and consumer-focused mortgage and transaction startup, Tomo Networks. They have yet to reveal the business model.
- Commentary
Startups and incumbents have been making an all-out effort to streamline the transaction in recent years. One of the chief hurdles involves stitching together the processes ancillary to the transaction – such as mortgage, title and insurance — which has spurred a bunch of innovation, including iBuyers and startups like Tomo and larger players like Zillow Group and Opendoor. A true digitized transaction, from start to finish, is still years away, but the hunt is on in earnest now.
- Reading for: November 2020
- From: Bloomberg
- Summary
Two of CoreLogic’s investors looking to take the company over decided to stand down given that the price had gone too high. Two other potential buyers are still negotiating a purchase of the company, whose current market cap stands at approximately $6 billion
- Commentary
First American Financial spun off its technology and information division in 2010, creating CoreLogic. Listed on the New York Stock Exchange under the CLGX ticker, CoreLogic is a multibillion dollar financial, property, and consumer information, analytics, and business intelligence company. Matrix, its MLS software, is the most-used MLS platform in the U.S. with 850,000 users. With continued consolidation, class-action lawsuits and the Clear Cooperation Policy, the MLS industry itself is also undergoing a reengineering.
- Reading for: November 2020
- From: Inman
- Summary
Los Angeles-based luxury brokerage, The Agency, the nation’s 25th largest brokerage by 2019 sales volume, continues its national expansion by expanding to Washington, D.C. by bringing on a 30-agent former RE/MAX brokerage.
- Commentary
A strong real estate market fuels opportunities for all brokerages with strong leadership and an appetite for growth. We expect to see more expansion and consolidation efforts in the months and year to come.
- Reading for: November 2020
- From: Realogy
- Summary
Realogy reported a net income of $98 million in the third quarter, a huge year-over-year jump from the $112 million it lost in the third quarter 2019. Realogy generated revenue of $1.9 billion, an increase of 20 percent, or $307 million, year over year.
- Commentary
Aided by a strong performance in its ancillary business, as well as a blazing hot third quarter across the board in real estate, Realogy’s restructuring efforts seem to be paying off. See the detailed Realogy analysis in the “2021 Swanepoel Trends Report” out December 7. Order a copy here.
- Reading for: November 2020
- From: Zillow Group
- Summary
Zillow posted $40 million in net profits in the third quarter, the first profitable quarter for the company since 2017. Its total consolidated revenue for the quarter was $657 million.
- Commentary
The hot third quarter in real estate helped buoy Zillow’s performance, as did a slow ramp-up of its cash-intensive iBuying program Zillow Offers.
- Reading for: November 2020
- From: Realtor Magazine
- Summary
On November 18, NAR unveiled a virtual simulation, fairhaven.realtor, to help Realtors more easily recognize discrimination in their work. The simulation will guide agents through a transaction and educates them on fair housing practices.
- Commentary
This is one of the first announcements by NAR as part of its commitment to improve diversity in the residential real estate brokerage industry. More expected in the not-too-distant future.
- Reading for: October 2020
- From: TechCrunch
- Summary
Opendoor goes public by merging with a so-called “blank-check company” or a special purpose acquisition company (SPAC). The SPAC, Social Capital Hedosophia II, which is associated with mega-investor Chamath Palihapitiya, invested over a $1 billion in Opendoor through the deal, which values Opendoor at $4.8 billion.
- Commentary
This version of IPO, termed “IPO 2.0” by some, represents an increasingly popular way for growing companies to go public without the scrutiny that comes with a months-long road show in a traditional IPO. With six-year-old Opendoor’s jump to public trading on the NASDAQ stock exchange, real estate has yet another public company.
- Reading for: October 2020
- From: The Real Deal
- Summary
In September, Zillow announced that it will hire in-house agents and take IDX feeds from MLSs to service its iBuying Zillow Offers wing starting in January 2021. The company will start in three markets, Atlanta, Phoenix and Tucson, and then expand from there.
- Commentary
The iBuying business model continues to evolve, and one of the nation’s largest, most powerful brokerage companies jumps into brokerage in an effort to make it profitable. Expect new marketing and advertising to give this momentum an added boost.
- Reading for: October 2020
- From: Broker Public Portal
- Summary
The industry initiative that advocates for display of listings on portals that prominently features listing agents’ names and contact information, among other “fair display” items, has a new lead in Joe Rand, the chief creative officer at Better Homes and Gardens Rand Realty, which Howard Hanna just acquired in late September.
- Commentary
The Broker Public Portal and its official website Homesnap have made some strides in recent years to become a popular consumer real estate destination but has struggled to gain the prominence it hoped. The popular, smart Rand gives the initiative a shot in the arm.
- Reading for: October 2020
- From: Bloomberg
- Summary
Sales of existing homes jumped 8.8 percent in August from July, according to NAR stats. The association attributes the sustained increase to low mortgage rates, which have stoked buyer demand even amid the pandemic.
- Commentary
Real estate has roared into the third quarter with no signs of slowing down. The Federal Reserve has pushed mortgage rates to all-time lows, below 3.0 percent on 30-year fixed-rate mortgages. This appears to have buoyed the real estate market. Rates will likely not go lower, so maybe it’s enough to hold the market while the rest of the economy recovers.