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T3 Insight Monthly Digest Readings
- Article available on Vox
Watchdog group sues 36 New York agents and landlords for housing discrimination The New York watchdog group Housing Rights Initiative, after an eight-month investigation using testers, has sued 36 agents, brokers and landlords in New York state court alleging their activities led to housing discrimination. The investigation centered on alleged discrimination against Section 8 recipients. Race is not the only inequity real estate brokers, agents and leaders need to focus on. This investigation and lawsuit highlights another important element of diversity that the industry needs to focus on as well: discrimination against lower-income clients. This broad-based need to improve industry diversity is one of driving forces behind The Real Estate Apprentice Foundation, a nationwide nonprofit founded by T3 Sixty CEO Stefan Swanepoel, that aims to help people from underrepresented and underprivileged groups jumpstart real estate careers.
- Article available on HousingWire
Now that its sale to private equity groups Stone Point Capital and Insight Partners is complete, CoreLogic is making moves, with the planned acquisition of closing services firm ClosingCorp. Many of the nation’s 25 largest lenders use the tool to help derive closing cost pricing. The deal is expected to close in the third quarter.
- Article available on GeekWire
The market for iFunders – which provide financing solutions to homebuyers that go beyond the traditional mortgage – is hot! Flyhomes, which helps homebuyers make all-cash offers with short-term loans, launched in 2016 and has already raised $160 million in debt and equity financing. It now adds $150 million to the pot with this raise. Another iFunder, Homeward, which offers a similar service to homebuyers, raised $371 million in May.
- Article available on US Department of Justice
On July 1, the U.S. Department of Justice pulled out of a proposed settlement with NAR related to its antitrust lawsuit against the trade organization announced last November. Under that proposed settlement, NAR agreed to make buyer agent compensation fees publicly available via MLSs, prohibit buyer’s agents from advertising their services as “free,” and make all properties listed on the MLS available to all licensed agents. NAR was still implementing those changes when the DOJ pulled out citing an interest in keep its ability to pursue future antitrust claims against NAR unfettered. This development, along with new U.S. Federal Trade Commission Chair Lina Khan, regarded as tough on antitrust issues, suggests that the DOJ is evaluating expanding or changing its existing lawsuit against NAR, or filing a new one. This, along with the existing handful of class-action antitrust lawsuits against NAR from homesellers and homebuyers, adds some weight to concerns about further legal actions that could significantly change how U.S. real estate has been practiced for decades.
- Article available on TechCrunch
Alternative financing models, or iFunding, in which lenders provide innovative ways to streamline the homebuying process, have become extremely popular with investors, and startups. Accept.inc, which helps buyers submit all-cash offers after qualifying for a mortgage, is the latest iFunder to raise a large round. Just this May, another iFunder, Homeward, raised $371 million. Investors and startups are hoping these iFunding models will get traction and lead to simplified, speedier transactions, and betting big.
- Article available on The Wall Street Journal
Global investment firm Blackstone Group has acquired Home Partners of America, which owns over 17,000 U.S. single-family homes that it rents out, for $6 billion. As home prices rise, more families are priced out or delayed in the ability to purchase a home, which will likely increase the demand for single-family rentals – that’s the bet Blackstone is making. Blackstone has deep experience with single-family rentals; it was a major owner of single-family rentals in the wake of the subprime mortgage crisis with its Invitation Homes business, which owned over 80,000 single-family home rentals. It divested in that business in 2019, but now it’s back.
- Article available on Yahoo Finance
Mortgages have been an important source of ancillary revenue for residential real estate brokerages for decades and younger companies are beginning to jump all in. Compass, founded in 2012, has partnered with Guaranteed Rate to form a new joint-venture mortgage company OriginPoint, while eXp, founded in 2009, formed a joint venture with Kind Lending to establish Success Lending. Compass leverages a mortgage partner already with a presence in the industry, which allows it to jump in quickly to the mortgage space and ramp up production quickly. Realogy formed its own joint venture with Guaranteed Rate, Guaranteed Rate Affinity, in 2017, and it has contributed importantly to Realogy’s bottom line in recent quarters. Kind Lending, on the other hand, is itself a startup, having launched in just 2019.
- Article available on Inman
MLS Now, which serves 13,800 subscribers in Ohio and West Virginia, is eliminating the “Coming Soon” status for listings as it found a significant portion of agents using the status primarily to market, and sell, listings before they went officially active in the MLS. This practice of marketing homes to encourage exclusivity, which the Clear Cooperation Policy aimed to curb, is still rife in many markets. Exclusivity persists, however, with agents using the office exclusive provision of the policy, and by agents making listings live in the MLS on Friday, but waiting until Monday to mark as active, which complies with the policy’s rules. MLSs will have to continue to monitor this premarketing activity and tweak their rules accordingly.
- Article available on Inman
EXp Realty’s national brokerage footprint with a team-forward brokerage approach is attracting teams in droves. Inman dove into the trend, which T3 Sixty also analyzed in its 2021 Swanepoel Trends Report chapter “Real Estate’s Cloud-Based Brokerage Takes Flight.” As teams shared in this article, and as T3 discovered upon diving into the company’s business model and interviews with executives, eXp is growing by leaps and bounds because of its revenue-sharing model, in which agents earn a portion of the company revenue of agents they recruit, its equity plan, in which agents earn company shares based on different performance metrics and a borderless, office-less support network that facilitates collaboration and growth. Access the STR and other T3 research at T3 Intel.
- Article available on Businesswire
HomeServices of America tapped company exec Christy Budnick, who has been CEO of president and CEO of Berkshire Hathaway HomeServices Florida Network Realty since 2018, to lead its franchise wing HSF Affiliates. In this role, Budnick will guide the brands Berkshire Hathaway HomeServices (BHHS) and Real Living. With a sales volume of $139.3 billion, BHHS was the nation’s fourth largest brand in 2020, according to the Real Estate Almanac. Budnick was the 193rd most powerful leader in real estate, according to the SP 200. She replaces No. 18 on the SP 200 ranking Chris Stuart, who left to lead Ben Kinney’s startup Place, which provides backend tech and support for real estate teams and agents.
- Article available on Inman
RE/MAX has reached an agreement to acquire RE/MAX Integra’s North American franchise region, which includes 19,000 agents in the U.S. and Canada. The acquisition continues a yearslong strategy by RE/MAX to acquire large regions they do not already own. The is another bold step by REMAX as existing leaders in the industry push back against the strong growth from a slew of new franchisors and brokerages that are well-financed and expanding rapidly.
- Article available on The Data Advocate
In a bold move a group pf MLS organizations have collectively through a new company, MLS Aligned, acquired the messaging and showing tool Agent Inbox . The group of five MLSs led is by Arizona Regional MLS with MLS Listings (Silicon Valley), UtahRealEstate.com (Utah), Metro MLS (Milwaukee, Wisconsin) and RMLS (Oregon). The acquisition indicates an effort by MLSs to own their own technologies following Zillow Group’s recent acquisition of the popular MLS showing service ShowingTime.
- Article available on Inman
ZipLogix, the forms software provider that was founded and run by a California Association of Realtors subsidiary until 2019 when Lone Wolf Technologies acquired it, will see its Realtor association connection terminate at the end 2021. NAR, which began offering parts of the technology as a member benefit in 2015, has decided to no longer offer it to members after spending $62 million over six years to provide this technology to members. When NAR’s support ends later this year, forms and transaction software will now compete on equal footing in markets across the U.S., which will open up the forms and transaction management technology markets a bit wider.
- Article available on TechCrunch
Homeward, which operates in Texas, Colorado and Georgia, helps streamlines moves for homeowners looking to buy a new home with iFunding, a twist on iBuying in which companies streamline transactions with alternative financing models. The startup purchases the next home homeowners want and then leases it to the homeowners until they sell the home they are moving from. At the same time, Homeward offers the homeowner a guaranteed base price for their previous home, which they list on the open market. The company charges a fee for this service and gives a credit to the client if they use the company’s mortgage. Realogy’s RealSure program, which operates in a similar fashion to Homeward, recently expanded to five additional markets, and Offerpad, another iFunder, has announced plans to go public.
- Article available on Realtor Magazine
NAR membership soared to 1.48 million at the end of 2020, an all-time high and up from 1.4 million at the end of 2019. The surge in membership reflects a hot market and a surge in people looking for flexible work opportunities during a pandemic-disrupted year.
- Article available on Yahoo Finance
Invesco Real Estate has committed to investing up to $5 billion in single-family rental homes over the next three years, and represents an increased focus by institutional investors on residential real estate. Currently, 2 to 3 percent of the nation’s single-family rentals are owned by institutional investors versus half of the nation’s multifamily units. That gap could narrow, however. If institutional investors appreciably increase their single-family home market share, as all indicators show they might, the brokerage industry will have to adapt to accommodate the new sector. Their increasing presence also influences macro housing trends, which will affect homeownership, home demand and affordability – all key housing issues now.
- Article available on The Orange County Register
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.
- Article available on Inman
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.
- Article available on Street Insider
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.
- Article available on The Real Deal
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.
- Article available on New York Times
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.
- Article available on Inman
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.
- Article available on Vendor Alley
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.
- Article available on Inman
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.
- Article available on CNBC
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.
- Article available on Inman
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.
- Article available on CNN
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.
- Article available on The Motley Fool
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.
- Article available on Curbed
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.
- Article available on Forbes
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.
- Article available on CNBC
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.
- Article available on Bloomberg
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.
- Article available on Inman
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.
- Article available on The Real Deal
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.
- Article available on Freddie Mac
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.
- Article available on Opendoor
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.
- Article available on Redfin
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.
- Article available on The Real Deal
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.
- Article available on Bloomberg
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).
- Article available on Notorious Rob
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.