8 graphs that show how much real estate has changed since the crash

The following is a reflection from Glenn Kelman, CEO of Redfin, on the years since the 2008 global financial crisis. It has been republished from the Redfin blog.

Ten years ago, on September 15, 2008, the great financial crisis began with Lehman Brothers’ bankruptcy. I remember a board meeting in which an investor said her husband was loading the car with bottled water, in case our civilization collapsed.

I remember learning in a lunch line that we had just hired another real estate agent, when I’d already begun thinking about a lay-off. I remember the lay-off. And I remember that many of the houses that I saw on home tours got uglier, because their owners had left in a hurry or in anger, or just knew there was no point in fixing them up. History had arrived.


As a technology-powered real estate start-up at the center of it all, we experienced the crisis in the way a toddler might experience a hurricane: intensely. Everyone knew the world would never be the same, but the changes weren’t what we anticipated. Even now, many of those changes are clear to Redfin only because at different times we’ve been their eyewitness, their beneficiary, their target, or their propagator. Here are the eight that stand out to us.

1. Progressive policies widened the wealth gap

The financial crisis contributed to a massive wealth gap, larger even than the income gap. The income gap is a well-understood phenomenon with many causes, but it’s the wealth gap that matters more: because wealth is accumulated through capital gains and not just income, and because it’s wealth, not income, that is transferred from one generation to another, creating long-term class divisions.

And what no one has noticed about the wealth gap is how it was exacerbated by progressive reforms designed to limit the financial leverage available to the middle class. The government printed money for people to borrow at almost no cost, but passed laws that ensured only the wealthiest half of Americans could borrow it, all at a time when houses and stocks were at rock-bottom prices.

Rich people began buying homes from poor people just when those homes were most affordable. Without easy credit to mask stagnant wage growth, middle-class Americans began to feel poor.

2. A landlord nation

Mortgage interest rates dipped as low as 3.3%, a bonanza that seemed relatively short-lived at the time but that will in fact haunt the housing market for the next 30 years: homeowners have become loathe to give up the loan they got in 2012, and can easily find renters to pay the mortgage on their old place, sometimes by renting out the whole house if they want to move, otherwise just a garage that has been converted into a bedroom.

Founded in 2008, Airbnb became the marketplace for this arbitrage between low mortgages and high rents. Between 2006 and 2018, the fraction of Americans renting their home increased by 13%.

Because interest rates have dissuaded so many people from selling their homes, the laws of supply and demand no longer work in housing. From 2010 to 2017, even as home prices increased nearly 50%, the number of homes for sale per household declined 37%, and are still 38% below the historical average.

3. The builders never came back

That so few re-sale listings are reaching the market would normally make the opportunity for builders only larger but the construction industry never recovered: the number of single-family homes we started to build in 2017 still hadn’t reached half the level of twelve years earlier, in 2005.

Before the crisis, George W. Bush appealed to voters in new developments at the edge of every American city with his vision of “the ownership society.” Today, there’s no longer a broad consensus that we owe each generation the roads, schools, houses and credit to make the American Dream possible.

Builders are cautious about big, risky projects and wary of reforms that make homeowner lawsuits easier to win; many simply shrug when vilified by citizens and local governments that used to be their partners in housing the middle class.

4. The rise of the second city

Cities like Detroit, Pittsburgh, Philadelphia, Baltimore, Providence and Milwaukee were left for dead, but when demand returned to a country that was no longer investing in more housing, these were the cities with the housing reserves to take people in.

The folks who could no longer afford San Francisco, New York, Washington, Seattle and Chicago moved, in a trickle at first and then in a great wave. This has turned the fundamental narrative of 20th century American migration on its head, prompting Oklahoma City’s mayor at one point to say, “it’s like the Wrath of Grapes.” Migration patterns now shift from city to city in search of affordability, driving up prices in Seattle before moving to Denver, then to Portland, then to Nashville, then to Salt Lake City, with long-time residents starting to leave a city even while the number coming is still rising.

This cycle will continue for years to come, straining the social fabric of one city after another, but also bringing prosperity to America’s once-forgotten places.

5. The disruption of the real estate industry

The financial crisis sapped the resources of many real estate brokerages and their standing among consumers. At the same time, Middle-Eastern and Asian money flowed into private technology companies at almost unprecedented rates, creating the so-called unicorn bubble of billion-dollar private companies.

Before the crisis, Redfin was virtually the only technology-powered real estate brokerage and no one wanted to fund us. Now, Wall Street has come to the firm conclusion that technology is going to change how people buy and sell homes. The private capital invested in real estate technology companies increased from $28 million in 2008 to a projected $3 billion in 2018, with almost all of it going to disruptive brokerages, not ad-driven listing-search sites.


Over that same five-year period, a boom for real estate, the largest holding company of traditional real estate brokerages, Realogy, lost nearly 60% of its market value, despite five straight years of increasing revenues.

6. Wall Street buys Main Street

The new capital hasn’t just funded the development of new technologies, but also the outright purchase of houses. Instead of just brokering a sale, companies like Redfin, Opendoor, Offerpad and Zillow are now buying homes directly from their owners, renovating the properties, and then trying to sell them at a profit.

In markets like Phoenix, more than 5% of home sales are now to institutional buyers, and the number is growing fast.

A decade ago, we were undone by a system-wide failure in deciding who could get a home loan; if there is going to be a system-wide failure in the housing market’s future, it could be in the algorithms institutional buyers now use to price homes.

7. The internet consolidates

The free-money stimulus that followed the fiscal crisis has benefited the companies best able to raise capital, funding the growth of titans like Uber and Amazon over a decade. An Amazon investor would shrug at the company’s continued reinvestment of potential profits because she couldn’t get 3% interest on her money without taking unusual risks.

These equity investments in companies that grew in size without having to generate significant profits or dividends funded the creation of near-monopolies in e-commerce, cloud computing, and transportation. It created a mindset where capital itself was the competitive weapon, not just the technology you could build with it. It has made the technology industry nearly an oligopoly.

8. The end of the middle

The fiscal crisis also engendered a deep feeling that the system was broken, spawning the Tea Party and Trumpism on the right, and Occupy Wall Street and Sandersism on the left.

Millions lost their homes, but to rebuild the system, the government chose not to prosecute the bankers and traders behind a global economic collapse.

The political and economic order survived 2008, but Americans on all sides spent the next ten years trying to tear it down. Faith in our institutions had already begun to wane before 2008, but the economic anger engendered by the crisis sharpened this trend.

But perhaps what’s most remarkable is what didn’t happen. America created the global financial crisis, but emerged as the world’s strongest economy. 

The country seemed poised for a major redistribution of wealth but then resumed the focus we’ve had for the last 30 years, on creating wealth, even if much of it remains concentrated in the hands of a few. The economy recovered better than we could have hoped, and still American society has fractured more than we could have imagined.

Zillow breaks into lead referral business

The new pilot program, which launches in Florida under Premier Broker, will give Zillow a cut of the commission as brokerages generate leads with no upfront costs.

Zillow is testing a new referral service in Florida that could shake up how it does business, and for the first time in the company’s history, earn a piece of the real estate commission pie — a step it has avoided since the company launched 14 years ago.

The pilot program, which will operate under the umbrella of Zillow’s Premier Broker lead-generation platform, allows brokerages to receive a limited number of leads with no upfront cost. Brokerages then pay a portion of the brokerage commission once a deal is closed — which Zillow refers to as a “performance advertising expense.”

A Zillow spokesperson declined to comment on what the portion of the commission will be, but noted it could change as testing continues.

Greg Schwartz, president of media and marketplaces at Zillow Group, wrote in a blog post introducing the new program that the change comes as a response to broker feedback.

“You told us that it’s sometimes disruptive to pay for advertising in advance and you would advertise more if we could change the timing of the payments,” wrote Schwartz.

Premier Broker is launching first in Florida with two partners: NextHome and Keyes Realtors. Brokerages in the state that are interested in participating are encouraged, in the post, to contact the company.

“Helping our members work with more buyers and sellers is our primary focus,” James Dwiggins, CEO of NextHome told Inman. “Ongoing marketing costs can be expensive for most brokers and agents, so a fee for success allows every dollar earned to be a win.”

“We are always open to exploring new partnerships that benefit our agents, and with our continuing expansion of offices across the country, we are positioned to provide the coverage Zillow is looking for in piloting their new program,” Dwiggins added.

Right now, Zillow only has plans to launch the pilot in markets that are underserved by Premier Broker and Premier Agent — where there aren’t enough advertisers to meet the demand of home shoppers. The new program is not intended to displace Premier Agent or Premier Broker, the former of which is a top revenue earner for Zillow and a program that’s currently being updated.

“We see this as a win-win for homeshoppers in these underserved markets and for Premier Broker clients,” Schwartz wrote. “Prospective buyers and sellers will receive responses from our Premier Broker clients, and broker partners will be able to take advantage of a pricing system that makes sense for their bottom line.”

The new program would put Zillow in direct competition with Opcity and the newly launched Rocket Homes, referral services powered by major companies. Opcity was recently acquired by Move Inc., a subsidiary of News Corp and the operator of realtor.com, and Rocket Homes is a sibling company of Quicken Loans.

Real estate’s new disruptors: The ‘PayPal Mafia’

A group of hard-charging, investor-entrepreneurs who have built some of the world’s most iconic tech companies have launched a multi-pronged assault on the real estate industry. A striking number come from two groups: the so-called “PayPal mafia” and private equity behemoth Blackstone Group.



Their combined wealth, experience and commitment to mutual support should cause market incumbents to take their projects seriously, despite the long history of failed bids to fundamentally change the real estate business.


Serving as financiers, managers or a combination of the two, these Silicon Valley and private equity vets — at least four of whom are controversial libertarian billionaires — have helped reshape a number of industries, and they are determined to do the same to real estate. Tying together the fortunes and industry ambitions of many of these players are three real estate startups in particular: Opendoor, Roofstock and Bungalow.


At least five of this coterie, including Opendoor co-founder Keith Rabois and Gawker-slayer Peter Thiel, all hail from the “PayPal mafia,” a group that built the online payments giant PayPal, and later moved on to found or provide key financing to some of the world’s highest-profile tech companies, including YouTube, Tesla Motors, LinkedIn, Yelp, Facebook, Yammer and Palantir Technologies.


A number of others cut their teeth with Blackstone, the private equity behemoth that showed it was possible to buy and manage tens of thousands of single-family homes. Other worthy mentions include former Uber CEO Travis Kalanick and Silicon Valley investor titan Marc Andreessen.


The PayPal mafia


In his critical book of Silicon Valley hotshots,”The Know-It-Alls,” author Noam Cohen described the PayPal mafia as a group of “self-styled survival-of-the-fittest free-marketers commit[ed] to a strategy of collective risk and mutual support.”


To understand how the clique can turn startups into rocket ships, consider LinkedIn. The social network was founded by PayPal mafia member Reid Hoffman; got financing from members Peter Thiel and Keith Rabois; and received office space from another former PayPal colleague, Cohen wrote. Hoffman later paid this help forward to the group of PayPal vets who created YouTube with financing and office space, according to Cohen.


“My membership in a notable corporate alumni group in Silicon Valley has opened the door to a number of breakout opportunities,” Hoffman has said.


Read it all at Inman

Keller Williams is building a new consumer-facing app to challenge Zillow and Redfin

Keller Williams has acquired SmarterAgent, a mobile-first platform that connects to more than 650 multiple listing services and allows brokers and agents to create branded real estate search apps, Inman has learned.

The move to acquire the technology platform, which currently serves more than 300 brokerages, will allow the real estate franchisor to compete directly with search giants like Zillow and Redfin, Keller Williams Chief Innovation Officer Josh Team told Inman.

“As we’re breaking out more and more of our technology platform, consumers are a big part of that,” Team said. “We’re going to be launching our new consumer strategy in the first quarter of next year and mobile will obviously be a big piece of that.”

Keller Williams is currently SmarterAgent’s largest client. The technology platform boasts more than 400,000 active agents and 20 percent of the brokerages listed on Real Trends 500 use SmarterAgent, according to Team.

“We are building the end-to-end platform for real estate,” Team said. “SmarterAgent, our agent’s branded mobile app, will be connected in real-time with their database, marketing plans and Kelle, our AI, as part of an all-in-one system, allowing Keller Williams agents to simplify their life and focus on providing the best consumer experience.

Keller William’s decision to acquire SmarterAgent was a defensive move against tech distributors in the industry, Team said. Founded a decade ago by brothers Brad and Eric Blumberg in Philadelphia, SmarterAgent hands Keller Williams a team of 31 mobile developers and MLS knowledge as it pushes to develop a state-of-the-art consumer-facing app. There are no plans for layoffs and Keller Williams will retain the company’s senior management team.

“You’ve heard Gary [Keller] talk about the agent-enabled tech versus the tech-enabled agent, and so the idea of a Zillow or Redfin coming in and buying SmarterAgent then having access to all 400,000 agents’ mobile apps out there being used by millions of people was something that was concerning to us,” Team said.

Team said the acquisition is a signal to Keller Williams agents that the company is serious about its investment in technology and revealed that the company has quietly acquired a number of other tech platforms in the past four months.

Team declined to provide the names of the companies acquired by Keller Williams but said that among them is one of the largest property management software platforms, a home inspection product and a company focused on real estate data, AI, predictive intelligence and contract parsing. The acquisitions come as Keller Williams seeks to launch virtual brokerages for its expansion franchises.

“Now is the time that the brokerage community joins as brother in arms,” Team said. “The more that we can help every agent’s mobile application get better, the more that we can help every brand defend their share of market right now – as we move into a slower market and some of these companies are operating on razor thin margins and not making profit at all – they’re going to be challenged.”

SmarterAgent checks off an important box as part of Keller Williams’ multi-pronged roadmap to enhancing its technology.

“The foundation is a connected real estate platform and on top of that you have three core focuses: your brokerage operating platform, agent-operating platform and consumer operating platform,” Team said. “The SmarterAgent acquisition allows us to speed up the deployment of the consumer arm of that. They already have the foundation, we just have to enhance it, improve it, and build a better consumer experience.”

Keller Williams declined to provide terms of the acquisition, but Team said the funding of the SmarterAgent acquisition and other recent acquisitions stem from the company’s $1 billion tech fund, which was announced at Inman Connect San Francisco in 2017.

Zillow gets broker’s license in Arizona, but has ‘no plans’ to represent homebuyers and sellers

The Arizona Department of Real Estate is requiring the license so the Seattle tech giant can keep operating its Zillow Offers homebuying and selling service in the state.

Zillow is getting a broker’s license in Arizona, but it has no plans to begin hiring real estate agents anytime soon, and it will continue to rely on other brokerages to represent it as it wades further into homebuying and selling transactions, according to Errol Samuelson, the chief industry development officer at Zillow Group.

Samuelson made the comments in an interview with Inman on Monday, regarding Zillow’s just-announced acquisition of Mortgage Lenders of America, a mortgage lender that will help Zillow expand beyond its initial informational and home search purposes and provide home searchers with more services to convert them into homebuyers, directly on Zillow’s popular namesake website.


The Arizona Department of Real Estate (ADRE) contacted Zillow in April 2018 when it first launched Zillow Offers,the company’s direct-to-consumer homebuying and selling platform, in the state. The ADRE said that Zillow needed to be licensed as a broker in the state to operate the program, according to Samuelson. The agency administers broker’s licenses for two-year-periods.


“We came back to them and explained — and they understand — that we are not the broker of record when we do these deals,” Samuelson said. “We use local third-party brokerages to represent us when we buy, we use local third-party brokerages when we sell.”


Despite the explanation, ADRE said it felt it was necessary for Zillow to get the license, so the Seattle-based company complied, Samuelson said.

“It’s not going to change anything about the way we operate the Zillow Offers program,” Samuelson said. “We’re still going to keep using local agents and brokers representing us as the brokers of record. We’re still going to use our representatives to list our properties.”

“We’re not going to have Zillow employees listing properties, we’re not going to have Zillow employees representing buyers and sellers,” Samuelson added. “This is strictly about getting paperwork in place.”

Zillow has actually held broker’s licenses in the past, Samuelson confirmed. When it acquired Trulia and RealEstate.com, those acquisitions came with licenses, and when the company first started, it had some licenses. Over the years, Zillow let those lapse. The company is licensed as a brokerage in Texasand perhaps other states, Zillow spokesperson Kate Downen told Inman via emai. Inman has asked where else the Zillow is licensed as a brokerage and why the company is licensed in Texas and will update this story when we hear back.

“Zillow has had broker’s licenses off and on over the course of 11 years and it hasn’t really changed our perspective in that — we don’t have any plans to become a brokerage in the sense of representing buyers, representing sellers, having agents that list,” Samuelson said.

“As we expand Zillow Offers expands, if Zillow needs to gets licensed in other states, it will comply on a case-by-case basis,” he added.

Zillow just sent the ADRE its letter letting the state agency know the company is complying today and Zillow is not sure how long the licensing process will take, Downen said.

Asked what exactly Zillow Offers is doing that Arizona says requires Zillow to get a real estate license and what policy or law the state agency cited that compelled Zillow to become licensed, Zillow declined to comment.


“The laws about this are really broad. They’ve asked that we get a license, and we’re complying,” Downen said.


Read the full article here

The Cost of Selling Without a Real Estate Agent

You’ve heard of buyer’s remorse; but without your market expertise and sales skills to back them up, sellers who choose to sell their home on their own just may experience “seller’s regret” when they see how much less they get for their properties. FSBOs earn an average of $60,000 to $90,000 less on the sale of their home than sellers who work with a real estate agent, according to the National Association of REALTORS®. Here’s the breakdown:

  • All agent-assisted homes: $250,000 (median selling price)
  • All FSBO homes: $190,000
  • FSBO homes when buyer knew seller: $160,300

With this kind of discrepancy, why would any seller choose to go it alone? Some may want to avoid paying an agent’s commission—but even factoring that in, FSBOs still stand to make less on their home sale. “Talk to an agent and find out what they suggest for the commission, and then do the math yourself,” researchers write on NAR’s Economists’ Outlook blog. “The closing price for the agent-assisted seller is likely going to be way above a FSBO. [But] in reality, homes sold by the owner make less money overall.”

Homeowners seem to be hearing the message: Only 8 percent of sellers last year—an all-time low—chose to sell their home themselves, according to NAR’s 2017 Profile of Home Buyers and Sellers. That figure has been falling since 2004, when 14 percent of homeowners sold their own homes.

Of the share of FSBOs last year, 38 percent of the homes were sold to a buyer that the seller knew, such as a friend, neighbor, or family member. The majority of FSBO transactions, however, were sold to buyers the owner did not know.


Read the full article here

The Real Reason Your Client’s Offer Was Rejected

So, your clients fell in love with a home and made an offer that they felt was a very good one. Now they want to know why it was rejected. It’s not always cut-and-dried, but realtor.com® recently featured some of the reasons sellers don’t accept certain offers, including some surprising logic.


The buyers revealed too much.

Personal letters have become a popular strategy that some real estate professionals recommend, but it’s important to ensure the letter doesn’t hurt your clients’ chances. “When the bids are very close, things like a personal offer letter can either help or hurt, depending on what it says,” Andrea Gordon, a real estate agent with Red Oak Realty in Oakland, Calif., told realtor.com®. “In one case, the buyer went on and on about the huge remodel he would do when he owned the house. But this was a slap in the face to my sellers, who had spent a considerable amount of money in the past five years remodeling the property.” Make sure your clients don’t unintentionally insult the sellers or their personal tastes in trying to convince them to take their offer.


The offer was too high.

Sellers may want to bypass those offers that seem too good to be true because they could be an appraisal nightmare. “I had a listing in a very sought-after neighborhood, and we immediately received two offers over list price,” says Gail Romansky at Pearson Smith Realty in Ashburn, Va. Romansky says the first offer was $15,000 over the list price and the second one was $40,000 above asking. “While the latter higher offer was tempting to take, I explained that the house was not likely to appraise for this higher amount, which meant the loan might not close,” Romansky told her clients. “So we went with the lower offer of the two.”


Buyers nickel-and-dime everywhere else.

The full-price offer may be enticing to the seller but the request for, say, $10,000 in closing costs may sour them on it. Tracey Hampson, a real estate professional with Realty One Group in Valencia, Calif., says buyers making attractive offers should avoid feeling like they have the right to collect elsewhere in the transaction.


The financial picture raises questions.

Of course, sellers want to feel assured that the buyer can actually complete the transaction. “I had a buyer who made an offer on a house, but they came in with a low down payment, a very high debt-to-income ratio, and a subpar credit rating,” says Kevin Deselms at RE/MAX Alliance in Golden, Colo. “This spooked the seller because it called into question the buyer’s ability to get their loan funded and close the transaction.”