Quick Take – February 23, 2020

I missed last week’s Quick Takes; mea culpa. I believe I was in the air somewhere over Louisiana when I realized. So we’ll just have to catch up on two weeks’ worth of stuff.

Notorious TL;DR

It’s been a busy couple of weeks since the last Quick Take, as public companies started reporting earnings. But other stuff happened as well.

African-American Homeownership Lowest Since 1968: What If It’s Not All Race?

First, a public post in which I look at the news that black homeownership rates hit the lowest level since 1968, which is when the Fair Housing Act was passed.

While race and discriminatory steering certainly play a role, I thought the focus on only race obscured a more fundamental and more important dynamic: blacks marry at lower rates and divorce at higher rates than other ethnicities. And the correlation between marriage and homeownership is extraordinarily tight.

I raised the issue because younger generations of Americans and Canadians are not getting married. We keep hearing economists say “family formation will improve” which will really drive demand, and it keeps not happening.

This is a topic I talk about quite a bit both here and in person, so we may return to it at some point.

[VIP] The Notorious Interview: Scott Martineau, Brad Nix, OfferBarn

I also published an interview I did with the CEO and co-founder of OfferBarn, Scott Martineau, and one of his investors and advisors, Brad Nix. We chatted both before and after I wrote my article that mentioned them — [VIP] Agents Know iBuyer is For Real — and we got into greater depth about what’s happening on the ground.

Given more recent news (see below), it seems like a decent idea to listen to what they’re finding as actual entrepreneurs as well as brokers on the ground in Atlanta, one of the epicenters of the iBuyer phenomenon.

[VIP] Redfin, Q4/2019: Strong Results All Around, and Signs of Surprising Convergence

We got into earnings week with Redfin kicking off the festivities. I got into some depth with their Q4 and 2019 numbers, as I usually do, then thought about what I was hearing from them on the earnings call.

My surprising conclusion is that while Redfin had a fantastic Q4 and a great 2019, and things look really quite rosy for them in 2020… Redfin is converging towards the traditional brokerage companies like Realogy, rather than converging towards the tech-powered disruptors like Zillow and Opendoor.

I didn’t see that one coming, so read the whole thing if you’re curious.

What Does Resilience in Real Estate Look Like?

I was inspired enough between trying to understand earnings reports to write this public post. The proximate cause is my friend Joe Rand, a broker in New York and a former corporate lawyer, writing an op-ed piece in Inman about how the incumbents are responding to disruption, and because they have scale, they’ll ultimately win.

Since a theme of my blog for a while, and probably for 2020, is that the industry is plagued by fundamental problems… and none of the solutions offered thus far seem to solve any of them, I chose to talk about that some more with respect to brokerages. Whatever response to disruption, if it doesn’t solve the inverse relationship between productivity and profitability, and doesn’t solve the lack of control over the consumer experience, it won’t actually do much for the traditional incumbents.

At least, that’s my argument. Check it out if you haven’t already.

[VIP] Zillow, Q4/2019: Turn the Page

I managed to get this out the door on Friday, so you might be seeing it today when you get into the office… but I wrote up my thoughts on Zillow’s Q4 results.

In short, they were incredible. IMT continued its surprisingly strong results, while Homes just blew the doors off in terms of revenue, growth and losses.

But the main point I took away is the extent to which Zillow has completed its pivot away from an agent-centric advertising portal (which Wall St. still calls Zillow’s “core business”… something I dispute…) to a market maker with related services.

It’s a weird feeling. So many of my past predictions, which I’ve been pointing out for years, are now becoming reality… but with spins and details I did not see coming.

[VIP] The Notorious Interview: John Campbell, Stephens

Friend of the Notorious blog (and me as well) John Campbell of Stephens returns for another interview. I recorded it before the earnings hit, but my laptop died on me… which necessitated going live yesterday. But we didn’t really talk about Q4; we talked about his takeaways from the Inman conference.

He’s a very smart, very perceptive analyst of what’s going on in residential real estate. We don’t agree on everything, but it is such a pleasure to talk to him about the industry. Hope it’s a fun listen for you as well.

Quick Takes

What’s been happening in and around the world of real estate?

Trump administration proposes massive cuts to HUD

This is likely important news that will go completely unnoticed by the vast majority of the industry, because it’s one of those things that won’t really affect commissions.

But the cuts proposed by the Trump Administration might be a signal as to how they’re thinking about housing policy, particularly in a potential second administration. Seems to me they have other spending priorities and generally prefer to leave housing issues to the states when possible.

Ben Kinney, Chris Suarez launch new brand-agnostic platform

This news caught my eye for a couple of reasons.

One, it’s smart. The new platform, Place, is trying to handle all of the administrative, financial, and operational aspects of an agent team so that the team leader can focus on lead generation.

Practically speaking, what that means is Place will handle an array of administrative and business tasks that might otherwise eat into the time of real estate professionals who would rather focus on helping clients.

Yes, I know it says “helping clients” but trust me, that’s not what team leaders or productive agents do today with 90% of their time.

Two, Ben Kinney is a superstar in the world of Keller Williams. Granted, he owns numerous companies, including stakes in multiple brokerages, but his brokerages are essentially outgrowths of his team.

That made it interesting since… Place sounds like a great deal for the top 1% of agent teams who Kinney and Suarez are targeting, but I just don’t know what it does for the brokerage, especially in a cap environment like KW’s.

It’s yet another piece of the value proposition that is being eaten away by a third party vendor.

So is KW going to welcome this with open arms because it’s Ben Kinney we’re talking about? Or is this going to be something Gary Keller regards as a negative since it isn’t going to be helpful to his actual franchisees…. I don’t know, but it is interesting.

BTW, Place or something very much like it feels like a fantastic acquisition target for Zillow. You’ll understand if you’ve read my take on Zillow turning the page.

Fannie Mae, Freddie Mac subpoenaed in commission lawsuit

We got a tidbit of news from the Gotterdammerung of real estate: the commission antitrust lawsuits.

The attorneys for Sitzer, which survived a motion to dismiss, are moving into discovery. And we are slowly finding out the extent of that effort.

The latest news is that the two largest GSE’s, Fannie Mae and Freddie Mac, have been subpoenaed for documents and data related to agent compensation:

All information about broker and agent compensation for each real estate transaction in the U.S., including type, terms, source, amount, the amount offered in any listing and the amount actually paid, rebates, discounts or incentives; the currency in which the sale and the broker and agent compensation was billed and paid; whether the seller, buyer or anyone else who made an offer was self-represented; and the type and amount of any expenses or costs associated with the transaction and who paid those expenses

This is not the last subpoena we’ll see in these cases, but among the first. Oh, the things we are about to find out!

The rise and stall of the offer aggregators: How iBuyers are bringing startups to heel

Inman published… I don’t know what to call it. It’s not a news story precisely, nor is it an op/ed piece. Guess we’ll call it a “special report”…. The topic was how the iBuyer companies like Zillow, Opendoor and Offerpad are either fighting off or very chilly towards the new crop of iBuyer offer aggregators.

It’s pure coincidence that I wrote about OfferBarn a couple of weeks ago… I’m certain of it.

Nonetheless, Teke Wiggin does a very good job of laying out what’s been happening with all of these companies that want to be the Kayak of iBuyers. What Zillow and Realtor.com did to listings, these guys want to do to iBuyer offers.

Except Homie don’t play that game. So far. Not yet.

It’s an interesting story and one that bears some watching. The fact that iBuyers want to fight these, instead of figuring out a way to work with them, is interesting in and of itself. But the reasons why they don’t may be even more interesting.

We may return to that topic soon.

Warren Buffett’s HomeServices Becomes the Top Home Brokerage in the U.S.

In the nature of “not new, and not entirely true” comes the *cough* news *cough* that HomeServices of America became the top brokerage in the U.S., overtaking Realogy’s NRT unit.

Except that that happened already last year, with 2018’s numbers. RealTrends updated its RealTrends 500 list and HomeServices remained #1 by transaction sides.

But just like last year, Realogy’s NRT was still #1 in Sales Volume because the NRT is so heavily concentrated in high-rent coastal markets.

So they’re both #1, and they were both #1 last year too!

But hey, Bloomberg, so… good that it got a mention at all, I guess.

Housekeeping Notes

I board another plane Tuesday to head to Niagara Falls for Reality 2020 put on by OREA, Ontario REALTORS. But first, I’m going to stop by RE/MAX’s big convention, R4, tomorrow for a quick chat with some folks. That seems timely since I’m writing the RE/MAX Q4 earnings report analysis this week, while traveling.

In any event, if you’re at either event, and want to say hello, let me know. Otherwise, I’ll see you around the blog and the Lounge.

Thank you all!

-rsh

PS: I still miss Phife Dawg.