Probably the most frequent single question I get as a realtor from my friends and clients and contacts is “Are we in a real estate bubble?
Are We Brewing A Bubble In Seattle?
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Author Archives: Chuck
Don’t Get Carried Away!
A couple of weeks ago I had occasion to take three different clients through the same house – an attractively-priced 1967 split-level home just north of Microsoft. So everybody knows that Microsoft will be hiring a lot more folks over the next few years, and a lot of those folks are thinking maybe they should pick up an investment rental in that area – with so much high-income job growth, there should continue to be great appreciation. Great logic. But don’t get carried away by the opportunity.
In this case, the home was priced at $375,000 – for a 1967 split-level home, 3 bedroom, 2.25 bath, 1,820 sf, 2-car garage. All the right specs. Price egregiously low. First, that low price led people to look at the house who were not anywhere near qualified for the price it would actually sell for. Second, that low price led investor bidders to fight over it in a bidding war that maybe should live in the annals of northwest real estate. So here’s what I have heard: the first winner got it for $475,000 – and then failed financing. Seller put it back on the market, same low price, same bidding war (if there were 10 to start with, there might be 9 still standing – hopefully fewer as they realized what it was really going to take to win it). Second winner got it for about $470,000.
Was it a great deal? I don’t think so. Was it a reasonable deal – maybe so. This place was structurally sound, but needed to be completely updated and refinished. It would be fair to say that a lot of the house was original (almost 40 years old) and worn out, including the garage doors – and on and on. The lower level would need to be stripped down to the studs and re-wired and re-sheetrocked. The baths needed to be redone. The kitchen space needed to be reconfigured (i.e. move walls) and then rebuilt. If the new owners are both thoughtful and handy at doing a lot of the work themselves, they will probably come out fine.
If you knew it was going to be $475,000 to start with, you might have looked for one in much better shape and saved yourself a lot of work. Don’t get carried away!
A Funny Thing Happened On The Way To The Forum…
Actually it was a great evening at the MIT Enterprise Forum program last Wednesday (3/15) on the topic of Online Real Estate. I was on the volunteer program development team that put the evening together, and I got tagged to put together this note for you 🙂 And my own personal thanks to all who helped us with insights and contacts to build the program, including Dustin. There’s already been a lot of great timely comments on the program in this blog, so this note is primarily to report some of the stats and survey results, and a couple of my own comments on disruptive technologies and market inertia (or active resistance, as the case may be).
Attendance at the dinner/program meeting was a sold-out 400 people, one of the highest numbers ever for an MITEF program. The program panel was made up of three local online real estate companies – House Values (Niki Parekh), Redfin (David Eraker) and Zillow (Spencer Rascoff), plus a broker, Real Property Associates (Gordon Stephenson), and an Internet savvy agent, who was also our moderator (Jim Reppond, Coldwell Banker). So it was a good crowd, and a good spectrum of players on the panel. The program consisted of introductions of the players and their companies, key questions and panel responses led by the moderator, and open Q&A from the audience.
Wednesday morning (3/22) we reviewed the results of the online survey we sent out to the 298 attendees that we had emails for – we got 96 responses back, which is a pretty good sample. Here’s some highlights of the responses:
- 63 % were there because the program was relevant to their work or job – usually not that high; lots of Realtors present, as expected. For over 60%, this was their first time at an MIT Forum event. The other large segment was more the regular MIT Forum attendees who follow, and lead, tech-driven companies and their business issues.
- 87 % said the topic was relevant to them; 78 % said the program met or exceeded their expectations.
- 69 % said the level of detail was just right, but 31% said it was too general – higher than we would have liked.
Enough of the stats. Here’s some quotes from the comments that show more of the flavor of the event, and some of the mixed reactions it generated:
“Having Zillow, Redfin and House Values in the same room at the same time was the reason I decided to attend. Not necessarily the speakers themselves, but the companies they represented.”
“I was expecting to hear about more revolutionary technology. It seems the real estate industry is still in the technology dark ages.”
“The topic was “The New World of Buying and Selling Real Estate”. The moderator and the audience of R.E. agents didn’t allow for a real discussion on the future because they feel so threatened by these new technologies. Boos from the crowd of R.E. agents and a moderator who encouraged it stifled an open and honest discussion.”
“It is difficult for businesses to share the future directly as competition is present and they cannot release product plans before they are ready to launch.”
“It was good to hear the stories on the companies’ background and how they work. Although, at times it almost seemed as though I was at an infomercial.”
“Great topic; always fun to hear the spirited discussion that an industry in transition generates.”
All of the above once again proving that it is very difficult to satisfy all of the people all of the time, and that divisive subjects generate divisive reactions. It would be fun to do this again a few years from now, when more of these companies are bigger, and public, and have more visible business strategies.
So now I get to put in my nickel comments, based on my own background as a tech exec, seven years working with the MIT Forum on these kinds of programs, and now full-time realtor for several years. I think that this is an industry in the very early stages of being hit by disruptive technologies and the new business models that they enable. The mass and momentum of the industry are huge, and the consumer market is highly diverse. It may take quite a while for the new business models to clarify and engage their target segments of the market and start to get real (no pun intended) traction. The players we see today may not be the players of the future (for example, see Dustin’s earlier post about Google Base vs Zillow). But some will get traction, and as they do we will see a lot of resistance and delaying actions by those whose market is being disrupted. Some resistance will be tightened corporate policies, some will be PR campaigns, and some will be lobbyist-driven regulation. Anything sound new here? We’ve seen it in industries as diverse as airlines and telecoms and travel and books and so on … Delaying change is worth $billions to the incumbents, and they are pros at the game. But it still looks to me like the technology train is on the tracks, and gathering speed. Personally, I will take every advantage I can of the technology-driven changes… and I will continue to welcome ‘old-fashioned’ people-driven referrals 🙂
Something’s Afoot in the Real Estate Business – but what does it mean and where is it going?
(Editor’s Note: I few weeks ago, I sat down with Chuck Reiling to discuss an MIT Enterprise Forum he is helping to organize that will feature leaders from some of the top real estate technology firms. His excitement at the idea of bring people from Zillow, Redfin and HouseValues together to discuss the future of real estate was obvious and contagious. Hence, I asked him if he would be willing to give some background on the project, which led directly to this post. Interestingly he’s not the only one who is excited about this forum as he the story was already picked up by both Robert Gray Smith and John Cook. Chuck and his wife are local RE/MAX agents.)
There’s been lots of local and national press lately about new online real estate offerings like Zillow and Redfin. With lots of investor money moving into the arena, we know there is change afoot. The question is, how much change, and for whom? Change for the consumer? Agents? Both?
As Ardell described recently in her “History of Real Estate” articles (Part 1, Part 2 and Part 3), the residential real estate business is always in a state of change. Ten years ago the online MLS systems caused a lot of change. The listing books got thrown away, and a few agents who couldn’t adapt went with them. Then the MLS derivative sites started appearing, with MLS download data becoming available to the public. People could start doing their own online searches without having to call an agent, or cruise the streets on Sunday afternoon looking for open houses. So change is ongoing, and maybe there are only a few real (no pun intended) points of stability.
My daddy and my uncle were both brokers years ago. The only points we still have in common with their businesses seem to be clients, agency law, and the For Sale sign in the yard; almost everything else has changed. For a long time, ‘public’ records in boxes in warehouses were not very publicly accessible for most of us, but government agencies (state, local and federal) are rapidly putting their public records information online to support their operations, and incidentally help us too. And new services like Redfin, Zillow and House Values make that data even easier to use in support of their own business models. As we see locally, the big four real estate companies, Windermere, Coldwell Banker, John L. Scott and RE/MAX are also exploiting that data in conjunction with MLS data on their sites. None of this has changed the basic business model of professionally assisted transactions with buyer and seller agent commissions. While the traditional model has been a subject of debate for a long time, and a lot of creative alternative business models and offerings have been tried, the industry is still seems to be running on business as usual.
However, there is also a lot of technology-driven change right now. Someone with a background in the high-tech industry might observe that real estate looks like just one more industry about to be disrupted by the Internet – changes caused by dramatically improved information availability, rapid communications and online business models. But residential real estate is still dominated by local interests, its product is both expensive (understatement) and unique, and there are a lot of local and national consumer protection laws on the books – some good, some bad, and more coming. So who is right, and what will happen next?
To try to pull together a picture of the impact of these changes, and where they might lead, a local organization called MIT Enterprise Forum is focusing one of its dinner programs on the topic of Online Real Estate (clever title). The Forum focuses on highlighting business issues and opportunities for tech-driven companies and entrepreneurs. The Online Real Estate program will be on Wednesday, March 15, at the Bellevue Hyatt Hotel. See www.mitwa.org for program details and reservations.
These MIT Forum events typically draw 200 to 400 attendees, and this one will probably be on the larger side. For better or worse, it seems like everyone is interested in real estate these days. The program will be panel-based, with a traditional real estate broker, a top online agent and execs from Redfin, Zillow and House Values, with an open Q&A session at the end. I’m on the program team that is pulling the program together, and I’d have to say I expect a very lively conversation on the stage that evening. 🙂