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Tag: Zillow

Castles in the Sand

Addictive real estate

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Of all the things we can become addicted to in our difficult world, real estate is probably one of the safer vices. Or is it?

Wanting to see how other people live has been around forever. Certainly, television has promoted shows like the oldie “Lifestyles of the Rich and Famous,” and more recently “House Hunters,” but what we have going on now is far more addictive. The internet, by design, is addictive but may be especially so for potential homebuyers who need to get a jump on properties as quickly as possible.

Several online websites list properties for sale, including properties on local real estate multiple listing services, which once were unavailable except to Realtors. Zillow is the most well-known, and there are plenty of Zillow addicts who are constantly surfing Zillow, not only because they are looking for a home but also just because it’s fun.

Zillow not only lists properties usually by homeowners, but multiple listing properties can be on the site as well. Zillow also lists estimated values if you provide them with a specific address. Believing these numbers can be dangerous in a fast-moving real estate market. Today’s value can be understated in a week. I always remember the owner of the first real estate company I worked for saying if you’re gone for a week, you’ll come back to a whole new market. Now, if you’re gone for a day the market may have changed.

Online real estate websites studies have shown that the highest traffic times on their sites are weekdays between 9 a.m. and 5 p.m. Remember when most of us had jobs actually working in an office during those hours? Well, now that remote work has taken over large areas of the workforce, everyone has time to “Zillow surf” between Zoom calls and changing the baby.

Is all that time surfing working? Maybe. Buyers do have an opportunity to find new listings in their price range and area as soon as they’re on the market, but the stress can be overwhelming.

There is also an interesting report released by the National Association of Realtors indicating that from 2010 to 2020 about 71% of the increase in housing wealth was gained by high-income households. This shows that the housing value gap between households earning more than 200% of their area’s median income and other homeowners widened significantly in the decade. As of the end of last year, homeownership is at 65.5% per the Census Bureau, but that doesn’t appear to be helping middle-income households.

This is a really bad situation that is only getting worse since first-time buyers are being left out of the real estate market more every day. Lack of inventory and rising mortgage rates are only making that situation worse. Homeownership is the path to building wealth and this country is gradually losing the middle class because of all the roadblocks that are preventing them from owning homes.

This isn’t news to the Anna Maria housing market, where the number of properties priced at more than $1 million far outweighs everything else. It’s not too much better off the Island, either. New construction is generally starting above what first-time buyers can afford, and affordable resales are few and far between.

Millennials can surf Zillow as long as they want but, unfortunately, it may not help them. On this, I have no advice. Sometimes the best answer is to take a breath and see what develops.

In this market, it will likely be a long breath.

Castles in the Sand

Virtual real estate

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

As the world moves closer and closer to virtual realities and artificial intelligence, no area of our lives will be unchanged. Real estate is and has always been a people-to-people business and based on Zillow’s recent experiment with automating the process, the people are winning.

Zillow created a decade-long successful business when they established an algorithm to put a value on practically any property in the country. Zillow’s Zestimates were so popular it spun off the term “Zillow Surfing” because who doesn’t want to know what their house or their relative’s house or their best friend’s house is worth? Use of their app grew 19% this year alone. With all that experience and success, what could go wrong by going into the house flipping business?

House flipping is nothing new to the real estate business. An investor buys a home, does a quick touch up and puts it back on the market at a tidy little profit. Sounds perfect for a company that already knows the value of everything; therefore, Zillow went into the iBuying business.

Based on their Zestimate, Zillow makes offers to sellers who were looking to make the process faster by eliminating the long inspection, appraisal and closing process. Typically, they were looking for properties that were relatively new, about the same size and affordable, basically homes that they could turn around quickly without doing much work.

Unfortunately for Zillow, they started their iBuying program at just the wrong time. Because of the pandemic, home prices rose sharply and properties that did need renovations sat on the market because of the dearth of contractors. Despite the buying frenzy the country was in, Zillow said it was able to convert only about 10% of serious sellers who asked for a Zillow offer –  apparently there was too much competition from non-virtual buyers.

They ended up announcing the shutdown of the iBuying division of their business in early November. It will take them a few more quarters to wrap it up at the expense of several thousand employees. Their flipping program was a big flop. This all goes back to real estate being a people-to-people business, particularly when the product you’re buying and selling is generally the most expensive thing in people’s lives.

So, is there a future for iBuying? Probably; there are still companies out there doing it. My opinion is the machines will never be good enough on their own to compensate for real people. It’s certainly possible that the future lies in a combination of virtual and real people involved. The process still needs a real estate expert to lay eyes on the property and the location looking for unusual and negative aspects that no algorithm can compensate for.

Meanwhile, there are a whole bunch of startups who will purchase a home for a buyer with all cash and wait for their mortgage to be approved for a fee. This, of course, is in response to buyers being locked out of the market by all-cash buyers. The National Association of Realtors reported that homes sold in July received an average of 4.5 offers, with all-cash buyers with no contingencies always rising to the top of the pack. A few of these companies are Flyhomes, Ribbon Homelight Inc. and Orchard.

Selling a home is not like selling shoes online. They’re hard to return if the fit isn’t right and companies who have experience in this area of marketing are finding that out. Replacing the knowledge of a hands-on real estate professional isn’t easy, no matter how good you are at writing algorithms.