Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are you an aspiring housing nerd or home buying? Most stats are garbage
(Editorial) Housing stats are fascinating to many, whether in the market or practicing, or just as a hobby, but most stats are bunk. Here’s why and how to spot legitimate data.
Housing data isn’t as reliable as you might think
You don’t have to be an economist to be an aspiring housing data nerd, and you don’t even have to be in the market for a home. Many people are just intrigued by housing and its broader impact on the national economy. The problem with this data is that a lot of it is garbage, and opinions are formed on faulty information and disseminated across cable news outlets, either giving people false hope or needlessly panicking the nation. Let me explain.
Let’s say you’re fascinated by music, but you’re not in the industry, you’re just a fan. You want to know the hottest songs right now. You’ve dug around the top lists on Spotify, you’ve read all of the music bloggers and journalists’ take on new sounds, and while driving, you hear a local DJ proclaim they have the list of the nation’s hottest songs. Bingo – that is what you’re looking for. But when you go to his blog, there’s nothing fresh, nothing quantified, no science, just a hodge podge of songs he likes. That has merit, but it wasn’t what you were looking for.
This happens in housing all the time. I’m not anywhere near an economist, I’ve just been an observant housing writer for years (and secretly a data nerd, shh!). That said, here are just three examples of faulty stats:
- ILikeHousesAndPizzaAndCats.com (a site I just made up) reports today that their data shows housing in a downward spiral, with foreclosures up 12 percent, sales down 80 percent and housing starts remaining stagnant. Scary, right? The problem is that it’s flat out wrong, but some talking heads don’t vet their information, they just see the word “report,” and opine that the sky is falling.
- SomeNationalHousingSite.com (another site I just made up) reports that housing is improving, as home prices are up 35 percent from 2012. Unlike the first example, the information isn’t wrong, it’s just extremely limited, as most real estate search sites are reporting the home prices of houses for sale on their site. The data is not wrong, it’s just incomplete, and let’s face it, most people don’t read the methodology portion of reports to understand just how limited this data is (especially true for the very small search sites that offer data reports as economic indicators).
- SomeUniversityThatLikesHousing.com (obviously, another made up name) reports that consumer sentiment is up 12 percent over last month, and home buyers are feeling super happy about the market and are ready to jump in. It’s not false data, but if you read the methodology, it is often a web survey placed on the University (or search portal’s) site and is based on 250 responses. The data is not wrong, but the data set is too limited to consider scientific.
How to find legitimate data
There’s no need to be cynical, just critical – not all housing indicators are bad (hence, why we report on only a handful and discard many others). How can you tell which indicators are legitimate? Let’s talk about that.
Often, the federal government puts out numbers, such as the housing starts data, and that’s reliable, because where do you think builders apply for permits? The government. Fannie Mae and Freddie Mac offer stats, and while it’s only based on borrowers’ whose homes are backed by Fannie/Freddie, that accounts for the majority of active loans, so it’s a large enough number to extrapolate from.
What you may not know is that realtor.com is widely accepted as the most complete data set in the industry, as they have the most direct feeds from MLSs (where Realtors originally enter your house for sale from their computer, before it is magically disseminated across the world wide web (a discussion for another day)). With this much reliable data, it is ironic that they were the last of the major search sites to finally hire a Chief Economist – no other site has this amount of historical raw data to dig into.
Zillow has acquired Trulia, and combining their data will put them pretty high up there with realtor.com, but they’re not quite there yet, despite having highly respected economists on staff (that personally admire and respect). They’re growing their data set though, so give it a few years and we suspect they’ll have nearly the accuracy of realtor.com (unless every broker in America revolts and refuses to let their listings appear on Z or T). Like any other search site, their information is based on their users and listings, which for now remains incomplete.
Another reliable source is the National Association of Realtors (NAR), as they not only study all of the data as a whole, but constantly research Realtor practitioner trends. You may think they have an agenda because they’re a trade group representing their members (so you think “yeah, yeah, it’s always a good time to buy or sell or whatever”), but we’ve found their data in recent years to be amazingly accurate… even their predictions and forecasts are pretty close to right on. And want in on a secret? If you read NAR data, watch for other economists to mimic their wording. That’s how you know a source is legit.
So how can you tell if data you’re getting is complete, scientific, and reliable? Read the methodology. The red flags are outlined for you in the aforementioned sites I made up as examples. Regarding national stats, anything Harvard puts out is going to be golden, CoreLogic has more data and reliable analysis than almost any other information provider in the world, and for local stats, your city or state’s Board of Realtors (or “Realtor Association”) will have the most accurate information (which your Realtor has access to).
Why this nerdy geeky dorky stuff matters
Data accuracy isn’t just for the hobbyists – if you have a home on the market or are hunting, you want to make damn sure that the price is fair. You want to know the accurate average days on market for your subdivision, not just some projected number some stranger pulled out of their you-know-what.
Listing data accuracy has been a huge tangled mess in the real estate industry, as listing syndication took off without the proper groundwork being laid (no one could have predicted this Jetsons-like future). Organizations like NAR have been devoted to untangling the mess through data standards and policies, but when any Joe Jack Bob can start a website, invite brokers post their listings there for free, call it a national search site, and tell CNN that housing is falling apart based on their data (and for whatever reason CNN runs with it), consumer sentiment is improperly swayed.
It’s such a touchy subject that realtor.com’s latest marketing campaign is entirely about data accuracy (as seen in this video below (which we enjoy and chuckle at every time)):
Any economist will tell you that what they do is scientific, and not having large amounts of raw data can lead to improper analysis. When reading a study’s Methodology, consider the source (is it Joe Jack Bob in a basement or a reputable national organization with a real economist on staff?) and consider the science (a 200 person web survey is not a scientific study that yields national data results). Read the methodology folks, because most housing indicators are garbage.
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