The real estate housing market has – perhaps surprisingly – improved in spite of the pandemic. The National Association of Realtors reported that sales in August had increased by 10.5% over the previous year, and that the rate of sales in 2020 was at a 14 year high. Both existing and new homes have benefitted.
There are a number of reasons why this is happening, such as lower international sales and rental properties becoming more desirable. Fewer houses are being put on the market as well, which has caused the supply to shrink as prices rise. There’s also questions about how the business world will work post-pandemic, where remote work and telecommuting may become more commonplace.
In any case, home sales are brisk and show little sign of slowing down, and big tech is making moves to capitalize on the growing trends. The pandemic is bringing another revolution to the marketplace – some people aren’t even meeting their realtor, while others sometimes buy without even seeing the home. Even if these are outliers, it’s undeniable that this is big business for digital platforms.
Compass is certainly one of the rising stars in this area, having seen a massive revenue increase of 56% as prices climbed, reaching a total of $3.7 billion. As described by CNBC, “Founded in 2012, the New York-based company has sought to bring advanced technology to real estate agents, giving them better data, marketing tools, and customer relationship software than they can get from a typical brick-and-mortar brokerage.”
Protocol explains Compass’s technology: “…[their] primary offering is a CRM that contains a marketing center (Digital ads! Videos! Email newsletters!), market analysis tools, and client rosters. Compass also has an ‘AI-powered comparative market analysis tool’ that lets agents optimize prices, and ‘Compass Collections,’ a visual workspace where agents and clients can look at homes and chat within the UI.” Further, Compass makes 2.5 – 3% in commission on a house sold.
Alongside the revenue bump, net losses fell by from $388 million to $270.2 million, further bolstering an already solid market value. Softbank’s Vision Fund – which has had stakes in WeWork and OpenDoor, recently made a third investment in Compass after an evaluation of $6.4 billion in 2019.
All of this has led Compass to file for an IPO. Comparable companies such as Zillow and Redfin have seen similar stock market success, with the former seeing three times as many shares sold and the latter just below this.
Some have expressed concern that the housing market could change at any moment (even dredging up the events of 2008). Protocol’s article goes into great detail about this, stating that there is vulnerability with regard to interest rates increases, which would drive people to rent more so than buy. Competitors could also become problematic if they follow Compass’s model.
Still, at this time, Compass’s position is favorable and expected to continue this way. As the pandemic could last another year, housing market conditions may remain as they were in 2020, which may help push Compass’s success further. More and more people are utilizing online tools for real estate, after all.
Robert Snodgrass has an English degree from Texas A&M University, and wants you to know that yes, that is actually a thing. And now he's doing something with it! Let us all join in on the experiment together. When he's not web developing at Docusign, he runs distances that routinely harm people and is the kind of giant nerd that says "you know, there's a King of the Hill episode that addresses this exact topic".
