Real estate forecaster Stefan Swanepoel captured the essence
of the year that was when he called the industry “chaotic” and “changing at what appears to be an
unprecedented pace.” The biggest industry news of 2019 reflected the
disruption that is—and has been—occurring technologically and in other ways in
real estate, including:
- New business models that promise to solve transactional pain
points for consumers. - Unveiling the secrecy around off-MLS listings.
- Addressing ongoing inventory shortages.
We compiled a list of some of the biggest real estate topics
that made headlines in 2019—and we make predictions for 2020.
1. The Housing Crunch
The lack of inventory
nationwide was a major theme in 2019. Lawrence Yun,
chief economist for the National Association of REALTORS®, warned often that
first-time buyers would have a difficult year, as the housing crunch became
most acute in entry-level price points. While total inventory was down 5.7%
year over year in November, according to NAR, inventory for homes priced
below $250,000 plunged 16.5% year over year. Production from
builders, who are saddled with escalating construction costs and labor and lot
shortages, continued to lag buyer demand, making inventory shortfalls worse, housing economists said at
NAR’s first-ever Real Estate Forecast Summit earlier this
month.
The shortages have pushed home prices higher just as buyer demand soared,
in large part due to sub-4% mortgage rates. But the median price for an
existing home among all housing types was $271,300 in November, according to
NAR data, pressing on buyers’ budgets.
What’s next for 2020: There’s a silver lining for homeowners: “Real
estate is on firm ground with little chance of price
declines,” Yun said during the Forecast Summit. “However, in
order for the market to be healthier, more supply is needed to assure home
prices as well as rents do not consistently outgrow income gains.”
2. The Rise of the iBuyer
iBuyers,
though not a new concept, dominated the industry
conversation this year as companies like Opendoor captured more
market share. But instead of fearing the iBuyer, an online entity that makes
instant offers to home sellers, real estate pros began to
see opportunities to work with iBuyers. More traditional brokerages,
too, entered the iBuying model this year with their own spin on such services.
- Realogy launched RealSure in
conjunction with Home Partners of America to give sellers a cash offer on their
home that is valid for 45 days, while the home also is publicly listed with a
Realogy agent. - Keller Williams launched
Keller Offers, partnering with the iBuying platform Offerpad. - Redfin partnered with
Opendoor to widen its Redfin Now iBuying program. - eXp Realty rolled out its
Express Offers to 13 states.
What’s next for 2020: iBuyers
have deep pockets and are expanding rapidly. Most of them will likely
begin adding services such as mortgage and title to capture higher margins,
predicts Jeffrey Fagan, president of the Orlando Regional REALTOR® Association.
Indeed, Opendoor, a giant in the iBuying space, entered the mortgage
business this year and partnered with title insurers to become
a one-stop shop for real estate transactions.
Expect
more brokerages to look for alliances with iBuying firms. “I think iBuyers are
here to stay, and I think as an industry, we will find that we will need to
address the iBuyer position as an option to sellers who desire that approach,”
Fagan says. “We need to closely watch these companies and even possibly let
them teach us how to improve our own models.”
3. MLS Disputes Grow Louder
MLS issues came
to the forefront of the industry’s consciousness this year. A growing number of
brokerages were keeping listings off the MLS, choosing instead to create “limited exposure”
listings and advertise them on their own private platforms—accessible
exclusively to their agent networks and a small, select group of potential
buyers. Such a practice, coupled with expanding iBuyer market share, meant MLSs
were faced with declining and incomplete inventory, further impacting the
availability of listing information to consumers and brokers.
The
industry responded. In November, the National Association of REALTORS®’ Board of Directors approved
the “Clear Cooperation Policy” to address the growing practice
of limited exposure listings. The policy requires listing brokers who are
participants in an MLS to submit their listing to the MLS within one business
day of marketing the property to the public. It does not prevent brokers from
taking office-exclusive listings.
What’s next for 2020: MLSs
have long been the cornerstone of an orderly and transparent real estate
market, but that is being challenged as the use of limited exposure listings
continues to grow. To better serve brokers and consumers by ensuring a
pro-competitive and pro-consumer marketplace, MLS consolidation is
increasing. Some MLSs also are collaborating to improve their
technology and streamline broker and consumer access to data with data-sharing
agreements. An NAR presidential advisory group looking into the future of the
MLS recommended an industrywide effort to urge further consolidation among MLSs
and provide added support to those who do.
4. Data In-security
Keeping
your and your clients’ personal information safe during a transaction has
become a pressing issue. Cyber threats, from wire fraud to malware attacks on MLSs,
are growing. Scammers are hacking into real estate
professionals’ email accounts and those of mortgage companies,
attorneys, title companies, and others involved in a transaction. Prior to
closing, scammers will send unknowing buyers fraudulent wiring instructions for
their down payments. Once the money has been wired, it rarely can be recovered.
What’s next for 2020: Expect
scams that target real estate transactions to widen in scope. The funds disbursed
to sellers after settlement, either from refinancing or selling a property, are
also being targeted by fraudsters. “We can’t allow the consumer to lose faith
in our ability to protect them and their
money in a transaction,” Fagan says.
Fallout
from data security laws also is expected to be a hot topic in 2020. Starting
Jan. 1, the California Consumer
Privacy Act takes effect; enforcement starts June 2020. Other states
are considering similar measures. The CCPA gives consumers the right to know
what personal information a company intends to or has collected from them. Real
estate pros who collect client information and use it in marketing data could
be held liable if they don’t abide by certain protocols.
5. ‘Proptech’ Accelerates
The
property technology space—including products and services that offer digitized
closing platforms, artificial intelligence, and data analytics tools—has seen a
surge in venture capital funding. In the first half of 2019, investors poured a record
$12.9 billion into real estate tech companies. That surpassed the
$12.7 billion record for all of 2017.
NAR
has helped influence the exploding proptech market, continuing to prepare new
and diverse startups for the marketplace through its award-winning Reach Accelerator program. At
the association’s second annual Innovation, Opportunity & Investment Summit
in August, Curbio, a presale
renovation company, won the “pitch battle”—perhaps a sign of a
burgeoning marketplace for such services.
What’s next for 2020: The
iOi conference set the stage for what’s to come: The pace at which
technologies like iBuyers and artificial intelligence are reshaping the real
estate industry is only going to speed up. Expect more
well-funded real estate technology startups to vie for market share. “The real
estate market is changing very quickly,” says Jerry Clum, founder of Hommati, a
real estate services company.
Tech-savvy
millennials—a strong force in the housing market—are prompting the tech
evolution in real estate, Clum says. “Because they grew up with video games and
computers, they are more visual than previous generations. In order for a home
to get noticed in all the clutter out there, real estate agents need to use
dynamic visual content to set their listing apart.”
Other
technologies center on growing iBuying platforms, fostering digital
transactions, and weaving artificial
intelligence into your business. “Startups are growing with massive
amounts of venture capital money,” the 2020 Swanepoel Trends Report notes.
“Because these startups can operate without being beholden to short-term profit
demands and invest heavily in growth, they have the ability to disrupt the
incumbent market regardless of their eventual success.”
—Reprinted
from REALTOR® Magazine Online, December 2019,
with permission of the National Association of REALTORS®. Copyright 2019. All
rights reserved.
