Editor’s Note: The following commentary is from HAR President and CEO, Bob Hale’s latest weekly email roundup of events, trends and issues impacting the real estate industry that he sends to nearly 50,000 HAR members. This column was sent on Friday, Aug. 12, 2022.
Hale is one of our industry’s most respected leaders who will be helping lead the discussions at the upcoming RISMedia CEO and Leadership Exchange September 6-8 in Washington D.C. We believe our readers will find the following commentary and perspectives, both thought provoking and interesting. If you would like to see and hear Bob Hale as well as more than 120 other interesting industry thought leaders, join us at this year’s RISMedia CEO and Leadership Exchange. Register here.
For industry leaders, executives, and decision-makers, the (beginning of August) has been among 2022’s most informative and mentally challenging. It has been a virtual tsunami of announcements, press releases, shareholder communications, and presentations regarding the first two quarters of 2022.
Significant numbers of real estate industry-related corporations released their second quarter performance reports, other companies executed on early third quarter management decisions and NAR contributed through its annual Leadership Summit.
Dozens of industry-related organizations and entities announced developments regarding earnings, losses, new products and personnel decisions.
The theme of this can be summed up by one word—risk. Moving forward every individual working in the industry and/or marketplace must be prepared to work within a world of expanded and focused risk. Now is the time to prepare to meet the challenges of this new environment.
In earnings twist, most real estate companies avoided the worst in Q2
Despite a quickly slowing market in the second quarter, many of the dozen or more real estate companies that posted earnings last week managed to turn a profit and stave off ruin. Here’s a look at some of them:
Zillow: Premier Agent dips as Zillow hangs on to modest profits. Revenue was down 23% year over year to $1 billion. But significantly, the company managed to turn a profit of $69 million.
Offerpad: Profitability continues for third-straight quarter, even with an ongoing market shift Offerpad is the second-largest dedicated iBuyer, but is the first company from its segment to appear on this list because it managed to clock its third straight profitable quarter between April and June. The company ultimately reported a net income of $11.6 million, up 26% year over year.
Opendoor: Prices get cut to offload inventory, but profitability proves elusive. Last week reported a loss of $54 million during the second quarter of this year. It’s also worth noting that Opendoor and Zillow announced a new partnership the same day that both companies reported earnings.
Rocket Companies: $300 million in cuts helped the largest mortgage lender in the U.S. stay profitable with a $60 million second-quarter profit on $1.39 billion in revenue.
eXp World Holdings: eXp Realty is one of two relatively new, tech-oriented public brokerages (the other being Compass). In the second quarter, the company’s revenue jumped 42% year over year to $1.4 billion—results that gave it a “record quarter,” according to its report. eXp was also profitable, earning a total of $9.4 million in net income.
RE/MAX: Profits and global agent counts tick up slightly. The company brought in $5.8 million in net income.
Redfin saw both revenue and losses both spike with revenue at 29% year over year to $606.9 million.
Keller Williams sales volume increased, but inventory woes drag on other metrics. The company revealed that its overall sales volume climbed 1% year over year, ultimately hitting $146.8 billion in the second quarter.
Douglas Elliman’s revenues dipped in the face of a luxury housing shortage. The company’s second quarter performance generated its second highest quarterly revenue ever of $364.4 million and the company’s net income clocked in at $10.2 million.
Compass second quarter
- 2022 financial highlights vs. same year-ago quarter
- Net sales up 19% to $515.6 million
- Net income up considerably to $31.0 million vs. $(11.3) million
Anywhere Real Estate Inc. reports second quarter 2022 financial results
- Generated revenue of $2.1 billion, a decrease of 6% or $134 million year-over-year
- Net income of $88 million
While Proptech investors didn’t have a banner year, they managed to bring some acceptable performances.
Notarize has completely embraced a full eClosing process that Improves the borrower experience
Notarize, a leader in online notarization, heard the calling for more streamlined digital mortgage options and responded with new programs that offer improved technology for the real estate market with an all-in-one workflow to complete remote notarizations as part of the eClosing process.
For title agents, Notarize provides tech solutions that allow them to digitize the notarial process to save time, reduce errors, condense closing cycle times and accelerate the delivery of closing
CubiCasa’s 2D floor plans app delivers floor plan in 24 hours at no cost
In a recent survey by the National Association of REALTORS®, floor plans ranked as the third most desired listing feature for homebuyers, after photos and detailed listing information. But floor plans are a relative rarity on multiple listings services: only 10-15% home listings in the U.S. have floor plans.
CubiCasa, a real estate software company based in Finland, responded with a new product to enable homeowners to generate floor plans at no cost through their app.
The firm claims that its technology is used in 172 countries and created more than 1 million floor plans.
The next generation of Zillow surfing uses an ai-generated floor plan to bring together listing photos and 3d tours for a more authentic and seamless virtual home-shopping experience
This product, powered by Zillow tech, but available to use for free on listings anywhere—serves as a dynamic guide to give shoppers digital insight and detail so they can more quickly and easily narrow their search to only the homes they love and want to see in person Zillow uses machine learning to not only generate floor plans, but also imports each listing photo and places it on the floor plan, giving shoppers an in-person perspective of a home’s shape and flow that simply scrolling through static images can never do.
For buyers and renters, Zillow’s AI-generated floor plan means navigating more seamlessly and naturally through photos, a 3D Home tour, and other listing information, getting a remarkably accurate sense of a home’s flow and space. An hour of teleporting through interactive floor plans on Zillow can replace an afternoon, or longer, of scheduling tours and driving around town to see homes in person.
More than half (56%) of buyers agree they wasted time on their home search by viewing properties that they would have skipped if they had understood the floor plan before their visit. Almost three-quarters (74%) agree that a dynamic floor plan helps them determine if a home is right for them.
81% of buyers and 71% of renters said they were more likely to visit a home if the listing included a floor plan they liked.
Zillow uses panoramic photos captured by an agent or photographer with the free 3D Home app and a 360-degree camera, and then applies the company’s computer vision and machine-learning models to generate a 3D Home tour and interactive floor plan. This includes AI-predicted room dimensions, square footage, and the location of the listing photos relative to the other media. And now, it also imports every listing photo and places them on the floor plan to more easily navigate and get a feel for the home.
The floor plan, 3D tour, and photos are automatically uploaded to the listing on Zillow and Redfin, and can also be added to the MLS, embedded in a website, or shared via email or social media.
71% of sellers said they are more likely to hire an agent who includes virtual tours and/or interactive floor plans in their services.
People are still moving to flood and wildfire zones, because risk ratings are hard to interpret. What may help them make more informed housing choices? Showing what those floods and fires could cost them.
Climate change will be an important factor in the homeownership experience far into the future. Consumers would do well to understand that in many areas of the country climate-related events are not incidental but rather a regular part of the environment. Homeowners need to understand probable future costs and include them in determining the future costs of home ownership.
The industry is currently testing an online tool for the Gulf Coast that provides residents with actionable resilience information. It is an early model of what residential risk reporting could look like.
Rather than just presenting a score, the tool offers information on the costs annually and over time that one can expect from each hazard, such as flooding or wind damage, and how the home’s census block compares with the local area, county, and state. To capture the effects of sea-level rise, for example, we model the number of years it will take for a home to go from outside a high flood risk area to being inside.
The development of real estate-focused climate and hazard risk metrics, such as those offered by First Street Foundation and ClimateCheck, is a step in the right direction, going beyond government risk maps that provide risk data by county. The next step is to ground those numbers in behavioral science research.
Many consumers also have unrealistic beliefs that insurance and government payouts after disasters will fully compensate them for their losses, and a false sense of security that building codes and permitting mean homes are built to withstand any natural hazard.
Industry warned to prepare for $40B hit on commissions
In addition to climate-related dangers and risks, real estate professionals must also beware of a potential risk being posed by a number of lawsuits that are challenging the way real estate agents are compensated.
If lawsuits challenging the way real estate agents are compensated upend the longstanding practice of listing brokers splitting commissions with buyer’s brokers, the real estate industry should prepare for the $80 billion in annual commissions paid by sellers to shrink by as much as half.
Industry experts have warned that the brunt of the impact will be borne by buyer’s agents, buyer-focused real estate brokerages like Redfin and the vast ecosystem of companies that provide services to buyer’s agents including Zillow and realtor.com.
RISMedia recently published a roundup of the current lawsuits threatening real estate commissions, which you can read here.
The vast majority of the issues discussed in this Insights are not about the future. Most of these issues are in place and impacting our industry and marketplace right now. Every brokerage should have a risk management plan. Every brokerage should be providing regular risk training programs for staff, managers, and agents. HAR is here to help and will continue to keep you informed so you can be prepared and hopefully mitigate your risk now and in the future.
Visit HAR here for more information.