Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Last month Zillow.com launched a new feature called “Instant Offers.” Press real estate can be found here.
It is:
“…a way for homeowners to sell their homes quickly by providing them with offers from investors and a comparative market analysis (CMA) from a local real estate agent, as an estimate for what the home might fetch on the open market.
Here is a bit more about how it works:
“To participate in Zillow Instant Offers, verified homeowners interested in receiving investor offers confirm information about the home (number of bedrooms, square footage, etc.), highlight any updates and provide several photos of the home. From there, select investors who buy homes in the area can present their offers alongside the CMA from a local real estate agent. Any investor offers and the CMA will include an overview of fees associated with each option, to enable sellers to make an informed apples-to-apples comparison.”
When I first saw the headline, I thought they were copying Opendoor. But it’s not the same model. They aren’t buying the homes, like Opendoor, they are simply working to coordinate an “instant” transaction. Still, I’m sure that Opendoor provided at least some of the impetus for this feature.
Of course, the most interesting question with these online real estate platforms is: Will they disrupt real estate agents? Mike Delprete wrote a great post about this in the wake of Zillow’s announcement.
But ultimately he concludes something that I have felt strongly for years:
“So, while real estate sites are best positioned to disrupt the real estate industry by displacing agents, they’re also the least likely to do so, because agents are their biggest customers and source of revenue.”
The irony.
About 70% of Zillow’s revenue comes from real estate agents. So it seems unlikely that they – at least currently – will be the ones that turn the tables on agents.
Some real estate platforms have started diversifying their revenue streams for probably this exact reason. But who knows, it may be a new entrant, rather than an incumbent, who pulls this off.
Zillow.com recently published some research where they looked at U.S. home prices broken down according to location: urban, suburban, and rural.
Here’s what they found:
As you can see, urban homes across the U.S. largely trailed their suburban counterparts in terms of absolute value up until the end of 2014. At that point, urban homes then surpassed suburban homes for the first time in the last two decades. (I wonder if this is a first or there was another crossover point before the late 1990s.)
Version One Ventures – which is an early-stage venture capital fund based in Vancouver – recently published a free handbook called, A Guide to Marketplaces.
Online marketplaces are really fascinating because they are perhaps broader in scope than you might initially think. For example, Uber is a marketplace. There’s a supply-side (drivers with cars) and a demand-side (people needing rides). Uber connects these two groups together and acts as a kind of digital middle person. Uber does not own any of the cars.
Last month Zillow.com launched a new feature called “Instant Offers.” Press real estate can be found here.
It is:
“…a way for homeowners to sell their homes quickly by providing them with offers from investors and a comparative market analysis (CMA) from a local real estate agent, as an estimate for what the home might fetch on the open market.
Here is a bit more about how it works:
“To participate in Zillow Instant Offers, verified homeowners interested in receiving investor offers confirm information about the home (number of bedrooms, square footage, etc.), highlight any updates and provide several photos of the home. From there, select investors who buy homes in the area can present their offers alongside the CMA from a local real estate agent. Any investor offers and the CMA will include an overview of fees associated with each option, to enable sellers to make an informed apples-to-apples comparison.”
When I first saw the headline, I thought they were copying Opendoor. But it’s not the same model. They aren’t buying the homes, like Opendoor, they are simply working to coordinate an “instant” transaction. Still, I’m sure that Opendoor provided at least some of the impetus for this feature.
Of course, the most interesting question with these online real estate platforms is: Will they disrupt real estate agents? Mike Delprete wrote a great post about this in the wake of Zillow’s announcement.
But ultimately he concludes something that I have felt strongly for years:
“So, while real estate sites are best positioned to disrupt the real estate industry by displacing agents, they’re also the least likely to do so, because agents are their biggest customers and source of revenue.”
The irony.
About 70% of Zillow’s revenue comes from real estate agents. So it seems unlikely that they – at least currently – will be the ones that turn the tables on agents.
Some real estate platforms have started diversifying their revenue streams for probably this exact reason. But who knows, it may be a new entrant, rather than an incumbent, who pulls this off.
Zillow.com recently published some research where they looked at U.S. home prices broken down according to location: urban, suburban, and rural.
Here’s what they found:
As you can see, urban homes across the U.S. largely trailed their suburban counterparts in terms of absolute value up until the end of 2014. At that point, urban homes then surpassed suburban homes for the first time in the last two decades. (I wonder if this is a first or there was another crossover point before the late 1990s.)
Version One Ventures – which is an early-stage venture capital fund based in Vancouver – recently published a free handbook called, A Guide to Marketplaces.
Online marketplaces are really fascinating because they are perhaps broader in scope than you might initially think. For example, Uber is a marketplace. There’s a supply-side (drivers with cars) and a demand-side (people needing rides). Uber connects these two groups together and acts as a kind of digital middle person. Uber does not own any of the cars.
But if you dig a little deeper and look at both the rate of appreciation and prices per square foot (as opposed to just absolute value), urban home prices appear even stronger.
Here’s a snippet from Zillow’s post:
“Over the past five years (2010-2015), average urban home values have grown 28.4 percent, compared to 21.1 percent for suburban home values. In the past year alone, U.S. urban home values grew 7.5 percent, compared to 5.9 percent for suburban homes.
On a per-square-foot-basis, homes in urban areas nationwide used to be worth roughly the same as suburban homes, before a gap started emerging in the late 1990s which has become progressively wider over the past roughly two decades. Currently the gap stands at 24.5 percent, with suburban homes valued at $156 per-square-foot and average U.S. urban homes worth $198 per-square-foot.”
And here is that same chart showing per square foot prices:
Everyone who reads this blog knows that there is a growing interest in urban centers. But if you look at the above charts for specific cities, there are still many cases where urban home prices are well below suburban ones.
To me, that serves as a reminder of the spikiness of this urban transformation, but also that it is likely still in its infancy. As recent as 20 years ago, Toronto largely didn’t believe that people would want to live downtown in modern apartments. Today we take that for granted.
So even with all of the gushing about urban centers, I still think we are only just getting started when it comes to creating the great urban neighborhoods of the future.
This is an incredibly power business model and it can and is being applied in many different ways. Here are the top internet marketplaces (via the handbook):
I have been interested in this space for years because I have been very curious as to why we haven’t seen more innovation when it comes to online real estate marketplaces. Yes, there are platforms like Zillow.com. But Zillow has not done to real estate what Uber is doing to urban mobility.
My thinking is that it comes down to supply-side aggregation. Online marketplaces in general are hard to get started, which is why investors love them. They have defensibility. But real estate, in particular, is even harder to jumpstart compared to the incumbent models because of what I see as constraints on the supply-side.
That’s why I am so excited about what BuzzBuzzHome.com is doing on the new construction side of the business. They are aggregating supply.
If you’d like to download the guide to marketplaces in PDF, click here. It’s a great read and I’m glad that Boris and Angela took the time to assemble. Thank you :)
But if you dig a little deeper and look at both the rate of appreciation and prices per square foot (as opposed to just absolute value), urban home prices appear even stronger.
Here’s a snippet from Zillow’s post:
“Over the past five years (2010-2015), average urban home values have grown 28.4 percent, compared to 21.1 percent for suburban home values. In the past year alone, U.S. urban home values grew 7.5 percent, compared to 5.9 percent for suburban homes.
On a per-square-foot-basis, homes in urban areas nationwide used to be worth roughly the same as suburban homes, before a gap started emerging in the late 1990s which has become progressively wider over the past roughly two decades. Currently the gap stands at 24.5 percent, with suburban homes valued at $156 per-square-foot and average U.S. urban homes worth $198 per-square-foot.”
And here is that same chart showing per square foot prices:
Everyone who reads this blog knows that there is a growing interest in urban centers. But if you look at the above charts for specific cities, there are still many cases where urban home prices are well below suburban ones.
To me, that serves as a reminder of the spikiness of this urban transformation, but also that it is likely still in its infancy. As recent as 20 years ago, Toronto largely didn’t believe that people would want to live downtown in modern apartments. Today we take that for granted.
So even with all of the gushing about urban centers, I still think we are only just getting started when it comes to creating the great urban neighborhoods of the future.
This is an incredibly power business model and it can and is being applied in many different ways. Here are the top internet marketplaces (via the handbook):
I have been interested in this space for years because I have been very curious as to why we haven’t seen more innovation when it comes to online real estate marketplaces. Yes, there are platforms like Zillow.com. But Zillow has not done to real estate what Uber is doing to urban mobility.
My thinking is that it comes down to supply-side aggregation. Online marketplaces in general are hard to get started, which is why investors love them. They have defensibility. But real estate, in particular, is even harder to jumpstart compared to the incumbent models because of what I see as constraints on the supply-side.
That’s why I am so excited about what BuzzBuzzHome.com is doing on the new construction side of the business. They are aggregating supply.
If you’d like to download the guide to marketplaces in PDF, click here. It’s a great read and I’m glad that Boris and Angela took the time to assemble. Thank you :)
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