5 takeaways as titans tackle real estate’s hottest topics
Industry heavyweights — and former rivals — Spencer Rascoff and Glenn Kelman addressed some of the toughest issues facing real estate in a lively discussion.
- Kelman said the inventory “standoff” could last years because most homeowners aren’t feeling the “distress” that might otherwise push them to sell.
- The DOJ is watching the commission lawsuits and could follow them with something more “aggressive,” Kelman said.
- AI has taken off, but it has a dark side that needs to be reckoned with, he cautioned.
What will finally break the inventory logjam? Should buyer agents really be worried about the class action lawsuits? And how is AI affecting the home shopping experience?
These were just some of the topics discussed today during a virtual conversation between host Spencer Rascoff, the former CEO of Zillow and co-founder of Pacaso, and his one-time rival, Redfin CEO Glenn Kelman.
Here are five of the biggest takeaways from the conversation.
The existing inventory 'standoff' could last years
Rascoff opened the discussion with a question about the state of the housing market, which Kelman characterized as "dead as a doornail." Kelman attributed that, in part, to the fact that homeowners aren't feeling squeezed like they were in the years following the 2008 financial crisis. Home equity remains high, and since most homeowners have sub-5% locked-in mortgage rates, they just aren't selling, which means inventory could remain low for the foreseeable future, Kelman suggested.
"In 2008, what broke the logjam was real financial pain. Nobody wanted to list then either because you're going to sell your house for half of its former value, but they had to because they were short on the mortgage," Kelman said.
Today, on the other hand, "that distress isn't widespread in the market," Kelman noted. "It's happened in a few places like Austin, Texas, which had been really hot with investors, but otherwise, there's no real distress in the market, so you just have this long standoff. It might last not just for months or quarters, but years."
The DOJ could 'do something more aggressive' following NAR lawsuits
Despite NAR's weight, deep pockets and conviction that it will prevail in the current buyer-broker commissions lawsuits, the organization may not be able to stave off litigation or avoid measures that could completely upend the real estate brokerage industry as it exists today, said Kelman.
"I think the Department of Justice is going to wait to see what's happening in these two lawsuits. My guess is that most judges are hesitant to cut the real estate industry in half and say all the buyer's agents are out of work," he explained.
"But it's possible the DOJ could follow up and do something more aggressive. Homes.com is making a huge bet on that. And if the buyer's agent now has to be hired and paid for by the buyer, I think it just radically changes the economics in favor of an Australian model, a British model, or something like that."
Candor can help build credibility
When times are good, people don't always pay much attention to their business — but they become much more aware and vigilant when things become challenging, Kelman explained. His approach? Be open and honest, in good times and bad.
"I have found that sometimes you try to talk to employees about your balance sheet or your P&L when the business is booming and people's eyes just glaze over. They're not really focused on any of those details," he said.
"But that candor works in your favor. Everyone's paying attention because you've had a layoff and they're worried that another one might be coming. The only thing they trust at some point isn't whether you say things are going well or things aren't going well. They just actually want to see what sales are coming in, what costs are going out."
Going back to the office is very real in some markets
Many big companies — including Redfin — have started requiring employees to return to the office, and that's having an impact on the market, Kelman said. "We've got a bunch of Amazonians who did decamp to Florida, Texas, Wisconsin, and other states like that coming back," he explained.
"A bunch of our Seattle agents are busy with Amazon [employees]," Kelman said.
AI can potentially reward unsavory home shopping behavior
While AI is having a huge year in real estate, there are serious pitfalls to be aware of, particularly when it comes to housing and discrimination.
"The issue with AI is that it figures out what people want and then it gives it to them," Kelman said. "Their click pattern never says, 'I'm racist!' but the AI is like, 'I think I get the drift here' and sends recommendations to neighborhoods that look a certain way."
The problem, Kelman said, is that AI "allows people to implicitly ask for something that they would be ashamed to ask for explicitly." It's an issue his company has thought a lot about, but concedes "there's no great solution to it" yet.