Heavy investment in Homes.com is paying off, CEO says 

ORLANDO — With a shareholder dispute now in the rearview window, Andy Florance has been able to refocus on the business of CoStar Group and its many brands, including residential search portal Homes.com.

The founder and CEO has remained upbeat about the future of the portal despite a barrage of criticism from activist investors earlier this year centered around CoStar's significant investment in Homes.com. 

"I feel like I've gone through a couple months of being hit with a two-by-four in the face, to put it mildly. I feel like I have a much stronger face," Florance said with a chuckle.

Following a presentation at the T3 Leadership Summit on April 23, Florance sat down with Real Estate News to expand on some of his points.

Getting back to business

Third Point, one of CoStar's largest shareholders, initiated the very public disagreement over the company's handling of Homes.com and executive compensation in February. Earlier this month, the hedge fund opted to sell its ownership stake in CoStar rather than continue to push for change.

Describing the investor battle as "very brutal," Florance said he has spent time meeting with — and reassuring — hundreds of other investors about the company's strategy for Homes.com. 

That strategy, Florance explained, is the same playbook that led to the company's success with commercial real estate portal LoopNet and Apartments.com: Invest heavily in the early stages to build a foundation for growth in the following years.

Wooing agents, leaning into AI

How does Florance expect to achieve growth with Homes.com? By winning over more agents, he said. A year ago, around 10,000 agents had signed up as subscribers — a number that has since increased to 34,000 — and Florance believes that within the next 2-3 years, Homes.com will have the largest subscriber base among the major home search portals.

That's because current subscribers are seeing a strong return on investment, he said, with an average of $36,000 in additional commissions earned in the first year.

"So those people are renewing and they're spending a lot less than what they're getting," Florance said, adding that word-of-mouth is helping, along with a maturing sales team.

Instead of just tracking overall page views, the company is also paying more attention to "quality" visits — meaning users who spend more time on the site — and engagement with the company's new artificial intelligence tools.

Florance has been impressed by how well AI is working so far. "It sounds like they are talking to an agent," he said. "It doesn't replace an actual agent, but I feel like it's the listing agents' assistant that's there to talk anytime you want about whatever you want."

Another factor hurting home sales?

Florance acknowledged that inflation and high gas prices stemming from the Iran war have slowed down the current real estate market — but he's also concerned about a more structural problem: the imbalance between the rental market and the supply of homes for sale.

When people begin their journey to find a place to live, most are open to either renting or buying, Florance said. In many markets, a surge in apartment construction has led to a surplus in units, which is flattening rental prices.

While Florance said both the rental and for-sale markets suffer from "shocking" permitting costs, he believes government finance programs like Fannie Mae, Freddie Mac and HUD have done a better job of facilitating multifamily development.

"So we actually have a glut of rentals and a shortage of homes," Florance said. "The real estate agents care that there's a shortage of homes, but the consumers care a little bit less because there's a pressure relief valve on the rental side."

Editor's note: Real Estate News is an editorially independent division of T3 Sixty.