Industry

Friday Flash: Flowers on doomsday

Author
Brian Boero
No.
1110

The “Homeservices” business model has been the wind beneath the real estate brokerage industry’s wings for years now.

That many real estate companies rely upon mortgage origination, title insurance or homeowners’ insurance as their profit centers is now a commonly understood reality. 

And the model is remarkably durable. Homeservices of America was built on it; Compass, the shiniest, newest thing going, is floating the idea today as if it were some sort of revelation. 

What’s interesting to me, though, is that no company has managed to market the consumer benefit of this model in a compelling (or, honestly, even passable) way. Yes, there are lots of legal and regulatory minefields in this area, but is the “one-stop-shop” message really the best we’ve got?

It shouldn’t be — especially now, with new entrants advancing alluring consumer propositions rooted in convenience.

“One-stop-shop” is a decidedly downscale riff on the notion that it’s easy to get many things from a single place. It brings to mind Kmart and Old Country Buffet, not Bergdorf Goodman.

The emotional benefits of having a mortgage, title or insurance operation as part of your brokerage lie near the certainty Joel wrote about last week. They’re in knowing that there are fewer points of failure in your transaction; in not being confused when your agent emails you a list of seemingly random mortgage brokers to call; in feeling just a little less anxious because you feel that there’s a cohesive team behind you. 

There’s a lot of opportunity here. 

I’m going to be at Inman Connect next month in Las Vegas with several of my 1000watt colleagues. 

We’re doing a little thing for indie brokers and for startup founders. If you’re interested, hit me up at brian (at) 1000watt dot net. 

There aren’t enough affordable places to live in America. That’s my takeaway from Harvard’s Joint Center for Housing Studies’ 2019 annual report

Things are out of whack. For example, the median household income in San Francisco and Oakland is $101,714 (wow, cool), yet only 17% of homes in this area are affordable to folks making this much money (ugh). The Bay Area is an extreme case, but the problem is widespread. 

There are a bunch of startups responding to this. Zero Down, to take one example, is a company that charges people a $10,000 fee to have them buy a home on their behalf, then sell it to them at a later date. Seems like a 35-37-year, interest-only mortgage with a bunch of points to me. Maybe that’s fine, maybe it’s insane. But it’s a workaround either way. 

There’s good news in the Harvard report for our industry, though. The homeownership rate continues to come up off the floor it collapsed to in 2010. Demand for our product, and therefore prices, are high. A large and diverse generational cohort just entering the market promises to sustain this. 

But it sure feels to me like we’re headed to a bad place when basic housing becomes a luxury product. The salutary effects of homeownership are myriad. You can feel them. Let’s hope they don’t continue to become rarer.

I guess it doesn’t help that, in addition to institutional investors scooping up several million homes in the wake of the crash, Ukranian oligarchs are buying up much of Cleveland

Two really impressive, successful independent brokerages have opened in my market this year. 

The most interesting broker we’ve worked with recently is also new, small and doesn’t have an AI strategy. 

There’s a national brokerage brand in stealth mode right now that won’t be offering an ibuyer program.   

Flowers bloom even in the spreading shadow of the doomsday meteor reportedly heading our way. Go figure.

Enjoy the weekend.