Real estate bubble? The dot-com kind.
Is a real estate bubble about to burst? I was still new to Seattle when the dot-com bubble went bust. The crash lasted from early 2000 into 2004. Internet euphoria had infected investors who put big bets on anything that ended in .com. They lost billions on overvalued companies. Hundreds of dot-coms disappeared while a few survived and flourished. The most notable survivor: Amazon.
It appears that the same scenario is playing itself out again. Only this time it’s happening in the real estate sector. This real estate bubble is the investment kind. The candy that’s irresistible to investors is called technology. “We are a technology company. We are not a real estate company anymore,” Keller Williams co-founder Gary Keller declared recently.
Compass, a new player in the real estate space calls itself an “American real estate technology company”. The founders of Compass are equally well-connected in the nation’s capital and in Silicon Valley.
Redfin, the publicly traded real estate brokerage, calls itself a “technology-powered residential real estate company” in its news releases. Back in 2017, the company CEO called Redfin “the Amazon of real estate.”
Those words must have been overheard by Realogy, the holding company that owns real estate brands like Century 21 and Coldwell Banker. On July 23rd, Realogy announced “TurnKey,” a collaboration with Amazon. It provides up to $5,000 of complimentary home services and products to the homebuyer. The franchises of Realogy are perceived as representing the traditional real estate model. Basking in the Amazon technology halo, Realogy’s stock jumped 23%.
According to Wall Street, In 2018, Realogy generated a $137 million profit while Redfin incurred a $42 million dollar loss. Investors, however, valued Redfin at $1.7 billion and Realogy at a mere $846 million. Likewise, the technology-touting Compass had just 35,000 transactions with a valuation of $4.4 billion, while Re/Max, the world’s largest real estate franchisor, had 1,570,000 transactions and was valued at a mere $946 million.
The investors’ love of technology often goes hand-in-hand with the hope that a company will “disrupt the real estate industry.” At the beginning of July, one of the more prominent disruptors, a UK company called PurpleBricks, pulled up stakes in the US. The company’s market valuation had slumped 75% since its 2017 overseas expansion. Where was the artificial intelligence when you needed it? Was this the first sign of a real estate bubble?
Am I a Real Estate Technology Agent?
Now, I write and design more on my iPhone than on the laptop. I had to forgo the German notion of perfection for the “get-it-out-there-now!” method. That’s why they call it INSTAgram.
What technology doesn’t replace is common sense, wisdom, a caring attitude, knowledge, expertise, courtesy, patience, punctuality, responsiveness, creativity, negotiating skills, sticktoitiveness, a cheerful smile, a sense of humor, empathy, curiosity, and the willingness to keep learning new things.
A Woodinville home with a Bothell address
On the market since Friday, July 26th, this Woodinville home is the envy of the neighbors. Read all about it here and take to the air with the drone here. I’m delighted to be the listing agent for some wonderful people.