Real estate forecaster Stefan Swanepoel captured the essence of the year that was when he called the industry “chaotic” and “changing at what appears to be an unprecedented pace.” The biggest industry news of 2019 reflected the disruption that is—and has been—occurring technologically and in other ways in real estate, including:
- New business models that promise to solve transactional pain points for consumers.
- Unveiling the secrecy around off-MLS listings.
- Addressing ongoing inventory shortages.
We compiled a list of some of the biggest real estate topics that made headlines in 2019—and we make predictions for 2020.
1. The Housing Crunch
The lack of inventory nationwide was a major theme in 2019. Lawrence Yun, chief economist for the National Association of REALTORS®, warned often that first-time buyers would have a difficult year, as the housing crunch became most acute in entry-level price points. While total inventory was down 5.7% year over year in November, according to NAR, inventory for homes priced below $250,000 plunged 16.5% year over year. Production from builders, who are saddled with escalating construction costs and labor and lot shortages, continued to lag buyer demand, making inventory shortfalls worse, housing economists said at NAR’s first-ever Real Estate Forecast Summit earlier this month.
The shortages have pushed home prices higher just as buyer demand soared, in large part due to sub-4% mortgage rates. But the median price for an existing home among all housing types was $271,300 in November, according to NAR data, pressing on buyers’ budgets.
What’s next for 2020: There’s a silver lining for homeowners: “Real estate is on firm ground with little chance of price declines,” Yun said during the Forecast Summit. “However, in order for the market to be healthier, more supply is needed to assure home prices as well as rents do not consistently outgrow income gains.”
2. The Rise of the iBuyer
iBuyers, though not a new concept, dominated the industry conversation this year as companies like Opendoor captured more market share. But instead of fearing the iBuyer, an online entity that makes instant offers to home sellers, real estate pros began to see opportunities to work with iBuyers. More traditional brokerages, too, entered the iBuying model this year with their own spin on such services.
- Realogy launched RealSure in conjunction with Home Partners of America to give sellers a cash offer on their home that is valid for 45 days, while the home also is publicly listed with a Realogy agent.
- Keller Williams launched Keller Offers, partnering with the iBuying platform Offerpad.
- Redfin partnered with Opendoor to widen its Redfin Now iBuying program.
- eXp Realty rolled out its Express Offers to 13 states.
What’s next for 2020: iBuyers have deep pockets and are expanding rapidly. Most of them will likely begin adding services such as mortgage and title to capture higher margins, predicts Jeffrey Fagan, president of the Orlando Regional REALTOR® Association. Indeed, Opendoor, a giant in the iBuying space, entered the mortgage business this year and partnered with title insurers to become a one-stop shop for real estate transactions.
Expect more brokerages to look for alliances with iBuying firms. “I think iBuyers are here to stay, and I think as an industry, we will find that we will need to address the iBuyer position as an option to sellers who desire that approach,” Fagan says. “We need to closely watch these companies and even possibly let them teach us how to improve our own models.”
3. MLS Disputes Grow Louder
MLS issues came to the forefront of the industry’s consciousness this year. A growing number of brokerages were keeping listings off the MLS, choosing instead to create “limited exposure” listings and advertise them on their own private platforms—accessible exclusively to their agent networks and a small, select group of potential buyers. Such a practice, coupled with expanding iBuyer market share, meant MLSs were faced with declining and incomplete inventory, further impacting the availability of listing information to consumers and brokers.
The industry responded. In November, the National Association of REALTORS®’ Board of Directors approved the “Clear Cooperation Policy” to address the growing practice of limited exposure listings. The policy requires listing brokers who are participants in an MLS to submit their listing to the MLS within one business day of marketing the property to the public. It does not prevent brokers from taking office-exclusive listings.
What’s next for 2020: MLSs have long been the cornerstone of an orderly and transparent real estate market, but that is being challenged as the use of limited exposure listings continues to grow. To better serve brokers and consumers by ensuring a pro-competitive and pro-consumer marketplace, MLS consolidation is increasing. Some MLSs also are collaborating to improve their technology and streamline broker and consumer access to data with data-sharing agreements. An NAR presidential advisory group looking into the future of the MLS recommended an industrywide effort to urge further consolidation among MLSs and provide added support to those who do.
4. Data In-security
Keeping your and your clients’ personal information safe during a transaction has become a pressing issue. Cyber threats, from wire fraud to malware attacks on MLSs, are growing. Scammers are hacking into real estate professionals’ email accounts and those of mortgage companies, attorneys, title companies, and others involved in a transaction. Prior to closing, scammers will send unknowing buyers fraudulent wiring instructions for their down payments. Once the money has been wired, it rarely can be recovered.
What’s next for 2020: Expect scams that target real estate transactions to widen in scope. The funds disbursed to sellers after settlement, either from refinancing or selling a property, are also being targeted by fraudsters. “We can’t allow the consumer to lose faith in our ability to protect them and their money in a transaction,” Fagan says.
Fallout from data security laws also is expected to be a hot topic in 2020. Starting Jan. 1, the California Consumer Privacy Act takes effect; enforcement starts June 2020. Other states are considering similar measures. The CCPA gives consumers the right to know what personal information a company intends to or has collected from them. Real estate pros who collect client information and use it in marketing data could be held liable if they don’t abide by certain protocols.
5. ‘Proptech’ Accelerates
The property technology space—including products and services that offer digitized closing platforms, artificial intelligence, and data analytics tools—has seen a surge in venture capital funding. In the first half of 2019, investors poured a record $12.9 billion into real estate tech companies. That surpassed the $12.7 billion record for all of 2017.
NAR has helped influence the exploding proptech market, continuing to prepare new and diverse startups for the marketplace through its award-winning Reach Accelerator program. At the association’s second annual Innovation, Opportunity & Investment Summit in August, Curbio, a presale renovation company, won the “pitch battle”—perhaps a sign of a burgeoning marketplace for such services.
What’s next for 2020: The iOi conference set the stage for what’s to come: The pace at which technologies like iBuyers and artificial intelligence are reshaping the real estate industry is only going to speed up. Expect more well-funded real estate technology startups to vie for market share. “The real estate market is changing very quickly,” says Jerry Clum, founder of Hommati, a real estate services company.
Tech-savvy millennials—a strong force in the housing market—are prompting the tech evolution in real estate, Clum says. “Because they grew up with video games and computers, they are more visual than previous generations. In order for a home to get noticed in all the clutter out there, real estate agents need to use dynamic visual content to set their listing apart.”
Other technologies center on growing iBuying platforms, fostering digital transactions, and weaving artificial intelligence into your business. “Startups are growing with massive amounts of venture capital money,” the 2020 Swanepoel Trends Report notes. “Because these startups can operate without being beholden to short-term profit demands and invest heavily in growth, they have the ability to disrupt the incumbent market regardless of their eventual success.”