Cassidy Claire Risien, 34, is an actor and artist living in Los Angeles but, even with her day job as a spin instructor, her budget is tight.
Despite that, she lives in a newly renovated townhouse in trendy Venice, California — just seven blocks from the beach.
“I had been living by myself and it was no longer sustainable,” she said. In an online search for rentals in her area, she set the price range to its lowest setting and a communal living, or co-living, option popped up among the results.
Now Risien pays less than a $1,000 a month to live at Haven, a co-living community.
Co-living spaces bring together a group of people, likely strangers, in a shared space. Often, there are private sleeping quarters but the kitchens and work areas are communal spaces.
For many like Risien, sluggish wage growth and sky-high rents in many cities have made it unaffordable to live alone.
Another chart showing that Americans are light on savings, and retirement is coming. Then consider the graph below – doesn’t there have to be more boomer liquidations on the horizon?
Demographic changes are like a slow tide changing business in fundamental ways. We are only a couple years away from having 2X as many people 65+ as we did during late 90s/early 00s. Are your products and strategic plans keeping up? #JBRECDailyInsight@JBREC@DemographChrispic.twitter.com/b8KPikcZlG
As our real estate market wraps up its strongest decade in history, let’s looks back at the trends.
The government intervened early in the decade by stopping foreclosures and manipulating rates to all-time lows. It resulted in the longest, strongest sellers’ market we’ve ever seen, with no real end in sight. How ridiculous has it become? This week I wrote an offer with the price and terms that the seller demanded, and she countered over the smoke detectors.
Big-time outsiders entered the industry too, hoping to get in on the commission pie. Because none of the industry leaders have been willing to put up an fight, individual agents are left to fend for themselves, and they have resorted to survival gimmicks like short-sale fraud and off-market sales.
Every March we would get a surge of new listings, and the number of choices would grow until August. Lately the inventory has peaked sooner as both buyers and sellers are more antsy about procuring a sale. The most fascinating trend has been how inventory has dwindled with rising prices – in the past when pricing would go up, it would cause more homeowners to sell, but not now:
Each year the best deals sell first, causing a gradual lift in pricing as the summer rolls on and buyers end up paying more later for the leftovers. These are interactive graphs, so you can see the stats for each month by running your cursor over the lines:
What can we expect over the next decade?
Mostly we will be selling old-people homes as the baby boomers phase out. In California there will be less impact as the kids find a way to keep the family estate and preserve the ultra-low property taxes, rather than buy a different home. But it seems inevitable that fewer move-up buyers will bother with the difficulties of moving, and just end up staying put – leaving only the old empty houses to sell.
The first few months of 2020 will be rip-roaring hot, and where that takes us will be very intriguing. If more oldtimers decide that leaving the state is the best/last/only solution, then the market could really take off as the inventory surges with more sort-of-reasonably-priced homes.
This new post about millennials and their housing/lifestyle expenses outlined by a Compass realtor in Houston made me think of the budget above which is more applicable to those of us in Socal.
Aisling Swindell was paying so much for rent last year—$2,100 per month to live in a studio in Downtown LA—she figured she might as well buy a place.
“The house I ended up buying was $440,000, which is insane, right?” says Swindell, who works for an online fashion company.
That price tag, which is $178,000 below the median in LA County, sounds unbelievable, especially for what she bought: 870 square feet in the city, plus a little yard, lots of natural light, some stylish updates, and charming, 1930s-era details, like wainscoting and solid wood doors.
But while she’s no longer a renter, she still doesn’t, technically, own a house.
Her $440,000 bought her a share of a larger property: a triplex on an 8,344-square-foot lot in Jefferson Park. Her right to occupy the unit, and her responsibility for maintaining it, are spelled out in a contract with her neighbors, who live in the triplex and, with her, are its joint owners.
If you’re interested, I can deliver a cash offer to you today!
Here’s research on the costs:
But what, exactly, do iBuyers bring to the table for home sellers? And, can this business model survive the housing market downturn so many are predicting?
That’s what Collateral Analytics sought to answer in a recent paper on the topic, which offered a deep dive into the strength of the iBuying concept.
First introduced in Phoenix by Opendoor in 2014, the iBuying concept offers home sellers the opportunity to sell and close on their home within days, hassle-free. The iBuyer then completes any necessary repairs and lists the home for sale.
“For motivated sellers who want a predictable sale date and need to move, perhaps a long distance from the current location, there is no question that iBuyers have provided a welcome alternative to traditional brokerage,” Collateral Analytics pointed out.
But all that convenience comes at a cost. The paper dissected the math behind the model, estimating that sellers end up paying between 13% to 15% more when they work with an iBuyer. This covers a difference in fees that ranges from 2% to 5% greater than a traditional real estate agency, plus an allowance for repairs and another 3% to 5% to cover the iBuyer’s liquidity risks and carrying costs.
The paper also noted that the iBuying model makes these companies susceptible to a number of risks, including the need to safeguard vacant homes and the possibility that the automated valuation models they rely on will overvalue a property, resulting in a loss.
They could also face troubles if home prices decline.
“A downturn in home prices, not forecast by the iBuyer market analysts, could be devastating as they ramp up their business platforms, particularly if the cost of capital increases,” the paper stated. “At the same time, downturns are precisely when the most sellers would want this option.”
While Collateral Analytics lists several companies that are investing big in the iBuyer model – including Opendoor, OfferPad, Zillow Offers, Redfin, Realogy CataLIST, Perch and Keller Offers from Keller Williams – it also states that only the most efficient firms with enough capital and market share are likely to survive.
And of course, this all depends on how appealing the concept turns out to be, mainly, how many home sellers are willing to pay for convenience.
“For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile,” the paper stated, “but what percentage of the market will want this service remains to be seen.”
The big money and heavy competition is causing ibuyers to juice their offerings.
Opendoor will buy your house for cash, they will buy your next house, they have rebates, and now they will even buy your house back within 90 days if you don’t like it.
Our belief is that everyone should love the home they just purchased, and we are going to stand behind that. Opendoor guarantees buyers will love the experience and purchase the home of their dreams at the best price, or we will buy the home back within 90 days. This guarantee extends to qualifying homes in Phoenix, Dallas-Fort Worth, and Raleigh-Durham.
There are conditions, of course. This is the most intriguing (bold added):
In the case of a Third Party Home, we require a copy of a licensed general inspection report, and reserve the right not to offer the guarantee if there is any material defect identified in the report (e.g., foundation issues, roof damage, inoperable HVAC systems, unpermitted additions) or if Opendoor determines the purchase price is materially above the fair market value of the home. We will contact you within 24 hours of receipt of the report if this is the case.
They don’t have experienced, professional agents to represent you. Nope, just ‘tour assistants’ who open the door – so how will you know if you paid fair market value?
People will believe what they want to believe, and the company will help sway your opinion by having comments like this on their website:
A really good price, and a really good deal?
There will be buyers who jump at that!
These companies don’t want to get realtors involved, and the excuse is always because we cost too much.
But these disrupters don’t want the customer to know too much – either buyer or seller – so they can skim a few more bucks off them. It has the potential of creating an artificial market, where the companies tell you what the houses are worth – and you better like it!
The path forward is becoming more clear. Zillow is rapidly expanding their ibuying enterprise, and because they are so well-known, they have a shot at a major disruption.
In the video below, Mike describes how homeowners who used to rely on their zestimate for a home valuation are now getting a written quote from ibuyers – for free. In Phoenix, the center of the ibuying universe, 40% of homeowners get a quote from an ibuyer before selling their home.
In effect, ibuying is the new zestimate, and more tangible because if you like the number, you could sell your house instantly.
Sure, Zillow is losing money, but their first-year volume is remarkable:
Since launching Zillow Offers in April 2018, more than 170,000 homeowners have requested an offer through the program. In the second quarter alone, there were 70,000 requests.
Zillow reported that it made $1,578 on each home it sold in the second quarter before interest expenses are calculated. After interest expenses, the company, on average, lost $2,916 per home. Barton believes that, eventually, the company will earn 400-500 basis points of return before interest expenses on homes it sells.
It’s an improvement, however, over the company’s first-quarter numbers, where it lost, on average, $3,268 per home it sold, after interest expenses.
“Over time, our unit economics should benefit more from other adjacent services, like mortgage origination, title and escrow,” Barton said in a letter to shareholders. “We expect to be able to leverage these services to support Zillow Offers and improve the consumer’s overall transaction experience, while also generating cost savings for Zillow and our customers.”
They are the only real estate company that has been willing to spend $100 million per year in advertising, and it’s what made them who they are today. It won’t matter if they charge 7% to 13% for their service, all that matters is that they advertise it – which may not be that costly.
Because many or most homeowners have saved their home on Zillow (giving up their email address), they will get regular solicitations to sell their house to Zillow.
Look how easy it is – one click and you get a cash offer…….just like 500+ others near you:
If you have 18 minutes to spare, Mike’s presentation below is a full examination:
Mike mentions that he thinks the companies who position themselves at the start of the consumer journey will win. Stay tuned for a Compass announcement shortly!
