Mon 10 Nov 2008
Redfin Bubble to burst?
Posted by Marlow Harris under Real Estate
[26] Comments
I had decided on a moratorium on Redfin news for awhile, but with their blogging, interviewing, press-releasing and general stirring up of the real estate dust last week, they’re hard to ignore.
With their venture capital dwindling and real estate commissions drying up, they’ve taken to a late-night-TV hawker mentality (But, wait, there’s more!) by offering special deals and twofers in hopes of attracting the last few home buyers before the holiday lull really sets in.
In a play borrowed from cereal manufacturer and candy bar makers who routinely make the packaging smaller while raising their prices, Redfin has begun to increase their services to where they should have been all along, while lowering the amount of their rebate.
But the most curious thing they’ve done is hire Bubble-Blogger Tim to write for their Sweet Digs blogs.
Tim and his fellow minions have killed several years now in writing Seattle Bubble, a blog devoted to documenting the rise and fall of real estate in Seattle and around the country. The blog is equal parts post and comment and the many threads boil down to
1. Real estate is overpriced
and
2. Only an idiot would buy or own a house.
So, it’s a curious and puzzling partnership. Why would a real estate business hire a writer/representative who doesn’t believe in owning real estate? If Redfin cross-links with Seattle Bubble, which they have and will, what kind of “buyers” are they hoping to attract? You can waste a lot of time spinning wheels writing low-ball offers from cheap bottom-feeders who are only testing the market. And readers of these bubble blogs tend to be frightened of home ownership anyway, so I imagine they’re not highly motivated home buyers.
It would be like Realogy hiring Patrick or ReMax hiring Keith to represent them.
And on the coat-tails of Redfin’s announcement, I get a press release from findwell, another discount broker, challenging Redfin and offering defecting Redfin clients an additional $500 rebate if they use findwell’s services instead.
And now another Redfin pretender out of Boston, House Savvy is here. They’re offering zero-cost listings to sellers in the Boston area and plan to make money just in sales. Didn’t Foxton’s try that? And Iggy’s House?
I’d add a link, but they’ve both since gone out of business.
26 Responses to “ Redfin Bubble to burst? ”
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November 10th, 2008 at 10:15 pm[...] Seattle Bubble is all about fear mongering and scaring the public away from buying a home. I know she mentioned it, but I don’t believe it. Marlow and many other agents and loan officers have not had a [...]
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November 17th, 2008 at 12:08 pm[...] Harris of Seattle, Washington takes 4th place for Redfin Bubble to Burst. Marlow is in the epicenter of the Redfin-induced real estate drama and always provides great [...]
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November 17th, 2008 at 12:14 pm[...] Harris presents Redfin Bubble to burst? posted at [...]
November 10th, 2008 at 10:56 am
Marlow, I really don’t know how you get the impression that I in any way espouse the #2 item up there, “Only an idiot would buy or own a house.”
To quote from Seattle Bubble’s About page:
Furthermore, the Seattle Bubble readership is far more diverse than you suggest. Yes, there are vocal extremists, but there are also thousands of regular folks just trying to make sense of the market.
November 10th, 2008 at 11:56 am
Oh, please. The reason you started that blog was to lament your inability to afford a home without, as you put it, taking out a “toxic mortgage”. Seattle Bubble’s entire raison d’être is to discourage, frighten and bully people. While I don’t have the time nor the inclination to wade through all your posts for examples, just a link to your forums will easily show the blogs negative and hostile slant: http://seattlebubble.com/forum/viewforum.php?f=2
Own it, Tim. This baby is yours.
November 10th, 2008 at 1:38 pm
Hey, you’re entitled to believe whatever you want, but I still think you might be confusing the opinions of a handful of extreme commenters with my own.
I started the site because I want to buy a home, and I want to do it wisely. That is still the case.
November 10th, 2008 at 6:19 pm
Hey Marlow,
I can vouch for Tim on this one. SB is THE place to go for detailed, statistical analysis of the Seattle Housing Market. Tim provides graphs, charts analysis, and yes, the commentors also take punches at media press releases.
The mainstream brokerage companies are not providing the kind of analysis that Tim is providing. This is why he has so many buyers AND sellers reading his blog.
Give it a try. Read SB once a day for a few weeks. Take a look at how many buyers and sellers are on there asking questions.
For every thesis there’s an anti-thesis and finally there’s synthesis.
I hold a somewhat philosophical opinion that the Seattle real estate market needs SB.
SB has the ability to help Seattle agents grow and become even better agents/companies.
November 10th, 2008 at 10:23 pm
Tim: If you want to buy a home wisely, come to Houston. I know a great Realtor.
November 10th, 2008 at 10:56 pm
I love SB. I’m a loyal reader.
The statistics are well analyzed and presented for objective scrutiny. There’s no other place where it is pulled together and presented so well.
I own a home now and I intend to buy a new one as soon as the local market stabilizes. I think SB has done a great job keeping me from making the mistake of buying into a falling market, and will help me buy when the time is right. I’m confident that because I read SB, I will see the stabilization happen before the rest of the public.
The commentary does bias negative, but the stats are fair and objective. And if you spend enough time there, you learn which bloggers to ignore and which of them are really bright.
November 11th, 2008 at 8:57 am
I’m another SeattleBubble reader. Like Tim, I lament that I cannot buy a house without taking a toxic mortgage.
Let’s run the numbers:
A few months ago (while a few Realtors(R) were telling clients to Buy now, or be priced out of the market forever ) the median home price was $445,000. For a conventional 6% 30 year loan, PIMI would run about $2820. Using a rational 30% front-end ratio (remember when it used to be 28%?), this requires that the borrower make about $112,920/year.
I don’t think there are *that* many households with that kind of income in Seattle.
So, houses are too expensive. I’m waiting till prices decrease to a more rational level.
November 11th, 2008 at 8:58 am
Good Morning Marlow and Happy Birthday!
Thank you for this timely forum to discuss the Seattle Bubble.
November 11th, 2008 at 9:01 am
Congrats on the new job Tim – I will be interested in seeing how it plays out.
I think SB has some wonderful stats and The Tim obviously works hard putting them together, but to borrow a phrase from my teenager, there are a lot of “haters” in the comment threads. It might be nice if some of them toned it down a bit in order to deliver their messages in an intelligent fashion. There is always a nicer way to say things without the personal attacks.
Marlow, I love your cereal box advertising comparison . I hadn’t thought of that one.
November 11th, 2008 at 9:41 am
Hi Dave,
Thanks for the birthday greeting. I can’t believe you remembered when I’m trying so hard to forget
November 11th, 2008 at 9:56 am
Marlow, I’ll vouch for THE Tim, too. SB does have followers or regulars (those who comment often) who seem to believe that owning a home is stupid. But I don’t think that Tim is one of them.
I have not found this to be true: “…readers of these bubble blogs tend to be frightened of home ownership anyway, so I imagine they’re not highly motivated home buyers.”
Why would Redfin hire someone like Tim? Because many buyers are reading SB to get a different view to balance out what they find on other real estate blogs/resources.
November 11th, 2008 at 11:54 am
I was talking with a long time agent who said Real Estate doubles every seven years. While recounting the conversation to another very long time agent he corrected me to say the price of Real Estate doubles every ten years. Another long time agent made the statement that Real Estate is worth what some one is willing to pay.
The value of Real Estate is as a hedge against inflation. If inflation is low, as it has been in the past eight years, then the value of the Real Estate appreciates at a very low rate.
The numbers are the numbers. Real Estate is tied to the Consumer Price Index and the value of Real Estate is what it can rent for. The idea that we are all buying the American Dream is a load of hype if it is not grounded to sound economic principles.
In fairness to the Seattle Bubble you can say anything to initiate dialog. The Tim guy for a long time just let it happen until people started attacking him personally. They now have rules.
The dialog and discussion has uncovered some fantastic global economic information. Some of the best information has come from the biggest crack pots. What really changed my opinion was the global financial market melt down.
Now, will radfun be a better service, heck no. The business model is still based on a money for doing nothing rip off. Rebates are a bribe. What they did was change the law to make it OK for a Real Estate company to pay for business.
Large corporate Real Estate companies can now market rebates for services which will probably include, title, escrow, or mortgage. What was meant as a safe gaurd for the consumer is now a free for all.
Let me say again that Real Estate is a very complicated business. To buy or sell property well is a craft.
November 11th, 2008 at 12:53 pm
“Seattle Bubble’s entire raison d’être is to discourage, frighten and bully people.” Sounds like you’re trying to do the same with Seattle Bubble…?
Seattle Bubble’s sources are transparent and factual (just as NAR research is). As someone looking to enter into home ownership for a cool half-million, it’s nice to get some perspective from someone who *isn’t* working on commission. The Tim doesn’t stand make a dollar if the market goes one way or another. What about you?
November 12th, 2008 at 11:13 am
Late to the party here but I also want my testimony on behalf of SB to be a matter of record. I think this post contains some inaccurate characterizations and is needlessly (and uncomfortably) vitriolic. Before I started reading SB regularly and vetting and studying The Tim’s analyses, *that* is when I was bitter and crabby, thinking I’d only ever be able to afford an ill-located dump in Seattle. Now I’m hopeful and empowered. I am “highly motivated” to use all available data to make decisions that are appropriate to my situation and short- and long-term plans, without the intervening influence of a third party who has his or her own financial interests at stake. SB has turned me into a confident independent operator — totally the opposite of a minion.
November 12th, 2008 at 1:04 pm
Oh, please. Just because The Tim doesn’t sell real estate doesn’t mean he doesn’t profit from it.
He has monetized his blog and sells links, text ads and banners and every time you click on one, it puts money in his pocket. He has quit his regular job so he can devote more time to this site, as adding content makes the site more sticky and attracts more readers. More readers=more advertising revenue.
And do you think he’s researching and writing for Redfin out of altruistic motives? Of course not, he’s a paid contractor. If he doesn’t perform, he doesn’t get paid.
And before you spend a lot of time fawning over him, Redfin and their objective statistical research, just remember that 95% of those stats come directly from those they love to malign, the Realtors, agents and brokerages that make up the NWMLS.
He can claim objectivity all he wants but the proof is in his product, and I stand by my observations.
November 12th, 2008 at 2:47 pm
The Tim profits from aggregating and disseminating information. Real-estate agents profit on a per-transaction level. This is a significant difference. He has to keep proving his value to me over and over again, whereas my relationship with the person who sells me my house has a set end point. If The Tim’s analyses become dubious, I stop visiting his site, and so do a lot of other people, and eventually his ad rates go down and he loses credibility as a Redfin commentator and he will not have a viable business; poor Tim. If a real-estate agent assures me that I can stretch to buy a house because its value will only increase, let’s say, and several months later I’m underwater and stuck — well, poor me. The agent’s commission is already in the bank.
Do you sell real estate out of altruistic motives? Would you do that work if you didn’t get paid for it, like The Tim did in the site’s very early days? Under capitalism, eventually the market decides whose services are worth paying for. For the time being, anyway, the market suggests that The Tim is a contender. But the market continues to make room for you too, which is great.
November 12th, 2008 at 3:33 pm
Nobody is perfectly unbiased, but The Tim is definitely more objective than any RE cheerleader I’ve read. In any case the data he uses to make his points is always made available for scrutiny and people can comment and ask questions on his blog and he will respond. His commentary is generally very well supported by the data and when it isn’t he will say up front that his conclusions are a best guess based on limited information.
It’s strange that you would harbor such animosity for him, given that you stated in your post that SB readers aren’t in the market for a home anyway. If all he’s doing is scaring away people that are already “frightened” then he’s having zero effect on you and not worthy of your attention.
November 13th, 2008 at 9:32 am
You see over on the Seattle Bubble there is an agenda, Real Estate agent bad, the Seattle Bubble good. radfun good, Real Estate professional commentary bad.
As it happens radfun is an internet business model, and the Seattle Bubble is a internet business model. Hmmm?
Yes Real Estate agents work for free all the time. People want free advice, all the time. Many people to feel that the Seattle Bubble is a source of free advice about Real Estate matters.
Real Estate agents provide data to buyers and sellers every day. It’s all free until you get into an agency agreement. You are then provided representation in what has become a quarter to half million dollar transaction.
What happened in Real Estate is that everybody wanted a fun, stress free Real Estate transaction. People wanted the process of a Real Estate transaction to be transparent.
People want the secrets of successful Real Estate buying and selling.
I could start writing today and continue to write until the day I die and still not explain a Real Estate transaction.
Real Estate is a personal choice. There are rules and rules that get broken. I can think of a hundred ways to do a “deal,” today. My deal is different from what you want.
So, yes, I ramble. I try to explain, on a daily basis, but what people at the Seattle Bubble want is a discount. They are looking for something for nothing.
November 14th, 2008 at 4:54 pm
The Tim doesn’t stand make a dollar if the market goes one way or another. What about you?
In the grownup world of business, you find that people who stand to profit by selling something to you may, surprisingly, still provide the best advice.
To put it another way, just because someone is a disinterested observer doesn’t necessarily mean that their advice has any value.
November 18th, 2008 at 1:52 am
Marlow, David, et al – here is a challenge about the objectivity of real estate agents: find a quote or blog post from a real estate agent from any point in the past two years that says “even if you can, now is a bad time to buy” or says “prices will probably fall.”
Ok, now from that candidate list, how many of them are saying “prices will fall in my market” without implying or flat out saying “but now is still a great time to buy.”
And if you do find one of these rare quotes, how long did it take you?
Agents get paid for closing a transaction, not for providing insight. In this manner real estate agents are a lot like used car salesmen.
So do I trust agents, yes – to make sure a transaction goes through and to make sure it complies with the law. Just not about the direction of the market.
November 18th, 2008 at 10:38 am
“So do I trust agents, yes – to make sure a transaction goes through and to make sure it complies with the law. Just not about the direction of the market.”
Amen. Although– “trust” is a complicated word. It’s not that all realtors are liars (sup, guys), but the level of truthiness has to be a bit bent at times like these.
While there’s an inherent contradiction to working for a real estate company and saying buying is useless, I don’t think it signifies an ultimate turn against the industry. Buying is useless in SOME situations and particular locations, but specificity is the key. The generalizers are really missing both sides of the coin.
November 19th, 2008 at 9:04 pm
I am really enjoying the news on Redfin and what is happening with it. I don’t believe any of the discount models out there really fully understand what has to be done to really drive a systemic change across the industry. I enjoy the innovation and creativity but the current model of this business always gets back to the business is expensive to be in and non-steady so that commissions have to compensate for the valleys that are commensurate with the sales model and cycle.
November 20th, 2008 at 2:17 pm
all markets return to the curve.