The signs are piling up that the market is cooling, shifting the upper hand from sellers to buyers. But for online portals like Zillow and realtor.com, the good times may just keep on rolling.
That’s because a buyer’s market may increase competition among sellers and their agents. And that, according to industry watchers, may mean that in the near future agents are going to need to spend more money on the online services, particularly marketing, that are the bread and butter of the portals’ business model.
Victor Lund
“Smart companies spend more when the market is down,” Victor Lund, founding partner of real estate consulting firm WAV Group, told Inman. “And they spend less when the market is up.”
Lund said that in the recent past, when homes were selling almost as soon as they were listed, some agents paid for digital market almost as a “placebo” for their clients. Those clients wanted to feel like their agents were doing everything possible to close deals, but really the homes would have sold even without any significant online marketing or a major digital push from the agent.
However, in a buyer’s market homes won’t sell themselves, which “drives up demand” for the marketing services offered by the online portals, Lund said.
“Now there’s a requirement by listing agents to market themselves,” he added. “People need to advertise and they didn’t before.”
Lund speculated that this trend could translate into better revenue for companies like Zillow, though it’ll likely be the spring before any uptick is readily apparent.
Other experts agreed that real estate portals will be able to weather a downturn, and potentially even prosper.
Mike DelPrete
Mike DelPrete, a real estate technology consultant, told Inman that the portals’ success or failure “doesn’t correlate with the housing market.” And like Lund, he said that agents, particularly those with more tech savvy, may opt to invest more heavily in their digital presence.
“You could paint a picture where those sophisticated agents are maybe even spending more money on Zillow,” he said. “It’s a bidding system, so maybe it heats up.”
For Veronica Figueroa, a broker and owner of RE/MAX Innovation in central Florida, a buyer’s market will require agents to connect on a more human level. And she too saw digital advertising as a place to spend money making that happen.
Veronica Figueroa
“Digital marketing is going to tell the story,” she told Inman. “The days of being fooled by stats are over.”
All of the experts who spoke to Inman for this story, and others this week, said they are already seeing evidence of market shift. That evidence is manifest in the form of increased inventory, falling home sales, and slowing price growth. The consensus was that the changes have already arrived.
J Philip Faranda
Though everyone who spoke with Inman for this story said online portals would likely survive a buyer’s market relatively unscathed, not everyone was convinced they would see major benefits. J. Philip Faranda, for example, a broker and owner of an eponymous real estate firm in New York state, was skeptical that agents will need to spend considerably more on advertising. That’s because he sees the shift driving less committed agents out of the industry altogether.
“When the market shifts, the agent herd gets thinner,” Faranda said. “There’s less competition for business.”
Others, such as DelPrete, also said a buyer’s market would likely thin out agents’ ranks, but only time will tell if that trend counterbalances increasing competition and the need to reach clients via digital marketing.
These trends may also have other, unexpected impacts.
Lund pointed to Facebook as another potential beneficiary of the shift to a buyer’s market, explaining that the world’s largest social network has several competitive advantages over dedicated real estate websites. Most adults are already on Facebook, for example, and unlike Zillow it doesn’t charge more for marketing in zip codes with more expensive properties. Agents can also customize their target audience, meaning that in a more competitive environment real estate professionals may opt to spend their money on Facebook first.
“Facebook advertising has been profoundly affective and it’s significantly cheaper,” Lund said. “I think Facebook is going to be the big winner here.”
