2019-05-02 Mid Yr. Lunch

The Shift in Real Estate:
What’s next for the

market, the transaction
and the industry?
Mid-Year Luncheon
May 2, 2019
Joel Singer
Chief Executive Officer
Shift #1 – the market
Sales down, price flat, inventory up
March. 2019
Existing Home Sales

-6.3% year over year % change
(Not seasonally adjusted)
Unsold Median Days Sales Price to

Price Inventory Index on Market List Price Ratio
$565,880 3.6 months 25 days 98.5%

+0.2% Y2Y +24.1% Y2Y +56.3% Y2Y -1.5% Y2Y
CALIFORNIA ASSOCIATION OF REALTORS®

page
03
Sales down
11 months in a row
20% Avg. year-over-
15% year % chg. =
-8.3%
10%
5%
0%
-5%
-10%
-15%
SERIES: : Sales of Existing Single Family Homes page

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
04
Slowest price growth in
high-end homes
California Year-over-Year Price Growth
5% 4.3%
by Quintile (March 2019)
4%
3%
2% 1.4%
1%
0.0%
0%
-1%
-2% -1.4%
-1.9%
-3%
-4% -3.8% -3.8%
-4.0% -4.1%
-5%
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100
Percentile
SERIES: Median Price of Existing Single Family Homes page

05
Is it a good time to buy or sell?
Q: Do you think it’s a good time to Q: Do you think it’s a good time
buy a home in California? to sell a home in California?
57% 56%
51% 53%
48% 50% 48%
46%
27% 25% 25%

22% 22% 24% 22%
21%
SERIES: 2018/2019 Google Consumer Poll page

06
CA’s Homeownership< U.S.
California Vs. U.S. – 9.5% gap in 2017
75%
CA US
70% Peak: 69.0%
64.5% 63.9%
65%
60%
Peak: 60.2%
54.4%
55%
53.7%
50%
45%
SERIES: Homeownership Rates

SOURCE: U.S. Census Bureau
page
CALIFORNIA ASSOCIATION OF REALTORS® 07
0%
10%
20%
30%
40%
50%
60%
70%
Hawthorne
80% 76.0%
Santa Monica
East Los Angeles
Glendale
Inglewood
San Francisco
Los Angeles
Bellflower
Alhambra
El Cajon
Florence-Graham
Oakland
Costa Mesa
Merced
Long Beach
Burbank
Arden-Arcade
Mountain View
Santa Barbara
El Monte
Pasadena
Santa Clara
South Gate
Chico
Lynwood
Berkeley
Anaheim
Alameda
Salinas
Santa Ana
Santa Cruz
2017 California Renter Rate by City
Majority renter cities will surprise you
Davis
Madera
Sunnyvale
Irvine
Tustin
San Diego
Fresno
Lodi
SOURCE: U.S. Census Bureau
SERIES: Homeownership Rates
Sacramento
San Bernardino
Escondido
50.7%
8
page
High Rent, Low Affordability –
Voting w/ One’s Feet
Generation Within County Across County Lines From Another State to CA From CA To Another State Net Migration
Millennials 1,269,761 501,057 264,066 288,973 -24,907
Gen X 721,834 222,616 100,990 128,469 -27,479
Boomers 401,666 147,033 58,637 99,576 -40,939
Greatest 134,591 43,565 22,813 33,475 -10,662

Total 2,527,852 914,271 446,506 550,493 -103,987
Household Income Within County Across County Lines From Another State to CA From CA To Another State Net Migration
$25K or Less 344,576 95,039 47,564 81,055 -33,491

$25-$50K 441,695 120,686 58,964 93,851 -34,887
$50-$100K 718,655 219,925 114,858 152,711 -37,853
$100-$200K 618,246 216,854 112,729 111,051 1,678
$200K + 404,680 261,767 112,391 111,825 566
Total 2,527,852 914,271 446,506 550,493 -103,987
Educational Attainment Within County Across County Lines From Another State to CA From CA To Another State Net Migration
Less than HS 378,933 113,901 28,971 45,611 -16,640

HS Grad. 543,495 188,503 78,750 122,013 -43,263
Some College 823,582 302,676 120,358 187,811 -67,453

Bachelors 520,182 204,167 133,592 120,806 12,786
Grad./Prof. 261,660 105,024 84,835 74,252 10,583
Total 2,527,852 914,271 446,506 550,493 -103,987
Housing Tenure Within County Across County Lines From Another State to CA From CA To Another State Net Migration
Owners 799,260 314,177 123,999 195,578 -71,579
Renters 1,728,592 600,094 322,507 354,915 -32,408
Total 2,527,852 914,271 446,506 550,493 -103,987
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09
Homeownership? Aspirational v. Attainable
• The desire for homeownership remains strong
• First-time buyers face often insurmountable obstacles
• Government policies do not support housing as in the past
• More Millennials are making the difficult choice to leave
• Their ability to build wealth over time is compromised
• Where will our children live?

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10
Shift #2 – the real estate
transaction
The process is far from easy…
+/-10 days +/-20 days
loan loan condition

process removal
move
buyer find
agent
financial
qualification
market
education
obtain
necessary
inspections +
conditions
in
+ view property removal,

property negotiation of inspections increase deposit
terms
loan
open
funding,
purchase offer accepted escrow,
disclosure, title closing title record
presented to sales deposit
inspections search procedures at city hall,
seller contract earnest
utilities
money +/-10 days on/off
market/ open inspection

provide facilitate
seller sales
analysis
establish
price and
houses
and
property
disclosures
property
inspections
and
conditions
receive
cash
list removal
by showings proceeds,
property
agent rent back
+/-15 days or move
multiple
listing,
advertising
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12
Transaction pain points
Is the real estate transaction broken?
Which Part(s) of the Home
Buying Process Is Broken?
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Nothing broken 21%
Mortgage financing 17%
Appraisal 13%
Escrow/closing 12%
Agent search 11%
Home search 6%
Other 39%
SERIES: 2019 Google Consumer Poll page

14
Which of the
Series 1
26%
Following Describes
Your Home-Buying
20%
18% 18% Experience?
14%
9%
7%
Too costly Took too long Rough ride Inefficient Smooth as Fantastic N/A
silk

15
Which part(s) of the home buying
process needs the most improvement?
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Appraisal 18%
Escrow/closing 17%
Agent search 12%
Home search 9%
Other 4%

16
Buyers’ Pain Points
• Loan approval
• Outbid by other offers
• Home appraisal too low
• Paperwork
• Contract negotiation

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17
27% of buyers say it was difficult to obtain financing
8%
21% 1 Extremely Difficult
Please rate how easy Somewhat Difficult

20% 2
or difficult it was to
obtain financing. Mean: Neither Easy Nor
3
(n=1,413) 3.30
Difficult
23% 4 Somewhat Easy
5 Extremely Easy
29%
SERIES: 2018 Consumer Survey page

18
Younger Buyers Had More Difficulty Obtaining Financing
Please rate how easy or difficult it was to obtain financing.
(n=1,402)
9% 6% 4%
17% 22% 14%
16% 32%
23%
Millennial Gen X Boomer
23% Mean: 3.16 Mean: 3.43 Mean: 3.63
29%
26% 30%
28% 21%
1 Extremely 2 Somewhat 3 Neither 4 Somewhat 5 Extremely

Satisfied Satisfied Satisfied nor Dissatisfied Dissatisfied
Dissatisfied
19
For buyers dealing with money hardest part
What was the most difficult part about the overall buying process?
(n=1,341)
Price/Down Payment/Loan/Mortgage 23%
Nothing/None 20%
Competition/Finding the Right Place 18%
Process/Stress/Waiting 15%
Paperwork 6%
Other 10%
NA/Not Sure 3%
20
Additional challenges buyers faced
with the home buying process
“Waiting for “Negotiating “negotiating

escrow to repairs during the bank and
close” the home the real state”
inspection.”
“getting “Down
funded for an “Probably the fact that it took
payment
overpriced so long to make an offer that
settlement”
house” would help benefit me. ”
“Raising the funds for “THE CREDIT

the down payment” CHECK”

21
More than a quarter experienced difficulty
with their home appraisal
Did you experience any

difficulty with your home
appraising at a value Yes,
equal to or below the
final sale price?
27%
(n=1,431)

22
Over half of buyers needed help with negotiating price
and finding their home
In which part of the transaction did you need the most
assistance from your agent? (n=1,335)
Negotiating price 26%
Finding the right home 25%
Negotiating terms of sale 22%
Help with legal issues 12%
Other 1%
23
Sellers’ Pain Points
• Agents charging too much
• Sales fell through due to buyers’ inability to secure a loan
• Home inspection
• Paperwork
• Contract negotiation

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24
Sellers needed assistance with a variety of things
during the sale With which part(s) of the sale did you need
assistance from your agent? (n=873)
40%
Negotiating price or terms of sale 53%
67%
38%
Determining listing price/strategy 52%
65%
39%
Advice about selling 43%
34%
34%
Home staging 29% Millennial
35%
31%
Gen X
Help with legal issues 29% Boomer
32%
29%
Timing or sequencing the sale 28%
23%
1%
Other 1% SERIES: 2018 Consumer Survey page
4% SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
25
More properties had fallen out of escrow
% of Properties Fallen out

% of Properties Fallen out of Escrow
of Escrow
20%
16.9%
14.8%
10%
0%
2013 2014 2015 2016 2017 2018
SERIES: 2018 Housing Market Survey page

26
Why did the properties fall out of escrow?
0% 20% 40% 60%
Buyer changed mind and decided not to buy 50.0%

Buyers could not secure a mortgage because of
10.7%
his/her credit background
Buyers could not come up with the downpayment 6.0%
Buyer did not qualify for a mortgage on terms
4.8%
acceptable to the buyer
Buyers could not secure a mortgage because the
1.8%
appraised value was too low
Seller decided not to sell 1.2%
Other 25.6%
SERIES: 2018 Housing Market Survey page

27
30% had challenges in the closing process
Did you encounter any

challenges in the Yes,
closing process? 30%
(n=1,060)

28
Younger sellers were more likely to experience
challenges in the closing process
Did you encounter any challenges in the closing process?

(n=1,035)
Millennial Gen X Boomer

Yes, Yes, Yes,
41% 24% 15%

29
Sellers had challenges with buyers & money
In general, what was the most challenging
aspect of your home selling experience?
None/Good Experience 27%
Buyers/Agents 12%
Price/Financials 10%
Waiting/Timing 9%
House Prep/Paperwork 6%
Selling&Buying 4%
Leaving/Location 4%
Stress/Personal 3%
Process/Legal/Inspections 3%
Other 10%
30
Additional challenges sellers faced
with the home buying process
“the price from “the legal “Waiting for

the offers” process” an offer”
“the length of time “Standing by once the escrow process

started. There were various steps that need
to be on the market to be completed on the buyer's side as well
with no solid as condo association requirements that
responses over 2 6- stalled the process a bit, but were ultimately
month periods” fulfilled as expected. ”
“Getting the most

money for it” “all the
paperwork”

31
Over 90% of Renters See Advantages to
Homeownership Compared to Renting
A good long-term investment 21%
Having the freedom to do what you want with your home 19%
The permanence and stability of planting roots 12%
An improved quality of life for my family 11%
Having equity in your home 9%
The pride of ownership 7%
Having more privacy 6%
The tax deductions 6%
Something else 1%
I don't see any advantages to homeownership 7%
In your opinion, what is the greatest advantage, if any, SERIES: 2018 Consumer Survey page
of homeownership compared to renting? (n=1,848)
032
Shift #3 – the industry
“the disruptors”
Dis- something that
-rup
interrupts an event,
activity or process by
causing a disturbance
tor
or problem
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page
035
35
It’s different today because it’s
happening all around us.
It wasn’t long ago that
IBM had 70% GM had 52%

of every computer in the of the auto market
world
Sears the 3 major networks

was the largest retailer owned the airwaves

page
37
And then… things changed
IBM GM
Sears the 3 major networks

lost 70% of their viewership
to cable TV

page
38
Why they didn’t see it coming…
Dismissive
Arrogant
Distracted
page
39
Disruption is continuous…
car movie brick &

service rentals mortar
music hotels checks gas vs.

vs. ePay electric cars

page
40
How do the venture
capitalists see us?
What are the ramifications of

having so much $$$ flowing
into the real estate industry?

page
41
Players in town
Zillow Offers | OpenDoor | Knock | OfferPad
PurpleBricks | REX | Compass
PurpleBricks
What is it? Fun Facts:

A fixed-fee real estate brokerage • No traditional brick and mortar
that operates as a cloud-based real estate offices
brokerage without physical
offices. • Flat fee applies regardless of
whether the property get sold
Source: PurpleBricks page

43
REX
(Real Estate Exchange)
What is it? How it works

• REX is a digital platform and full • 2% commission fee
service real estate brokerage.
• Buyers purchase a property
• Uses A.I. and machine learning through a REX agent, money
to identify buyers and sell homes goes toward the actual
outside of the MLS. property
• Buyers pay their buyer agent’s

fee if they don’t use a REX
agent
Source: REX page

44
Compass
What is it and how is it

different?
• A tech-company first and foremost
• First modern real estate platform that
pairs the industry’s top talent with
technology
• Employs a huge stable of engineers

tasked with accomplishing this feat
• The country’s largest independent real

estate brokerage by acquistion
Source: REX page

45
Compass
20/20/20 = IPO
20% market share
20 cities
by 2020

page
46
Zillow
iBuyers
What is an iBuyer?
“An iBuyer is a company that uses technology to make an offer on
your home instantly. iBuyers represent a dramatic shift in the way
people are buying and selling homes, offering in many cases, a
simpler, more convenient alternative to a traditional home sale.”
(Opendoor)
“An iBuyer is a real estate investor that uses an automated valuation

model (known as an AVM) and other technology to make cash
offers on homes quickly.” (Zillow)
Source: OpenDoor, Zillow page

49
How iBuying works?
1. Seller fills out online questionnaire about their home

2. iBuyer uses algorithms and technology to determine offer price
3. iBuyer presents seller with a nonbinding offer (typically within 2 days)
4. iBuyer sends inspectors to verify value and assess any needed
repairs
Source: Zillow, CBInsights page

50
How iBuying works?
5. Transaction closes and iBuyer takes ownership and

charges fee (6-8%)
6. iBuyer renovates for resale
7. iBuyer lists home
8. Offer is received, enters into closing process
Source: Zillow, CBInsights page

51
Zillow Offers

“…a home-selling option for • Not all homes receive an offer
homeowners who want a
predictable sale on their time line.” • Offers come from qualified
(Zillow) investors
• Only available for homes that

are not already listed
• Currently being tested in

Las Vegas and Orlando
Source: Zillow page

52
OpenDoor

• A CARMAX business model in the • Service fee of 6% and an
real estate industry. additional fee of up to 6% to
compensate for risks
• Buy homes directly from sellers/
homeowners • Buys only single-family home,
built after 1960, in the $125,000
• Sell them directly to interested to $500,000 price range
buyers
Source: OpenDoor, Forbes page

53
iBuyers will buy your home for cash
Offerpad Knock
buys directly from online home trading company
sellers - partnering with that buys sellers’ homes and
Zillow Instant Offers finds them new ones before
their old home is put up on the
market

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54
Traditional transaction vs iBuyers
Traditional transaction iBuyer
annoying speed
painful convenience
uncertain certainty
“iBuyers will have 20% market “iBuyers will have 60% market
share by the end of 2019.” share by the end of 2024.”
-Brad -Rob

page
55
iBuyers’ Target: Largest Segment of Home Transactions
74% of Home
Transactions
2039 2028
606
386
220 209
$0-$100k $100k-$250k $250k-$500k $500k-$750k $750k-$1m $1m+

Axis Title
Source: NAR, Morgan Stanley Research page

56
19
Where iBuyers Operate Austin, TX
Jacksonville, FL
Portland, OR
Tucson, AZ
Phoenix, AZ
Future Markets 12
Dallas, TX
Las Vegas, NV
Atlanta, GA
Boston, MA
Current Markets 9 Chicago, IL
Orlando, FL
Raleigh, NC
Denver, Co San Antonio, TX
Dallas, TX Los Angeles, CA
Charlotte, NC
Tucson, AZ Phoenix, AZ Nashville, TN
Phoenix, AZ Salt Lake City, UT
Tampa, Fl
San Diego, CA
4 4 Tampa, FL
Dallas, TX
Minneapolis,
3 3 Orlando, FL MN
Dallas, TX Phoenix, AZ Atlanta, GA Tampa, FL Houston, TX
Austin, TX Wayne Co., MI Inland Empire, CA Las Vegas, NV Las Vegas, NV Atlanta, GA Sacramento,
Dallas, TX Knox Co., TN San Diego, CA Atlanta, GA Charlotte, NC Charlotte, NC CA
San Antonio, TX Nashville, TN Orange Co., CA Denver, CO Salt Lake City, UT Raleigh, NC Denver, CO
Source: CBInsights page

57
Impact of iBuyers on Residential Real Estate
“The iBuying Market

could reach ~3% total
transaction penetration
by 2030, the equaivalent
of ~175k homes.”
(Morgan Stanley)
iBuying Homes (000s) % Total Homes
Source: Morgan Stanley Research page

58
Déjà vu
Party like it’s 1999?
REALTORS® offers more than just a property search…
A Real Estate Transaction is not just a listing on an MLS or a “For Sale” sign…

page
60
It’s still about building a
relationship with your clients

page
61
Brokerage Brand Plays a Limited Role
Most Important Factors When Choosing an Agent

page
62
SOURCE: NAR 2016 Profile of Home Buyers and Sellers
NAR Buyer/Seller Profile
40%
Reputation of agent,
– Most important
35% 31% factors when choosing
30%
Agent is honest and
trustworthy,
an agent
21%
25% Agent’s knowledge
of the neighborhood,
20% 14% Agent seems 100%
accessible because
15% Agent’s association
of use of technology
Agent is a friend or a with a particular
like tablet or
10% family member, firm, 4% Other, 5%
smartphone, 3%
14%
5% Agent has caring
personality/good
Professional
0% listener, 5% Agent’s designations held by
commission, 4% agent, 1%
Source: NAR 2016 Profile of Home Buyers and Sellers page

63
Important factors when looking for a real
estate agent
Referrals from people I trust 69%
Agents with similar listings to what I was looking for 64%
Looking at websites with ratings of agent performance 62%
Having a personal relationship with the agent 57%
Being a member of a REALTOR® organization 52%
Having used the agent in the previous transaction 41%
SERIES: 2018 REALTRENDS Consumer Study page

64
thank you

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The Shift in Real Estate:

What’s next for the

Existing Home Sales

Unsold Median Days Sales Price to

$565,880 3.6 months 25 days 98.5%

CALIFORNIA ASSOCIATION OF REALTORS®

SERIES: : Sales of Existing Single Family Homes page

SERIES: Median Price of Existing Single Family Homes page

27% 25% 25%

SERIES: 2018/2019 Google Consumer Poll page

SERIES: Homeownership Rates

Greatest 134,591 43,565 22,813 33,475 -10,662

$25K or Less 344,576 95,039 47,564 81,055 -33,491

Less than HS 378,933 113,901 28,971 45,611 -16,640

Some College 823,582 302,676 120,358 187,811 -67,453

• The desire for homeownership remains strong

• First-time buyers face often insurmountable obstacles

• Government policies do not support housing as in the past

• More Millennials are making the difficult choice to leave

• Their ability to build wealth over time is compromised

• Where will our children live?

CALIFORNIA ASSOCIATION OF REALTORS®

loan loan condition

+ view property removal,

market/ open inspection

Nothing broken 21%

Mortgage financing 17%

Agent search 11%

SERIES: 2019 Google Consumer Poll page

SERIES: 2019 Google Consumer Poll page

Mortgage financing 42%

Agent search 12%

SERIES: 2019 Google Consumer Poll page

• Outbid by other offers

• Home appraisal too low

CALIFORNIA ASSOCIATION OF REALTORS®

Please rate how easy Somewhat Difficult

SERIES: 2018 Consumer Survey page

1 Extremely 2 Somewhat 3 Neither 4 Somewhat 5 Extremely

Competition/Finding the Right Place 18%

“Waiting for “Negotiating “negotiating

“Raising the funds for “THE CREDIT

SERIES: 2018 Consumer Survey page

Did you experience any

SERIES: 2018 Consumer Survey page

Finding the right home 25%

Negotiating terms of sale 22%

Mortgage financing 14%

Help with legal issues 12%

• Agents charging too much

• Sales fell through due to buyers’ inability to secure a loan

CALIFORNIA ASSOCIATION OF REALTORS®

% of Properties Fallen out

SERIES: 2018 Housing Market Survey page

Buyer changed mind and decided not to buy 50.0%

SERIES: 2018 Housing Market Survey page

Did you encounter any

SERIES: 2018 Consumer Survey page

Did you encounter any challenges in the closing process?

Millennial Gen X Boomer

SERIES: 2018 Consumer Survey page

“the price from “the legal “Waiting for

“the length of time “Standing by once the escrow process

“Getting the most