Note: I also posted this on Zillowblog.
Another year has come and gone, and there is no shortage of year-in-review posts this week, including a good one by Dustin Luther (blogfather turned Realtor.com employee turned blogfather), and one from Inman News. Because I wrote the 2006 wrap-up post for ZillowBlog, I somehow got roped into doing the 2007 one also. So here is my take on the top themes of 2007:
1. 2007 brought us the worst housing downturn in recent memory. The national Zindex is down 6% versus this time last year, and some markets are much worse (Miami, LA and Las Vegas and are all in double-digit negative territory). Scarier still, about 16% of recent purchasers are in the red on their new homes – they owe more than their home is worth. Gulp.
2. Adding to the negative outlook, the sub-prime mortgage crisis accelerated the downward spiral as foreclosure rates rose and corporate financials tanked. With consumer and investor anxiety high, the stock market dropped sharply mid-year. Several large lenders “imploded” under the strain, making it more difficult for many would-be homeowners– even those with good credit– to get a loan. The worse may be yet to come with $890 billion of sub-prime mortgages set to reset in 2008, contributing to what some predict to be $300 billion in mortgage-related losses.
3. Brokerage sites are rapidly building out national Web sites with full MLS coverage. RE/MAX, Century 21 and many others either already have national sites with almost all FSBA (”for sale by agent”) listings, or they will by this time next year. This spells trouble for the dozens of start-ups which are little more than mash-ups between listings and a Google map.
4. Which leads me to my next theme, and one which Dustin nailed in his post. There has been a lot of sizzle, but very little steak, from the many start-ups chasing dreams of real estate domination. Dustin wrote:
“The launch of so many (already) forgotten sites. How about all the sites that launched with great fanfare only to fall off of everyone’s radar. Terabitz comes to mind. Social networks like Zolve (which went from charging almost $1000/year to $0/year in its first few weeks) and Propertyqube also seem to have dropped off the map. And there were many (way too many to name them all!) “local” sites that were hyped by the RE.net at one point or another: MyHouseKey (kinda dead), SuperListingSite (completely dead), Localism, StreetAdvisor, and YourStreet.”
5. Wall Street and Sand Hill Road were busy in our industry this year. Internet Brands (realestateabc) went public; Terabitz, Trulia, Zillow and Redfin all raised significant venture capital rounds; IAC (realestate.com, lendingtree.com) announced a 5-way spin-off which will make their real estate business standalone next year; Realogy was taken private by Apollo, the private equity firm; several high profile public Internet companies in our industry went through “busted auctions”, meaning that they were for sale but nothing came of it so they took the proverbial For Sale sign down. I’m sure 2008 will see more financial transactions in our industry: several less well-funded start-ups will fold, and there will be consolidation as well.
6. User Generated Content hit its stride in 2007. Zillow led the way with many UGC features: over 140,000 discussion posts in our forums; over 80,000 questions and answers in Zillow Home Q&A; and over 2,oo0 page contributions to our wiki-style “Real Estate Guide.” All told, Zillow gets about 25,000 unique contributions to the Web site each and every day from its community. Other Web sites have also launched question and answer features, comments on homes, and of course many many blogs.
7. The B2B players joined the fun: Realquest (owned by First American) launched in 2007 and Cyberhomes (owned by Fidelity) made significant updates. Both sites have similar business models to Zillow: advertising-supported free AVMs on most homes in America. The challenge for all players will continue to be differentiation, providing consumers and professionals alike useful services and value.
8. As I’ve written on my personal blog, it looks like 2007 will be the first year in a decade in which fewer Realtors celebrate the New Year than the year before. In 2008, we’ll likely lose several hundred thousand Realtors, and possibly even more mortgage brokers and loan officers. (I’ve already seen reports of 50K+ layoffs in the mortgage industry.)
9. Usually industries root for their market leader: as goes the fate of the New York Yankees, so goes Major League Baseball, for example. But sometimes the market leader has to keel over a bit in order to make room for innovators. Witness Google and Apple’s decade-long assault on Microsoft which has been a boon for the technology industry. In our little world, Realtor.com ends 2007 once again at the top of the pack. But Zillow is now about 2/3 their size, from a standing start less than two years ago, and others are nipping at Realtor’s heels. If current trends continue, it’s just a matter of time before MSN Real Estate or another top Web site unseats Realtor.com from the top spot. Hitwise says that Realtor.com had about 10% of the traffic in our industry a year ago, and now has less than half that.
10. 2007 saw huge growth in the acceptance of online advertising in our industry. Advertisers like American Express, Bank of America and Saturn can now be found on Zillow, for example, and over 9,000 local advertisers have bought EZ Ads from us in just a few months.
Now, specific to Zillow, here are a few year-end fun facts. Zillow has grown significantly in the past year in terms of capital (an additional $30M raised bringing the total to $87M ), employees (from 135 people to 160), site traffic (up about 20% year-over-year), advertising salespeople, (from 5 to a team of 20; Advertising offerings (launch of Zillow Home Direct Ads), for sale listings (launched the ability to post homes for sale in early December ‘06, so a handful then vs 400K now), brokerage partnerships (zero vs dozens today), newspaper partnerships (over 280 newspapers now), Make Me Move listings (about zero then vs 100K now), etc.
And now for some Zillow predictions: In 2008, Zillow will improve Zestimate accuracy; launch a mortgages product; significantly increase revenue and approach profitability; become the most visited real estate Web site in at least several key cities; cross the 1 million listings milestone; and much more.
Happy New Year to everyone, and we’ll see you next year– we’re looking forward to it!