The real estate market is crazy right now. In this short update show, we share one story of real estate madness, check in with Glenn Sanford of eXp World Holdings on agent disruption, hear from Austin Allison of Pacaso on the second home boom, and get a sobering look at climate change with Michael Beckerman of CRETech.
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2:15 House hacking and the crazy housing market
5:55 eXp and agent count
8:48 Pacaso and the future of second homes
11:50 Michael Beckerman and climate change
Deidre Woollard: Hello, this is Deidre Woollard, host of the Millionacres podcast. I'm tipping a little bonus episode to share with you some recent clips from the videos on Millionacres. In addition to this podcast, we've got our website which publishes dozens of stories every day. We also have a YouTube channel where we post interviews and series. I want to share a couple of those with you. Hopefully you'll find them interesting and valuable to you on your career as real estate investor. If you're a fan of this podcast, which I hope you are, on recent podcast episode, we had Lauren and Kyle Clugston of Rentals to Wealth. They were awesome and I loved tearing about their real estate investing journey and how it started with the house hack. Especially since on our own team we have multiple house hackers. One of our team members, a good friend of mine, Preston Freeman and his wife Lara. They just got married and they are just starting their house hacking journey. I interviewed them about this process because it was, I feel like a great chance to get in on the ground floor and watch how this evolves. They've been sharing some videos with me of their renovations. They're putting this altogether, we're calling this house hack the series. There's a clip that I'll share with you here, and you can see the first episode on YouTube. In this clip, they're going to explain to us what it was like to try and find a house in this crazy market. They're located outside of Denver. I think we all know the supply and demand issue for residential real estate is just totally out of control right now in so many markets. But hearing their struggle, just brought it home for me and hopefully for you too, and just shows how intense it can be for first-time buyers.
Preston Freeman: Maybe this was our fifth or six offer. At first, we were emotionally attached and then we just sat in there like, this is not our forever home. It doesn't matter if we lose it, it's an investment property. Yeah, we want to it but it's not going to make us depressed because we didn't get the home we wanted, because we're not going to live with them for more than a year or two. We put it in offer. Everything was going like 20, 30k over to asking and it was insane. We try to balance that into something that we would actually like to do and we ended up putting in some offers, getting some decline, we got one accepted, and then the inspection came. The person who owned it was very handy, but not very finishy. When we get the inspection back, there were just wires that were sticking out here, and plumbing was not done professionally and would probably need to be replaced, and it was going to be a very high maintenance investment property. We talked about it and even our agents was like, don't do this one. You don't want this one. Then we ended up backing out of that one and eating those funds.
Lara Freeman: Then I think the next one was the one that we went and weigh over because we thought that was the right thing to do. Then we were the backup offer.
Preston Freeman: They said we were too high. It's like I don't understand it anymore. They went with someone else, and then that person fell through. I think we have that. Then we were essentially a backup offer sometime after that, and I think the other one went through, so we didn't end up becoming the backup offer. Then this one got back on the market, we saw it, we loved it. It was very much finished and just needed some [inaudible 00:04:02] work that we could do ourselves. That one we appreciated. We can save some money and learn and do things together.
Lara Freeman: I wanted to add, before we were lucky enough to purchase this one, we experienced a lot of going to look at the housing and only have 15 minutes to look at this house. Then there's four other people waiting to also see this house. It's very pressure and the agents like, do you want to an offer, do you want [inaudible 00:04:30]. It's just very fast paced.
Preston Freeman: We'd go into market and then within two days you had to make your offer and it was just no longer accepting offers.
Lara Freeman: Four of us by the end of the day at five o'clock or something.
Preston Freeman: A couple of times, there's like 5:00 PM today, all the offers are going to be reviewed. It was only on the market for that day. It was insane. My agent would ask us and then then we're like, I got to go crunch numbers. I had made a spreadsheet without my brother and then we talked about it and maintenance and CapEx and vacancies and put all those variables in and did some high-level math to see if it was worth it. This one ended up being pretty liquid actually, especially once we run out this top units, once we move out and move onto the next one.
Deidre Woollard: For all of you stock investors and REIT investors, I want to share with you an interview that I did recently with Tim Beyers from the Motley Fool. We interviewed Glenn Sanford, who is a founder of eXp World Holdings. That's a publicly traded stock and one that has had quite a run in the past year. If you've been following eXp then you probably know they had insane growth over the last year in transactions, but also in agent count. Agent count is really the thing that they are focused on. I'm fascinated by this company, by their virtual brokerage model and their rubella online community. I'm really studying lately how some brokerages are valued as tech companies and their stock is priced appropriately, and others are valued as traditional real estate companies and their stocks are valued quite differently. My question for anyone who is listing is, do you think something like eXp should be considered a rival to Realogy and RE/MAX or is it a tech disruptor like Zillow and Redfin? Checkout Glenn's thoughts on disruption in general. He's quite a opinionated on it.
Glenn Sanford: Traditional real estate brokerage, there's not much innovation that's taking place. I'm not seeing Keller Williams, I'm not seeing RE/MAX, I'm not seeing any of the real deep brands. I'm not seeing anything out of home services, which is Berkshire Hathaway. Nobody is doing anything, in my mind, I'm just going, okay, if you guys don't want to take advantage of what's going on in the marketplace then we'll just take all your agents. That's mentally what I think about. But what I see is, you got the open doors, you got the Zillows, to some extent Redfin. They've got good metrics even though they're not growing as fast as we are, they're still attaching themselves to a unique part of consumer behavior that's going to grow over time. I think about those as being the companies to watch. The significant one is obviously Zillow. Zillow is it take no prisoners company. For us, we think about the idea that we have to, just because we don't know exactly what Zillow is going to do over time. We have to grow our agent base so that we are totally defensible against anything that Zillow might throw at us. On the Zillow platform, we actually have some of, if not, the most productive agents on the Zillow platform that are Zillow flex agents, and everything else. They're eXp agents. We've got like the Kyle Whistles, the Veronica Figueroa's. We got so many people that are the primary agents, and they ain't leaving in eXp. There's no way that Zillow can do anything to displace those people. But what if Zillow made a move? Maybe they've turned into a brokerage. What happens then? Can we create enough consumer behavior? Can we recreate enough stuff around us? That if Zillow decides to take aim at the entire industry, and try to take every brokerage on that we've got the ability to pivot and go. That was nice. If Amazon decided getting residential real estate, I think that would be crazy. That would that could disrupt stuff. But I don't think they are thinking about respiratory status. That's our next play.
Deidre Woollard: Speaking of the big Z, aka Zillow, I also sat down with Austin Allison, the co-founder of Pacaso. Austin is a serial entrepreneur. He's the founder of Dotloop, a transaction management system which was sold to Zillow a few years back. Now, Austin and former Zillow CEO, Spencer Rascoff, are seeking to change the second-home market with Pacaso. Recently had 75 million dollars funding round, which gave it a billion-dollar valuation, technically makes it a unicorn. But I feel like we need a different word because there are so many unicorn out there with billion-dollar valuations right now. It's just crazy. But the second home and luxury market are really robust right now. Seeing sales in the Hamptons, on Cape Cod, in Aspen, just go crazy, Lake Tahoe, and other area that's booming. We've got this really robust second home and luxury market. But what I wonder is, is this a blip due to remote work, or is this the start of a bigger trend? Here's Austin on what he's seeing.
Austin Allison: I think it's certainly related, but the broader theme that's impacting Pacaso's growth trajectory is that most people, who have some discretionary income are thinking about second home ownership right now. Frankly, even before the pandemic, when you survey our target audience, which is currently people with more than 150,000 in household income. When you survey that audience, you'll find that three out of four families aspire to own a second home. Even pre-pandemic, this was a dream that many people share. Post pandemic, I think what has happened is, the desire and the level of interest has intensified. We're seeing an increase in home prices in second-home markets. When you look at home prices, in general, they've increased about 14 percent nationally, and second-home market, they've increased 19 percent nationally. Similar trends you can see on the inventory side of things, we're in an unprecedented seller's market. Inventory levels were already low before the pandemic, and they decreased by 27 percent year-over-year. Then again, when you look at second-home markets, one thing that we'd like to look at is mortgage applications because that's a pretty good indicator of how many people are trying to buy homes in a particular market. We've seen mortgage applications increased by almost 100 percent, so almost double year-over-year. I think the net of it is, you have more families during and post-pandemic that are going to have flexibility, whether that's permanent work-from-home flexibility, part-time work-from-home flexibility, or continuing to work in the office but now on a new culture where there's more flexibility. Most people have more flexibility, and therefore, the idea of being able to use the second home is more feasible than it ever was. That is presented a tailwind for Pacaso's business.
Deidre Woollard: Also recently, we added a new rider, Jeff Piltch to the team. I really like Jeff, like me, he's pretty obsessed with prop-tech in real estate. He's out of Boston, works with prop-tech companies. He has been covering a lot of what's been happening in funding, and acquisitions. There is just a lot of money flowing to real estate venture capital right now, and that's pretty exciting. He recently interviewed Michael Beckerman of CREtech, who I've interviewed before, and who's just fascinating. This interview was on an issue I think every real estate investor needs to think about, which is climate change, and climate disruption. Beckerman is in the midst of creating this big initiative for funding around real estate role in climate change through CREtech Climate. He's working with a bunch of different companies, and really growing that very rapidly because he sees it as a very urgent situation. Fixing the climate problem in real estate takes so many forms. You've got the issue of construction waste, and how to reduce waste on jobs sites to reduce water usage. Then you've got the energy costs of running buildings, and how to make that more effective. You've got some big public policies happening at New York City is trying to make buildings more green. California is obviously very focused on that issue as well. You've got this public and private sector both coming together around this issue with a whole bunch of different initiatives. Michael Beckerman just feels like this is really urgent right now. Here's what he had the sale in that.
Michael Beckerman: Yeah. If you just put it in context, the real estate tech, or prop-tech sector, I don't know, 20-30 billion dollars a year invested in that sector. That is everything. That's data, that's building access, that's marketplace, you name it. The sector is hot right now. Then we're seeing IPOs, we're seeing specs, we're seeing big money being raised, and companies really started to scale 2020, '21. Then I come to the fact to discover the fact that this industry that I love, it's 40 percent of all carbon emissions, globally, are coming from the built world.
Jeff Piltch: Wow. That's a big number.
Michael Beckerman: How the hell do I not know that? I'm in this business of media, information, and content. I'm like, I got to do something about that because I believe in science, I believe in climate changes, real. If this industry is culpable in climate change, I got to use this big voice, this big platform to do something, so hence, we launched CREtech Climate, literally just like a month or so ago to try and galvanize the real estate industry to invest in climate tech, sustainability, and ESG. Same thing I did on CREtech, how do you connect the technology companies, how do you connect the corporates, the real estate industry, and how do you connect venture? You pull them all together to build a global platform. We did it in CREtech. We got up to about 100,000 or so as an audience, the biggest in the world on the real estate technology side. It quite took me a long time, Jeff. It look me 10 years. We don't have that much time. I feel a great sense of urgency on climate.
Deidre Woollard: That's it for this episode. Thanks so much for being part of the Millionacres podcast crew. Just a reminder. You can always email us to at email@example.com. We also are trying out a new text line through the service called community. You can text 703-775-1647, and that goes directly to my phone, and I'm issuing out text newsletter. It's probably once a week or so when something interesting happens. Is the free service. It's just something I'm trying out because I think it's fun, and I feel like I always want to hear from people. Real estate is very much a thing that people get smarter by learning from other people. One of the reasons I host the Millionacres podcast, is because I am using that time to make myself smarter, and hopefully make you smarter as well in real estate investing by talking to people who are doing things that are really interesting. One of the reasons that I'm focused on also having community engagement with listeners, is because I learned from all of you. You all have fascinating stories. You all have come to real estate in different ways in building your wealth portfolio in different ways. The more we learn from each other, the smarter, happier, and richer we get. Thanks for tuning in. Stay well, and stay invested.