[Study] Zillow rules real estate web traffic but lists far fewer properties

Quality, depth of Zillow’s non-MLS data in key markets questioned

Zillow Group’s (Z) two portals — Zillow.com and Trulia.com — get more traffic than realtor.com, but Zillow Group sites have fewer listings in most markets, and the two are losing ground in traffic.

That’s the finding of a lengthy study by BuildZoom.

And while Zillow has been increasing its total number of listings, it may not be able to close the gap if its current pace is any measure. Zillow, for its part, disagrees and argues its listing are growing weekly, and will do so for some time.

Right now, Zillow and Trulia together dominate the market in terms of traffic, but realtor.com recently surpassed Trulia to become the second most popular portal, according to the BuildZoom chart below.

Click to enlarge

(Source: Barclays)

Another difference is the sites are not equal in the quality of listings, nor do they have equal coverage in major metros, BuildZoom says.

BuildZoom.com Chief Economist Issi Romem has been looking at the question since April after ListHub pulled its contract with Zillow Group, and his findings seem to suggest that realtor.com is correct on quality in many markets.

“…(T)he number of listings being provided still varies widely from city to city. According to comScore, Zillow and Trulia combined attract far more web traffic than Realtor.com,” Romem says. “However, since News Corp (NWSA) acquired realtor.com the number of unique visitors to that site has steadily grown.”

Romem says that depending on the market, the portal buyers choose to search may be more important than they realize. realtor.com has an advantage despite getting less traffic than Zillow Group’s combined sites, he says.

“Before its recent acquisition by News Corp, realtor.com operator Move, Inc. had a 10-year head start, backed by the National Association of Realtors,” Romem says. “This advantage has translated into the realtor.com site having more timely, accurate and comprehensive nationwide listings. This is a result of receiving and updating data from almost all of the 800+ multiple listing services in the U.S. every 15 minutes.”

He says that the discrepancy between the number and quality of listings available on the Zillow Group portals and on realtor.com attracted a great deal of attention in April, whenListHub — a key aggregator of MLS data, now controlled by News Corp — terminated the contract, and stopped providing listing information to Zillow Group.

“In anticipation of the event, Zillow Group scrambled to negotiate its own agreements with individual MLSs to obtain listings which it had previously obtained from ListHub. By mid 2015 Zillow Group had signed agreements with just over 300 MLSs,” BuildZoom’s Romem says. “We tracked the overnight change in the number of listings on the different portals after ListHub’s agreement with Zillow Group expired. Since then, we have kept track of the listing coverage for the core cities of the 51 largest U.S. metro areas.”

The following chart reports the number of listings on Zillow.com as a share of the number of listings on realtor.com, contrasting April 15 to Sept. 21 of this year.

The lighter blue shade in the chart below is Sept. 21, and the darker is April 15. For each city, the bar shows the percentage of listings Zillow had at each time period studied as share of what realtor.com had listed. So in metros like Birmingham, Alabama, there was little gain in listings for Zillow, but in metros like Raleigh, North Carolina, and Las Vegas, for instance, Zillow gained a significant amount.

Click to enlarge

(Source: BuildZoom)

According to the chart, as of Sept, 21, Zillow.com has fewer listings than realtor.com in 42 out of 51 cities.

“The discrepancy is often quite substantial: in 30 of the 51 cities, Zillow.com has more than 20 percent fewer listings, and in 15 of the 51 cities Zillow.com is behind by more than 60%,” he says.

In a handful of cities — Los Angeles, New York, Phoenix and Detroit — Zillow.com provides more listings than realtor.com.

“While this may indicate the absence of some listings on realtor.com, it may also reflect data quality issues in Zillow’s database, such as incorrect listing details, or duplicate or expired listings,” Romem says. “We encourage readers to compare listings in these cities and form their own opinions.

What that means is Zillow Group’s “excess data,” he said, is likelier to come from non-MLS sources whose reliability is less certain.

Katie Curnutte, vice president of communications and public affairs at Zillow Group, disagreed about the quality of Zillow’s listings.

“Zillow now obtains all listings directly from MLSs or brokers, and our listing count is growing weekly,” she said in a statement to HousingWire. “We continue to add partnerships, and expect this to continue for some time.”

Romem argues that at least superficially, the numbers appear to support realtor.com’s claim of having superior data.

Which raises the question: Does realtor.com’s advantage matter for Zillow Group?

“As long as Zillow Group continues to draw substantially more traffic than realtor.com, agents and brokers will continue to feel compelled to advertise on its portals,” he says. “As a result, Zillow Group’s revenue is less sensitive to its listing coverage as one might think. Yet the danger remains that consumers will eventually recognize the discrepancy and flock to realtor.com or elsewhere in search of more comprehensive and accurate listings. If this happens, agent and broker dollars will follow.

“Going forward Zillow Group has the ability to close the listing gap as it continues to sign additional local MLS agreements, but will it succeed?” Romem asks. “Judging by its limited progress on this front between April and September — it is destined for an uphill battle.”

On Friday, Zillow sent an order to cease-and-desist order to BuildZoom in response to the information contained in BuildZoom’s study.

Zillow is trying to grow beyond online listings, positioning itself to try to take the lead in the online transaction revolution with such moves as its recent acquisition of DotLoop.

The company had a profitable second quarter, with Zillow Group reporting that its revenue increased 20% to $171.3 million from pro forma revenue of $142.8 million in the second quarter of 2014.

This exceeded the high end of the company’s outlook by $2.3 million, along with beating analyst revenue expectations by $2.58 million. Excluding market leader revenue, revenue increased 25% to $158.7 million from $126.8 million in the second quarter of 2014 on a pro forma basis.

Black Knight: Cash-out refis up 68% since 2Q 2014

Volume still 80% below 2005 levels

Cash-out refinances were up 68% year-over-year from the second quarter of 2014, as borrowers take advantage of still-low rates and newfound equity in their homes, according to Black Knight Financial Services.

This is the highest volume of cash-out refinancing in five years, but still nearly 80% below the peak in 2005.

As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, borrowers have been capitalizing on increased equity available in their homes and still historically low rates.

“In the second quarter of 2015, we saw cash-out refinance volumes rise almost 70% from the same period last year,” said Graboske. “While this is the highest volume in cash-out refinances we’ve seen in five years, it’s still nearly 80% below the peak in Q3 2005. Even so, it’s clear that borrowers have been capitalizing on the increased equity available to them.

“As we reported in last month’s Mortgage Monitor, total equity of mortgage holders has risen by about $1 trillion over the last year, and ‘tappable’ equity stands at $4.5 trillion,” he said. “Borrowers today are pulling out an average of $67,000 of equity through cash-out refis, nearly the levels we saw back in 2006. What’s really interesting though, is that even after pulling out that equity, resulting average LTVs are at 68%, the lowest level we’ve seen in over 10 years.”

He said that during this same time span, second lien HELOC lending rose, albeit at a lesser rate—that volume is up 40% from last year. However, as interest rates rise, there could be an increase in HELOC lending and corresponding slowing in first lien cash-out refis, as borrowers will likely want to hang on to lower rates for their first mortgage while still being able to tap available equity.

In its analysis of refinance transactions in comparison to prior loans, Black Knight also found that the distribution of cash-out refinances is highly concentrated geographically, with over 30% of all such transactions occurring in California alone.

Texas is second among states in terms of cash-out refinance volume, at just 7% of the nation’s total. Looking at Q2 2015 refinances in general, the data shows that borrowers are saving an average of $136 in principal and interest each month through refinance and cutting their interest rates by just over one%; the lowest such reductions in nine and five years, respectively.

These low averages are primarily due to the fact that borrowers refinancing are either lower unpaid balance (UPB) borrowers that haven’t yet taken advantage of low rates (and who will see lower monthly savings), or higher UPB borrowers that are taking advantage of low rates for a second or third time, and so are seeing incremental savings as compared to earlier reductions. Black Knight also observed increased interest among borrowers in securing term reductions through refinancing, with 34% of rate/term refinances in Q2 2015 including a term length reduction.

Of particular interest to banks and mortgage servicers, this month’s Mortgage Monitor also looks at the increased foreclosure timelines introduced by Fannie Mae and Freddie Mac, and the potential impact those extensions have had on compensatory fee exposure. In addition to the 34 states where extensions have been introduced, the compensatory fee moratorium currently in place in New York, New Jersey, Massachusetts, and Washington, D.C., was extended from June until Dec. 31, 2015.

New York and New Jersey alone carry two-thirds of the country’s compensatory fee exposure, even though these states only account for 27% of active GSE foreclosure inventory. All totaled, the states covered by the existing moratorium account for 74% of remaining compensatory fee exposure, and the foreclosure timeline extensions result in roughly a 38% reduction of gross compensatory fee exposure in non-moratorium states. Lifting the moratorium – with timelines remaining as they stand now – would result in nearly a quadrupling of mortgage servicers’ compensatory fee exposure.

Zillow completes Trulia integration; begins universal ad sales to agents

Rascoff: Agents never before able to reach this many people

After more than a year after it was first announced and nearly seven months after the deal closed, the merger ofZillow and Trulia is now truly and fully complete.

Zillow Group (Z and ZG) announced Wednesday that the integration of Trulia into Zillow is now finished, bringing to close a process that began initially in July 2014 when Zillow announced its plans to acquire its largest competitor, Trulia.

The last hurdle in the integration process was the company’s advertising platform. That process is now complete, and now agents that advertise with the Zillow Group can reach a massive audience, all with one ad buy – a fact that Zillow Group CEO Spencer Rascoff views as absolutely crucial for the future of Zillow and the real estate industry as a whole.

In a call with investors in August, Rascoff said that the integration of Zillow and Trulia’s advertising platforms presents real estate agents with an opportunity they’ve never been given before – to reach a significant majority of real estate buyers and sellers right in the palm of their hands.

During the call, Rascoff said that, according to comScore, the Zillow Group’s brands now account for 72% of all mobile-only real estate category visitors.

“This is extraordinary and represents a tremendous opportunity for our advertisers as well as validating our acquisition of Trulia,” Rascoff said in August.

“What I’m really excited about is being able to have our hundreds of sales people in Denver, Irvine and Seattle call real estate agents and say, ‘With one ad buy, you can appear in front of 72% of mobile-only visitors across mobile devices,’” Rascoff said on the call. “They’ve never been able to reach that type of audience scale before.”

And for Zillow Group, capturing more of the money that agents spend to advertise on is critical to the company’s success going forward. In fact, Rascoff said in May that Zillow “sells ads, not houses,” so gaining more market share of agent advertising is at the company’s foundation.

“Advertisers follow audience,” Rascoff said in April, and with the large audience that Zillow can boast across its various platforms, Zillow is well-positioned to capture more of agents’ advertising spend thanks to its audience.

According to Rascoff, the Zillow brand alone represents nearly half of the real estate category in market share of visitors. Rascoff also said in the August call that the Zillow Group now represents the 32nd largest web property in America.

And with that audience, Zillow expects to command more advertising dollars.

“The annualized run rate for our agent advertising business reached nearly $456 million at the end of the (second) quarter, compared to $349 million at this time last year, which is a 30% plus increase,” Rascoff said last month.

“This still represents a very small portion of the approximately $10 billion, spent by real estate advertisers per year,” Rascoff continued. “That says to me that, we are dramatically underpenetrated from our monetization standpoint relative to our potential.”

When discussing the Zillow-Trulia ad integration last month, Rascoff said that the completion of the integration would be “a glorious day.”

And it’s one that came much earlier than Zillow first thought it might.

According to Zillow, the integration was originally scheduled to be complete by the end of 2015, but according to a tweet from Rascoff, the integration is complete, four months early.

“As we near the end of this transitional year, I am incredibly proud of the speed at which we integrated the Zillow and Trulia advertising products,” Rascoff said in a statement announcing the completion of the Trulia integration.

“Every one of our ad products – mortgages, rentals, display media, and now real estate agent advertising – are seamlessly integrated so Zillow Group clients can buy advertising from one company, and the ads are shown across multiple consumer brands,” Rascoff continued. “We completed this complicated integration months ahead of schedule and are now well-positioned to benefit from our enormous audience scale as we move into 2016.”

For agents and brokers who use Zillow and Trulia to connect with buyers and sellers, the completion of the integration means they can manage their advertising efforts across both sites through one streamlined platform, Premier Agent, Zillow said in its announcement.

Through Premier Agent, agents can access and manage their combined Zillow and Trulia profile, which includes profile information, client reviews, and past sales, Zillow added.

According to Rascoff, the ad integration presents agents with a whole new world.

“(Real estate agents’) newspaper used to call them in the local market and say, if you advertise in the newspaper, you can reach a lot of people looking for real estate,” Rascoff said in August.

“But this is totally different from a scale, a measurement, a efficacy, an integration standpoint in terms of this ad product sending leads directly into an online CRM or they electronically follow-up on the leads,” he continued. “I mean they’ve never been able to buy audience at this scale, with this type of measurement and efficiency before.”

And that new world begins today.


Mortgage apps for new home purchases dropped 6% in August

MBA: Drop seasonally driven

Mortgage applications for new home purchases decreased by 6% relative to the previous month, according to the latest Mortgage Bankers Association’sBuilder Application Survey.

This change does not include any adjustment for typical seasonal patterns.

“As the summer winds down, mortgage applications for new homes saw a seasonally-driven decrease in August,” said Lynn Fisher, MBA’s vice president of research and economics. “However, applications for new homes were still up 19% relative to the same month last year, which is consistent with what we’ve seen so far in 2015.”

By product type, conventional loans composed 68.5% of loan applications, Federal Housing Administration loans composed 19%, Rural Housing Service/Department of Agriculture loans composed 0.9% and Veteran’s Affairsloans composed 11.6%. The average loan size of new homes increased from $316,995 in July to $317,035 in August.

Some normally optimistic analysts found the report troubling.

“The first quarter’s recovery in mortgage applications for home purchase appears to have been derailed by a lack of earnings growth and the resulting deterioration in affordability,” says Matthew Pointon, property economist for Capital Economics. “While earnings should pick-up, rates are also poised to rise, suggesting that it may take some time before we can declare that the recovery in mortgage applications is complete.

“With mortgage rates poised to rise and house prices set for further gains, the outlook for mortgage applications could therefore be bleak. Set against that, however, we expect earnings to start to pick- up. And with the pace of rate rises set to be gradual and affordability still favorable by past standards, we are hopeful that the earlier recovery in applications will resume over the next few months,” he said.

The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 524,000 units in August 2015, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

The seasonally adjusted estimate for August is a decrease of 1.9% from the July pace of 534,000 units. On an unadjusted basis, the MBA estimates that there were 41,000 new home sales in August 2015, a decrease of 6.8% from 44,000 new home sales in July.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.

Distressed sales just 9.4% of homes sold in June

REO share drops to lowest since September 2007

Distressed sales—real estate-owned and short sales—accounted for 9.4% of total home sales nationally in June 2015, down 2.4 percentage points from June 2014 and down 0.9 percentage points from May 2015, according to the latest from CoreLogic.

Distressed sales shares typically decrease month over month in June due to seasonal factors, and this June’s distressed sales share was the lowest for the month of June since 2007 when it was 4.9%.

Within the distressed category, REO sales accounted for 6% and short sales made up 3.4% of total home sales in June 2015. The REO sales share was the lowest since September 2007 when it was 5.2%.

Click to enlarge

(Source: CoreLogic)

The short sales share fell below 4% in mid-2014 and has remained stable since then. At its peak in January 2009, distressed sales totaled 32.3% of all sales, with REO sales representing 27.9% of that share.

The ongoing shift away from REO sales is a driver of improving home prices since bank-owned properties typically sell at a larger discount than short sales. There will always be some level of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2%. If the current year-over-year decrease in the distressed sales share continues, it would reach that “normal” 2-percent mark in mid-2018.

Florida had the largest share of distressed sales of any state at 21% in June 2015, followed by Michigan (20.7%), Maryland (20.5%), Connecticut (19.3%) and Illinois (19.1%). Nevada had a 6.8 percentage point drop in its distressed sales share from a year earlier, the largest decline of any state. California had the largest improvement of any state from its peak distressed sales share, falling 58.3 percentage points from its January 2009 peak of 67.4%.

While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are even close to their pre-crisis numbers (within one percentage point).

Of the 25 largest Core Based Statistical Areas (CBSAs) based on loan count, Orlando-Kissimmee-Sanford, Fla. had the largest share of distressed sales at 24.2%, followed by Miami-Miami Beach-Kendall, Fla. (22.8%), Tampa-St. Petersburg-Clearwater, Fla. (22.5%), Chicago-Naperville-Arlington Heights, Ill. (22%) and Baltimore-Columbia-Towson, Md. (20.6%).

Warren-Troy-Farmington Hills, Mich. had the largest year-over-year drop in its distressed sales share, falling by 7.2 percentage points from 20.8% in June 2014 to 13.6% in June 2015. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.3% in February 2009 to 12% in June 2015.

Monday Morning Cup of Coffee: What will the end of Fannie and Freddie look like?

Not even the experts agree

Monday Morning Cup of Coffee takes a look at news across HousingWire’s weekend desk, with more coverage to come on bigger issues.

Last week Ed DeMarco, the former acting director of theFederal Housing Finance Agency, wrote in the Wall Street Journal that in his opinion, it is time to put an end to Fannie Mae and Freddie Mac.

Here’s how that might go down:

One reason for the conservatorships in 2008 was that the country lacked a viable secondary market without them. The common securitization platform introduced by FHFA in 2012 will fix that by creating the operational infrastructure for other firms to issue mortgage-backed securities equivalent to Fannie and Freddie’s. That will enable Congress to end the conservatorships and replace the Fannie-Freddie model.

David Stevens doesn’t agree. He’s president and CEO of the Mortgage Bankers Association, but more than that, he worked as an executive at Freddie and served as the Assistant Secretary of Housing and Federal Housing Commissioner in the midst of the housing crisis. He’s also a veteran of the lending business.
Here’s a little of what he says.

The most important element here is to recognize that conservatorship is not a long term solution, and in the current state may be the riskiest position of all….

The role the GSEs play in supporting an affordable and sustainable housing finance system is absolutely critical to this nation….

Some might argue that this function could be replicated by other parties, private capital alone, or some new model. The fact is we need some form of government entity in the mortgage market.  Investors don’t like uncertainty – this why the vast majority of them will not buy any mortgage security that is not explicitly backed by the US Government.

To read the whole blog which includes his recommendations of what should be done to get the GSEs out of conservatorship — and you should read it — click here.

That’s a view of the GSEs’ future. What about the FHFA’s now? Ed Pinto, co-founder of the American Enterprise Institute’s International Center on Housing Risk, says the FHFA’s new mandates for Fannie and Freddie regarding its affordable housing policy initiatives is doubling down on failure.

“For more than 50 years, U.S. housing policy has relied on looser and looser mortgage lending standards in a misguided effort to promote broader home ownership and accomplish wealth accumulation, particularly for low-income households,” Pinto says.

And for nearly half that time, Fannie Mae and Freddie Mac have been required to meet low-income housing mandates.

“These misguided efforts have achieved neither goal—the U.S. home ownership rate is no higher today than it was in the early 1960s and low-income households (those in the 20th to 40th percentile of the income distribution) had a median net worth of only $22,400 in 2013, the lowest inflation-adjusted amount in any of the Fed surveys dating back to 1989,” Pinto says.

He says that simple economics explains why FHFA’s affordable housing mandates are doomed to failure. Research as far back as the 1950s has shown the liberalization of credit terms creates demand pressure that easily becomes capitalized into higher prices when undertaken in a seller’s market.

“As Einstein noted, insanity is defined as doing the same thing over and over again and expecting a different result,” he says.  “The affordable housing mandates should be abandoned.”

Pinto believes that housing finance needs to focus on the twin goals of sustainable lending and wealth building.

“The new Wealth Building Home Loan that Stephen Oliner and I developed does exactly that.  It offers a safer and more secure path to homeownership and financial security than the slowly amortizing, government guaranteed, 30-year mortgage,” Pinto says.

Speaking of the GSEs, how do things look on the mortgage bond investment side? Things are changing.

“Our neutral for securitized products and agency MBS since early May has been a little painful: spreads have widened more than we expected. Looking back, our mistake was to think that the Fed would have dialed back the tightening rhetoric by now and more forcefully maintained its inflation goals,” says Chris Flanagan at Bank of America/Merrill Lynch. “At this point, with real rates higher, breakevens lower, and securitized products spreads wider, it is too late to capitulate and move to an underweight across the board: the damage is largely done.

At a minimum, Flanagan says in a client note, we are a lot closer to the point where theFederal Reserve will once again have to assert itself on its inflation goals. When, or if, that happens, a sharp reversal in risk assets seems likely.

“The bad news, though, is that more pain on long positions in risk assets is probably needed before the Fed takes that step, which may not happen for another month,” Flanagan says. “For that reason, we move to a tactical underweight in securitized products credit exposed to new issue supply pressure, including CMBS, non-agency MBS, lower-rated CLOs and esoteric ABS. We stay neutral on agency MBS, on-the-run ABS and AAA CLOs, which we think will be somewhat more resilient.”

What happen when a columnist for Tribune puts 25% down on a house, but has $300 in unpaid parking tickets?

He doesn’t qualify for a mortgage, that’s what.

Stephen Moore moans about his frustration here:

My situation was doubly frustrating because I’m making a 25% down payment on the house. Researchers have examined huge samples of the portfolio of defaulted loans during the 2007-09 housing crisis. Virtually all the defaulted loans had low down payments, with many having less than 5% down, thanks to government “affordable housing” mandates.

The problem here is that Moore is sticking with big banks to make this loan. What would be really interesting is if he went to one of the nonbank lenders proliferating in the mortgaeg space right now. Or how about the Bank of Internet, crushing it with purchase mortgage originations lately.

Moore then closes with the aforementioned Pinto study and posits that his tax dollars go to helping lower income families get homes, but do little to help him out. It’s a fair point, sure, but talk to us when you’ve paid your parking tickets, pal.

On Tuesday we’ll hear from the FHFA — not on mandates and conservatorship, but on June’s home prices. Analysts expect the FHFA house price index to post a third straight solid gain of 0.4%. This report has been showing some strength in contrast to S&P/Case-Shiller data, which have been soft.

Simultaneously on Tuesday, we’ll get the Case-Shiller home prices for June. Another month of disappointment is expected for Case-Shiller where the adjusted monthly gain for the 20-city index is seen at only 0.1% in June. This, however, would be an improvement from the 0.2% decline in May and no change in April.

No banks closed the week ending Aug. 21, according to the FDIC.

Fannie Mae economic outlook for the second half of 2015 less upbeat

2Q GDP drop, China drive headwinds but should slow interest rate growth

The first print of second-quarter economic growth was weaker than expected, and its composition presents a less optimistic outlook for the rest of the year, according toFannie Mae’s Economic & Strategic Research Group.

The federal government’s upward revision to first-quarter growth was essentially offset in the second quarter, due in large part to a drop in nonresidential investment in equipment and structures.

Fannie’s researchers say that these factors, coupled with continued headwinds from a strong dollar and renewed declines in crude oil prices, are expected to continue to pose challenges in the current quarter, although consumer and government spending will likely provide support.

Housing is expected to contribute to 2015’s growth, with year-to-date main housing indicators staying well above year-ago levels.

“While consumer spending growth picked up as we expected in the second quarter of this year, other components disappointed,” said Fannie Mae Chief Economist Doug Duncan. “On balance, our full-year growth outlook remains unchanged from the prior forecast at 2.1%.

“We hold by our previous comments that income growth still needs to strengthen, particularly for younger households, in order to drive significant housing growth, but we are nonetheless seeing some positive improvements in the housing sector,” said Duncan.

Home sales have trended up and inventories are lean, supporting strong home-price appreciation, Duncan says.

“That price growth, driven by laggard supply response, helps build equity for existing owners but is a headwind for first-time buyers,” he says.

But given significant uncertainties from Greece and China — as evidenced by the red ink on Wall Street today — along with continued global monetary easing, and an expected slow pace of monetary tightening by the Fed, Duncan says he anticipates mortgage rates to rise only gradually through next year, which should continue to help support mortgage demand.