Month: September 2015

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.