Want My House? First, Take My Poodle (May 2012 Roundup)

Howdy Redfinnians!

Strap in for Redfin’s monthly round-up of U.S. real estate news! This month is action-packed, so we’re going Moby-Dick on you guys, with an epic market survey, crammed full of gossip, poodles, and inside baseball.

Prices Up, Inventory Down, Sales Volume OK, Rates at Record Lows

Let’s start with the numbers since the numbers are good. We already have access to broker-only data on how the market moved in April 2012, and the eye-popper is a big drop in the number of houses for sale. For the major cities in the West, the April supply of listings sank below three months:

Redfin’s Data for April 2012 on Single-Family Home Sales in 17 Urban Counties
We measure price changes in terms of median dollars per square foot.

Three months is low. If supply dips below six months, it’s considered a seller’s market.

Bidding Wars Are Back

And now the laws of supply and demand are kicking in. In San Francisco, Seattle, Southern California and Washington DC, the Wall Street Journal reports that bidding wars are back. Redfin clients in DC just won a deal by adopting the seller’s toy poodle, “Buddy.” An agent just wrote me to say that Inland Empire homes move in 50 hours, not 50 days: “I can’t even go out for a sandwich without losing another deal.” The shacks now selling for more than $1 million will make you cry.

Appraisal Roulette

Lenders are understandably nervous about these prices. Lots of deals are dying at the appraisal, with the bank refusing to loan money for a house under contract because the appraiser says it’s overpriced. Our DC listing agents have seen nearly half their deals kyboshed by a lender’s low appraisal. In some markets, agents are removing the lock-box immediately, just to be sure to walk the appraiser through the home in person.

The Bottom? We Hit That Last Year

Eventually, higher prices will show up in the historical data used by appraisers — and in the indexes used by economists too. The Wall Street Journal reports that “nearly six years after home prices started falling, more U.S. housing markets appear to be nearing a new phase: a prolonged bottom.”

According to our own analysis of 17 urban counties, we aren’t “nearing” the bottom: we hit it last year. From April 2011 to April 2012 in the mostly coastal cities we serve, house prices increased 4%. This is the first year-over-year gain we’ve seen in a long time:

No one else has April data yet, but the CoreLogic index only declined .6% in March compared to last year — once you exclude foreclosures and homes sold by underwater owners, CoreLogic prices actually rose .9%.

At the Bottom, Home-Owners Hesitate

So why aren’t more people selling homes? Well it’s hard to replace a million foreclosures per quarter, which is how fast the banks were once putting homes on the block. Most home-owners aren’t willing or even able to sell at the prices set by the banks. Having tanked the market, the banks no longer have so many foreclosures to sell.

The Shadows Recede

The rate of seriously delinquent mortgages is at a three-year low, but — fair warning — still stands at 3.67%, far above the normal delinquency rate of 1%. Foreclosures are down 19% year over year, and the number of foreclosed homes that banks still have to sell has declined over the past year.

Freddie Mac, the government institution that ends up owning lots of foreclosures, reported that its losses from the sale of foreclosed homes declined by 33%, and Fannie Mae is now in such good shape that for the first time since 2008 it’s paying a dividend.

What about the foreclosure tsunami everyone expected after the robo-signing lawsuits settled? It never hit our shores because the settlement forced banks to ease up on underwater home-owners and approve more short sales.

For Rent or For Sale

That leaves only conventional home-owners to hang a yard-sign — and most won’t do it. We talk to lots of would-be sellers who now believe time is on their side, and decide to hold off a year before listing their home.

With the apartment vacancy rate across 82 markets at an eleven-year low and renters coming out of the woodwork, even the folks who do put their house up for sale sometimes also try to find a renter at the same time, to see if someone else will pay the mortgage for a few years while the property hopefully appreciates.

Since the rest of the market is flat-footed, home-builders are the only ones with plenty of product, which is why the biggest builders just reported huge sales increases over last year, up 43%, 26%, 40% and 37%.

So Where’s the Sales Volume?

But home sales overall aren’t up that much, only an anemic 4% in March. Just because it’s a competitive market doesn’t mean it’s a hot market. The places where the market is most competitive — like Washington DC, Phoenix and San Francisco — are where sales volume is actually declining:

When demand is high and inventory is low, it’s sort of like trying to drive a Maserati on a Matchbox track: there’s nowhere really for buyers to go. The rate at which we take our own buyers on tour dropped 2% last week after a month-long plateau; like everyone else, we’re putting record numbers of homes under contract, but wonder if demand will keep building through the summer.

What’s Driving Demand? Interest Rates

Why are so many buyers anxious to buy now even when the pickings are slim? Rates. Over and over again, I’ve worried that, despite government promises, rates won’t last. Wednesday, the Mortgage Bankers Association reported the lowest rates on 30-year loans in the history of its survey:

But there’s another paradox here. Money’s cheap but it’s not easy. We just had a buyer worth $3 million get rejected for a $400,000 loan for lack of a steady paycheck. Right now, about half the country can’t qualify for a loan.

And rules requiring more lending documentation worked out fine in 2009 but the banks are struggling to keep up now that the market’s moving faster. Many sellers want the buyer’s loan approved in a week, and underwriting can’t swing it. In Southern California, our buyers are getting pre-approved for a loan not just by the lender, but by his underwriter too.

OK, that’s it! Comments, questions, just post in the comments section below, where the fur usually flies… And thanks for your attention, and for giving Redfin a try.

Best, Glenn

In the Trenches: Behind the Scenes of America’s Bidding Wars

We’ve been talking a big game about bidding wars this season, telling you that they’re rampant in places like the Bay Area, Seattle and DC, and sharing the tricks of the trade so you know what it takes to win them. But which homes are actually inciting these bidding wars and what’s it like to take part in the battle? Here you’ll find several homes across the country that have recently been the subjects of bidding wars, and we’ll give you the full scoop of what went down.  Click on the listing photos for more details about each home.

Listed by Chris Iverson, Intero Real Estate Services

Small House, Big Bucks in Palo Alto, CA

Beds: 2
Baths: 1
Sq. Ft.: 971
Listed: Mar 27, 2012
Closed: Apr 26, 2012
Days on the Market: 9
Asking Price: $948,000
Final Sales Price: $1,350,000
Sale to List Ratio: 142.4%
# Offers: 12

“My clients came in with a competitive all-cash offer of $970,000, 2.3% above asking,” said Redfin Agent Brad Le, “but we couldn’t compete with the winning all-cash offer 42% above the list price.”

Listed by Jeremy Cunningham, Redfin

Listing Agent Considers Unlisted Phone Number in Springfield, VA

Beds: 3
Baths: 2
Sq. Ft.: 1,559
Listed: Mar 29, 2012
Closed: Apr 30, 2012
Days on the Market: 4
Asking Price: $339,950
Final Sales Price: $381,000
Sale to List Ratio: 112.1%
# Offers: 14

“For the three days after I put this listing on the market, my phone did not stop ringing, and there was a steady line of cars lined up in front of the house,” said Jeremy Cunningham, Redfin Listing Specialist. “The winning offer had essentially no appraisal contingency. We chose it because even though it had VA financing, which requires an appraisal, the buyers agreed to cover any deficit in the event that the appraisal came in low.”

Listed by Simon Kiang, Re/Max

Cash is King, And Time is Money in Sunnyvale, CA

Beds: 4
Baths: 3
Sq. Ft.: 1,933
Listed: Mar 1, 2012
Closed: Mar 21, 2012
Days on the Market: 9
Asking Price: $1,029,888
Final Sales Price: $1,083,000
Sale to List Ratio: 105.2%
# Offers: 6

“My clients made an offer of $1,081,000, almost $60,000 over the asking price, with a 14-day closing, no contingencies, and a 90% down payment,” said Redfin Agent Miawand Bayan. “The seller ended up accepting an all-cash, non-contingent offer with a 7-day closing, with a price only slightly higher than our offer.”

Listed by Loic Pritchett, TTR Sotheby’s International Realty

Burning the Midnight Oil in Washington, DC

Beds: 2
Baths: 2.5
Sq. Ft.: 1,496
Listed: Nov 9, 2011
Closed: Dec 15, 2011
Days on the Market: 7
Asking Price: $649,000
Final Sales Price: $667,000
Sale to List Ratio: 102.8%
# Offers: 6

“My clients, their lender and I were up until 2:30 a.m. negotiating with the sellers and their agent,” said Redfin Agent Stuart Gavan. “We managed to beat out the other offers by reducing our contingency deadlines significantly and offering well above the list price.”

Listed by Erica Johnson, Coldwell Banker

Get Your Offer In First, Then Make Necessary Adjustments in Seattle, WA

Beds: 3
Baths: 2.25
Sq. Ft.: 2,460
Listed: Mar 29, 2012
Closed: Apr 30, 2012
Days on the Market: 1
Asking Price: $587,000
Final Sales Price: $600,000
Sale to List Ratio: 102.2%
# Offers: 4

“Ours was the first offer submitted, and once we found out a second offer had come in, we added an escalation clause,” said Redfin Agent Chad Pluid. “In the end, our offer wasn’t much higher than the competition, but I made sure to respond quickly and honestly to every request the listing agent had, and I think that helped us win out.”

Listed by Nick Chaconas, Redfin

Seller With Cash Stands Out Among the Rest in Washington, DC

Beds: 2
Baths: 2
Sq. Ft.: 1,500
Listed: Feb 3, 2012
Closed: Mar 16, 2012
Days on the Market: 9
Asking Price: $799,900
Final Sales Price: $803,418
Sale to List Ratio: 100.4%
# Offers: 3

“The top two offer contenders were just a few hundred dollars apart and had nearly identical financing,” said Redfin Listing Specialist Nick Chaconas. “We asked both buyers to come back with their best and final offers. The winning bidder quickly turned hers into an all-cash offer above list price with a rent-back period and no contingencies.”

Listed by Irene Bremis, Bremis, James J. Inc.

We Asked What the Seller Wanted, And We Gave It To Him in Somerville, MA

Beds: 5
Baths: 3.5
Sq. Ft.: 3,056
Listed: Mar 20, 2012
Closed: Apr 30, 2012
Days on the Market: 16
Asking Price: $759,900
Final Sales Price: $754,900
Sale to List Ratio: 99.3%
Estimated # Offers: 3

“We won this bidding war not only because my clients’ offer was all cash, but also because we included a Use of Occupancy agreement so that the sellers could close early and move out later,” said Redfin Agent Matt Zborezny. “We ended up negotiating $5,000 off the sales price after the inspection, but the sellers still preferred our all-cash offer so they could use the money toward their own home purchase.”

Life on a Short Street

On the empty sidewalk opposite my house, I was toodling along on my bike recently — and yes, I was also talking on a cell phone with my brother — when I heard a driver yell, “HEY BUDDY, WHY DON’T YOU WATCH WHERE YOU’RE GOING?”

Before even looking up, I responded: “WHY DON’T YOU GO F*** YOURSELF?” Then I saw my neighbor, still so stunned he hadn’t quite erased the jolly, just-joking expression from his face, sitting behind the wheel.

My wife later reminded me that since our street diverts cars one block to the north and two to the south, I didn’t even have to look up to know that the only possible target for my bizarre spasm of aggression was someone I’d see every week for the next decade.

When you think about it, your whole life is like that street, much shorter than you once imagined, almost entirely populated by people you’ll meet over and over again.

But for a long time, I didn’t think about it. Until I was 15, my twin brother and I began every fall term by apologizing to our assembled friends for the way we were the year before, as if the coming year could make everyone forget the fleas we occasionally picked up from our dogs, or our tendency to yank on one another’s headgear in tussles.

It wasn’t until I was a hiring manager who called job applicants’ references that I considered how long people would remember all the ways you act up as an adult. I began to reflect on my greatest hits. It was like hearing your own voice on an answering machine, except instead of taking 30 seconds it seemed to take 30 years.

I now see amazing job candidates, some better qualified to run a business than I am, dismissed with the slightest gesture by some dude we dug up from LinkedIn. “Can you send us a few thoughts about working with Jerry?” we ask in a note. The message back makes the rest a formality: “Can I call you instead?”

When you’re younger, you never wonder what would be said about you in such a phone call. The whole world is a vast frontier, a life without consequences. You rage through it like an instinctive animal. If you think you’re good at something, especially at a software start-up, you let everyone know it.

But then you get to the end of the street and have to double back again.

Do Open Houses Help Homes Sell?

With the National Association of Realtors’ big Nationwide Open House Weekend just around the corner, we thought it would be interesting to dig into Redfin’s stash of real estate data to answer the question: Does holding an open house make a home more likely to sell?

To answer this question, we analyzed over a quarter million listings across eleven different cities around the United States. To see what we found, watch this video, or keep reading below:

In San Francisco, an astonishing 83% of listings held at least one open house. In Phoenix and Las Vegas, less than 5% of listings had an open house. In the remaining cities, 20% – 65% of listings had an open house.

Apparently every weekend is open-house weekend in San Francisco. In fact, holding an open house is so expected there that homes that don’t hold an open house are a full seven percentage points less likely to sell than those that do.

In Las Vegas and Phoenix, where open houses are rare, the exact opposite is true. Homes that don’t hold an open house are 17 percentage points more likely to sell than those that do.

Everywhere else, the picture gets a little more fuzzy. In the other eight markets we examined, there was virtually no difference in the percentage of homes that sold, whether they had an open house or not.

But what happens if we break that data down a little further and take a separate look at homes that held an open house specifically within the first week of listing versus those that held an open house at some later date?

Interestingly, when an open house is held within the first week, a home is 13 percentage points more likely to sell than not having an open house at all, and 26 percentage points more likely to sell than if an open house is held sometime after the first week.

So is there some sort of magic that makes a listing so much more likely to sell if you hold an open house in the first week? Probably not.

What’s more likely is that an open house in the first week is just a sign that your listing agent is working hard to do everything he or she can to sell your home. In contrast, an open house later in the life of a listing is a sign of desperation—a “Hail Mary” attempt to move a listing that simply isn’t priced correctly or doesn’t show well.

So should you hold an open house? If you’re in San Francisco, absolutely. If you’re in Phoenix or Las Vegas, probably not. Everywhere else, it most likely doesn’t really matter whether or not you hold an open house, but if you’ve got a good agent, he or she will probably hold one anyway.

What Neighborhood is Right For You? Ask Redfin!

In life and websites, it’s the small things that count. Redfin’s latest update included a few of the small things that can really make a difference in how people use the site to search for a home to buy or to take the first step toward selling the one they have.

Buyers: We’ll suggest other neighborhoods you might like

When you’re looking for a home, you get a pretty good idea of what neighborhood is the right fit for you. When a lot of buyers save their home searches in two or three specific neighborhoods, we know there are some similarities there that other Redfin users should know about. So we use our data to show you which neighborhoods people with similar search criteria are checking out. For example, people who saved searches in the Columbia Heights neighborhood of Washington DC also saved searches in U Street Center, Petworth and Mount Pleasant. It’s important because it gives buyers the chance to consider some other areas they didn’t think about before, especially when a lack of homes for sale in one neighborhood causes them to look elsewhere.

Sellers: You can edit your home in the Home Price Tool

Redfin gets some of our home information from public records, which are good, but they’re not perfect. Now, if the number of bedrooms, bathrooms or square footage you see for your home in Redfin’s Home Price Tool isn’t accurate, you can fix it. Just click Adjust Details to update the facts and change the comparison properties, and you can save those changes in the estimate the Home Price Tool shows you. However, any changes you make will only be visible to you, and not to other people who use the tool. This was the number one request from people who used our Home Price Tool, and it helps us give you a more accurate price estimate for your home.

All According to Plan: Redfin Launches Austin Service

Hooray! Eighteen months after launching our website and mobile tools for Austin, Redfin has begun offering Austin service from our own Austin-based agents. Now Austinites can buy or sell a home via a Redfin agent paid based on customer satisfaction, and armed with the latest technology for scheduling tours, pricing homes, optimizing listing traffic and collaborating throughout escrow. Working with Redfin, Austinites can also save as much as half the commission charged by traditional agents.

Austin should be a perfect market for us, with plenty of real estate innovators, lots of progressive consumers, lots of weirdness, and plenty of technology to boot. We like Austin’s size too, as Redfin has already thrived in places like Portland and Boston, where the territory is a little easier to cover.

Redfin’s Austin business is led by superstar Cyndy Stewart, who has eight years of local experience. Cyndy is building a team of four folks to serve Austin, covering all of Travis and Williamson counties, as well as the towns of Wimberley and Dripping Springs in Hays County, south of Austin.

In all of these places, we’ll continue to give customers a choice of partner agents, too, especially where we still aren’t local or when we get too busy. For most of Hays County as well as Bastrop County, we’ll rely exclusively on partners.

For us, combining direct and partner service is the only way to build a balanced business, able to serve new customers in any neighborhood at the drop of a hat, without hiring more agents than we can support year-round, through thick and thin. That hasn’t changed.

What is new with Austin is that we waited 18 months to hire our own agents. Waiting is much better for customers than the old Redfin model. For example, when we launched Atlanta the old way in December 2009, we hired one guy to scramble around central Georgia, which is about seven times larger than Austin.

That one Atlanta guy spent his life driving and hoping for more business. Since it took time for Redfin’s traffic to grow, we didn’t have enough customers to justify a larger team. But almost nobody wanted to work with an agent trying to cover all of Atlanta, so customers were hard to come by too. It was a classic chicken-and-egg problem.

The solution we developed for Austin is the chicken then the eggs, launching a website and monitoring the traffic before deciding to hire agents in force. We’ve always been clear about this plan in Austin, yet beginning first as a website that referred customers to partners naturally raised a ruckus among real estate brokers. It’s a privilege to be a broker in Austin, and to participate in the local Multiple Listing Service used to share listing data.

At a conference in Austin just a few months ago, some of Austin’s thought leaders asked me how can we claim to make real estate better if we’re just another online middle-man, coming between the agent and his customer? Everyone in technology worries Redfin  will simply be a service business, and everyone in real estate worries we’ll simply be a web business. The truth is that we go back and forth, not because we can’t make up our mind, but because it’s the best way for us to serve our customers.

We’ll see how it works out in Austin. I bet it’ll be a smash hit. If you’d like to meet the new Redfin agents or our long-standing Austin partners, we’re having everyone from the local real estate scene over for a little party on May 2, with lots of Redfin execs flying into Austin from Seattle, and an engineer or two as well. Welcome Cyndy and howdy Austin!

Never Tell Me the Odds

In a board call last month, I finally told everyone that the commission savings that Redfin offers home sellers and buyers dramatically lowers our profits margins and there is no evidence that it drives more revenue.

We have, I told our investors, given away $100 million because of my irrational belief that

1. Redfin was put on this earth to make real estate better, and that
2. One of the simplest ways to make real estate better is to give consumers more value.

The problem with the refund is that it’s like the tooth fairy: nobody really believes in it until a gift shows up under the pillow. The first act of a rational CEO,  I said, would be to keep the service exactly the same and eliminate the refund entirely.

The line was silent. Then Austin Ligon, the founder and former CEO of CarMax, asked an unexpected question: “Can you name a great consumer brand that was built by someone completely rational?”

I thought about one of my heroes, Ted Turner, who once broke through a stalemate with stunned Japanese businessmen by removing his clothes one article at a time. He publicly described TimeWarner’s decision to shut down CNN’s cash-hemorrhaging foreign offices as a clitorectomy.

I remembered that Nike was so committed to its athletes that it paid for Tonya Harding’s legal defense after her goons clubbed a competing figure-skater in the knee. I thought about Whole Foods’s concupiscent piles of fruit, which are, like someone you fall in love with, so much better than they have to be.

Wouldn’t a more calculating business skimp on the strawberries?

The problem with rational decision-making is that you can’t ask consumers to have an emotional connection to your company if you yourself aren’t guided by emotions. When the only basis of your identity is an elaborate calculation of self-interest, you have no identity at all.

Nobody cared about Han Solo until he rode after Luke into a snow-storm yelling “Never tell me the odds!” And nobody will care about your company if you don’t take a similar stand. This is why Steve Jobs hated the word “brand,” because Apple’s identity was an authentic expression of himself, not a calculated construction of the marketing department.

What this cynical, jaded, spun-out, over-hyped world is still famished for after all these years is a reason to believe. Belief is such a deep need that we find ourselves developing tearful, fierce relationships with silly little products and then feeling like dupes when we find out how cynical their manufacturers can be.

Our need to believe is why investment bankers, who are so good at making money as investors, are almost always terrible at making money as the CEOs of consumer companies. They always do the math.

The problem is, that I do too. It’s easy to be crazy, but not after you know you’re crazy. Why did Redfin go to the trouble of figuring out how many people the refund put off, and how many it drew in, if we were just going to ignore the result?

I don’t know. What’s really hard about this job is knowing when to be crazy and when to be calculating, because you can’t just be one or the other. It’s certainly easier to be calculating. It takes confidence to ignore numbers, to set aside focus groups and advisers, and do what you believe in, because then the only person you’ll have to blame for your craziness is yourself.

But if I met my old self, the one just starting out in a consumer Internet business, the first advice I’d give him would be: have the courage of your convictions.

We do this all the time outside of business, without thinking a thing of it. A lovely friend of mine once broke up with someone because he wasn’t a little crazy. How, she asked, could she be crazy around someone who was always totally, maddeningly normal? Then she said, “That’s crazy right?”

I told her it was the only completely sane thing she’d ever said.

Redfin’s iPhone and iPad App Goes Native

Redfin’s mobile apps team has been firing on all cylinders, burning the proverbial midnight oil, working non-proverbial nights and weekends. The upshot is that we’ve released an upgrade today to our iPad and iPhone app that will give you faster access to even more beautiful home detail pages. It comes down to three words: native URL handling.

Now, anywhere there’s a link to a Redfin web page (in Instant Update emails and search results, for example), you can open them directly in the Redfin app. You’re one tap away from seeing all the information about the home and the huge photos in a format that’s tailored to your iPhone or iPad. You don’t need to copy/paste between applications, or use your mobile browser.

With the new version of the app, you can receive an Instant Update about a new home that just hit the market, tap on the link in the email and in a couple of seconds, you’re seeing details and big, beautiful images of a home that was just listed for sale.

Here’s what that looks like in three steps:

1. You receive the email and tap on the link to the home you want to see.

2. Choose to open the link in the Redfin app.

3. You’re among the first to see this newly listed home, and you’re seeing it in a format that’s made for your mobile device.

But wait…there’s more!

• Sync with AirPlay: When you combine the latest iPad, iPhone, Apple TV and Redfin’s iOS app, AirPlay wirelessly extends your screen to show details and a full-screen slideshow of any home, even while you’re searching the map and looking at details of the home.
• Retina-display previews: If you have one of the latest iPads, you’ll appreciate having preview images that are worthy of that beautiful screen.
• Open house sorting: Turn your iPad or iPhone into a house-hunting machine, and sort open houses by which are happening soonest.
• Improved stability: Crashes stink, so we hunted down the sources and fixed as many as we could find.

Customers have been asking for some of these improvements since we launched the first iPhone app two years ago, and we really wanted to take the time to get the experience right. We hope you’ll agree they were worth the wait.

What should the next version of our mobile apps include that they don’t already? Leave us a comment and we’ll make sure our mobile team adds it to their to-do list.

You’re Invited! Atlassian Founder Speaks at Redfin on Starting a Company

Big news! Scott Farquhar, CEO of Atlassian, is coming by Redfin’s San Francisco office next Thursday, April 12, as the latest speaker in our series of brown-bag talks about how to start your own business.

Atlassian is the maker of JIRA and Confluence, software for teams building products. Scott and I got to know each other years ago, just before Atlassian started getting noticed as the most exciting company in enterprise software, with jaw-dropping performance:

• 47% compound annual growth rate for the last five years
• 40 straight quarters of profitability
• $100 million in bookings in calendar-year 2011

Scott’s story is unusual because he has had the guts to create a bizarre & wonderful culture, the endurance to keep at it for ten years almost entirely boot-strapped, as well as the courage to drive revenue through better products rather than by hiring salespeople — Atlassiann still hasn’t hired a single one.

What’s interesting to me about Atlassian is that Scott and his partner Mike were able to build one of the world’s best software companies from Australia, which is like trying to put together an Olympic ice-hockey team from Jamaica. There is plenty of amazing talent in Oz, but many are wrestling crocodiles or working for a bank, not joining startups.

On Thursday at 4:30, Scott is going to sit down with Redfin’s San Francisco engineering team for an informal chat. The public is invited, but please leave a comment on this post at least a day in advance to let us know you’re coming:

• Date: Thursday, April 12, 2012
• Time: 4:30 p.m. Pacific Standard Time
• Location: 88 Kearny Street, 13th Floor, San Francisco

Dial-in number: 866-625-9936
Participant code: 7809241#

We told Scott not to prepare any remarks, but the topics we’re likely to cover include:

• Where Scott and his partner Mike got the idea for Atlassian
• What they’ve learned along the way about starting and running a business
• How customers found out about the company, in the early days and even now
• What Scott likes best about Atlassian’s culture of innovation and how it has changed over time
• How the company has extended that sense of community out to its customers
• How Atlassian works together across continents and time-zones
• Why the company went so long without investor capital and what Atlassian gained or lost when it finally did raise money
• Any and all questions from the audience
• The difference between a wallaby and a ‘roo.

It’ll be a lot of fun! Like every Australian I’ve ever known, Scott is pithy, understated and kind. He is also unusually thoughtful about the whole process of coding software and building a business, so hopefully you can come out to hear what he has to say!

Strange Days: Real Estate Enters the Twilight Zone (April 2012 Roundup)

Howdy Redfinnians!

Here’s our monthly round-up of everything that moved in the U.S. real estate market!

But first the Redfin news… Do you remember in Gladiator, when Russell Crowe says “on my signal, unleash hell?” That’s what Redfin did last month, launching:

• A Home-Pricing Tool: see the pictures and prices of very recent comparable sales — data once limited to real estate agents — to figure out what your place is really worth.
• Instant Updates: get email about new listings and price drops within 15 – 30 minutes.
• Open Book: check out an expanded directory of top-notch, customer-reviewed lenders and inspectors, now in Seattle, Chicago, Boston, Southern California, as well as DC and San Francisco.
• New Markets: tell the world about our new Philadelphia business, or that we finally hired Redfin agents to complement our Austin website.

And we’ve got all sorts of performance metrics, too. Redfin compared its 2011 performance to the market average and found that we sold homes 15 days faster, and for $8,700 more money. And we just published numbers on Redfin Agent pay, which is well above the 85th percentile for full-time agents in almost every market we serve. We also shot a home-movie of Redfin customers and agents.

Now Entering the Twilight Zone

But what’s going on in the market? Prices went down, but we believe they’re now going up in lots of places. Sales volume slipped, but we think that’s because there’s nothing to buy. Every 300,000 years, the earth’s magnetic field flips, and lots of weird stuff happens then too. You want examples of weirdness in the housing market? You got it:

• Multiple offers: 74% of Redfin’s March offers in Orange County, California faced competition. 51% in DC. Our clients are sending baby photos to sellers. We just published a six-step guide to winning a deal. Nationwide, Redfin’s offers increased 50% but its closings only increased 17%, so the competition has made us work a lot harder. Deals are getting stuck at the appraisal, because the price got bid up above the comparable properties used by the appraiser when trying to figure out if the home is worth loaning money for.
• A tale of two markets: prices are mostly softer for condos and townhomes, and homes in the boonies and at the high-end. But entry-level and mid-range houses are getting devoured like cupcakes at a five-year-old’s birthday party. Builders are shifting toward small-lot, in-city developments with vintage materials — and big waiting lists.
• Strange seasonality: one reason we saw lots of action early in the year was because this winter was so much warmer than last year’s. This made for better year-over-year comparisons: “It’s a dead-cat bounce!” exclaimed real estate freakazoid Nick Timiraos when I saw him Thursday. It also might mean demand came earlier in the year, like the cherry blossoms already lining the gutters, rather than actually increasing. Meanwhile, the number of homes for sale is down 27% from this time last year. At this rate, the summer-shopping season will be like a Soviet supermarket.
• Canaries are coming back to the coal mine: the annoyingly smart people who sold homes in 2007 and rented for five years are now buying again. When we surveyed 1,000+ Redfin customers buying a home this year, a whopping 14% were people who had owned, rented and were now buying again. First-time investors are coming out of the woodwork, with Redfin’s classes on how to evaluate income-generating properties filling up fast. We’re recruiting Tom Vu and his posse to speak.

Case-Shiller Down for the 5th Straight Month. What Me Worry?

So that’s how it feels now. But what about the numbers? Well, nationally, prices are down 3.8%, and California has fallen more than 5%:

Case-Shiller Index for January 2012, Not Seasonally Adjusted

Why is this old news? As Bill McBride noted last week in Calculated Risk, “some portion of the Case-Shiller index will be for contract prices six or even seven months ago… the key point is that the Case-Shiller index will not catch the inflection point for house prices until well after the event happens.”

Is the Inflection Point Here?

So the question is: has an inflection point arrived? But as we already predicted, the bottom is here. You can judge for yourself! Here’s what happening across the real estate market:

• Sales momentum stalled: Pending sales slipped .5% from January to February, when analysts expected a 1.0% increase. Compared to February 2011, sales increased 9.2%. More recently, last week’s home-purchase index increased 3.3% from the week prior, even as re-financings fell due to rising interest rates.
• The big builders are bullish: Toll Brothers reported its best spring in five years. Lennar sales increased 33%, and Hovanian sales increased 30%. But KB’s orders fell 8%.
• Shadow inventory falling: even as properties spend more time in the foreclosure pipeline, the number in the pipe declined because of fewer defaults at the beginning of the process and more sales at the end. Investors are gobbling up foreclosures by the thousands. Seriously delinquent mortgages dropped from 4.4% in February 2011 to 3.8% in February 2012. The historical norm is 1%, so we’re not out of the woods yet.
• Three new bottom calls: JPMorgan Chase’s CEO said “I believe we’re very close to the inflection point. People look at prices that are still coming down but all the other signs are flashing green.” A projection based on opinions from 38 economists predicted new-house-construction projects will nearly double from 2011 to 2014. Bank of America/Merrill Lynch revised its projection for 2012 home prices from a 3.5% drop to a .5% gain.

What About Interest Rates? Uh-Oh…

The monster under the bed is, as we said last month, interest rates. Pressure on rates has been building lately, despite the government’s insistence it’ll be able to keep rates low through 2014. The Wall Street Journal reported Monday that “investors have ramped up bets that a rise in the Fed’s key short-term interest rate, the federal funds rate, could come sooner.” For now rates are still just under 4%:

I like the article’s conclusion: “No one really knows what will happen when the Fed takes the punchbowl away, after so many years of rock-bottom rates.”

It’s a mixed metaphor but isn’t that perfect for these topsy-turvy times? Strap on your miner’s helmet. Grab your punchbowl plastic cup, and a bowl of popcorn too. This summer is going to be a wild ride. Questions, comments, fire away in the comments section below. And thanks as always for using Redfin!

Best, Glenn

Glenn Kelman | CEO, Redfin
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