Others will say that it’s another Kelman case for building Death-Star-sized startups rather than operating on a more hand-crafted scale. This is a bit truer, though I’d like to think that a company can get big without selling its soul. We just believe that the funnest thing in the world is to take something small and make it big. Growing is better than not growing.
And of course being capital efficient is better than dilution, so we’re not trying to persuade anyone to raise money. But even if you don’t take investors’ money — especially if you don’t — it’s useful to take their mindset, at least for the five minutes it takes to read what we learned while raising money from Greylock.
Because no matter how hard I try, I get into the weeds at Redfin and forget to think strategically about what we’re becoming. The process of raising money is an antidote to that tendency. While I sometimes resented having to spend a few weeks on Sand Hill Road explaining our story, by the end of it I had decided it was a good thing to be a little scared while talking to really smart people about basic strategic questions. You have to think everything through all over again, confirm some decisions, reconsider others, and come out ready to execute like a wild animal.
Hopefully we simulated that experience in a way that is useful to you. While writing the essay, I began to reflect on how my attitude had changed about VCs.
I used to think of them as the Wizard of Oz. As a 25-year-old raising money for Plumtree in the ’90’s, I often found myself hyper-ventilating in a rented Ford Festiva parked off Sand Hill Road, saying to myself THIS IS IT, THIS IS THE BIG ONE. Back then, I looked to Greylock or Sequoia as more than just a source of money or good advice, but as the only remaining dispensary of prestige or meaning — a Harvard that could reconsider my application, an Oracle capable of anointing our little startup as The One.
You need someone to look up to. When your first job out of school is at a startup, you stop believing in the 68th-floor executive suite, the older gentleman in the bespoke suit, the whole adult world that seemed so magnificently ordered just a few years before. You’re surrounded by dingbats just like yourself. There is no Star Chamber, only a series of poorly carpeted rooms that you will progress through for the rest of your professional life. By 24, the great chain of being had become so discombobulated for me that I was no longer even sure Coke was better than Safeway Select.
Since then I’ve become more of a humanist in my career, taking comfort in the idea that we can each decide what is meaningful or prestigious for ourselves, that there is no one to believe in or beseech except other well-meaning folks like ourselves.
But I’m still a little puzzled by VCs, who now sometimes seem more like the precogs in “Minority Report,” confined for most of their lives to a sensual-deprivation chamber, lightened at one end by the flickering of an endless PowerPoint preso: formidably gifted, carefully consulted, unsplattered by the muck of Redfin’s everyday reality, and yes, still tinged with my own feelings of reverence. It wouldn’t be a job I’d ever like — I have a bet with Madrona’s Greg Gottesman that I’ll never become a venture capitalist, he doesn’t know much emotion I need to put into and take out of a job — but even after all the ways I’ve become disillusioned about what not to believe in, it’s a perspective I value a lot.
The Ravens just beat the Browns 16 – 0, but those of you without a Tivo may have noticed something else about the Monday Night Football telecast: a new Apple iPhone ad featuring Redfin’s very own iPhone app. On seeing it, Redfin’s Scott Nagel, hardly one given to over-the-top displays of emotion, got high fives all around from his football-crazed children.
We knew the ad was coming, but Sasha put the fear of Apple in us and for once we kept a secret. To Conan Reidy and all the other people who say I can’t keep clam because of a few minor middle-school indiscretions, this is but one of many examples of really, really juicy stuff I’ve kept to myself…
Many thanks to the folks at Apple for hooking us up, and to Redfin’s iPhone team for building such a sweet app.
Over the same fortnight, TechCrunch has written about only one other company so often — exactly as often in fact — and that is Google, with hundreds of products and $180 billion in market capitalization, which has in the past 15 days settled its dispute with book publishers, announced a $750M acquisition with federal anti-trust implications, and launched a major new rival to the iPhone.
But don’t blame TechCrunch; its Twitter articles get more traffic than posts about almost any other subject. And besides, while the distribution of overall media coverage is different from TechCrunch’s distribution, it isn’tthatdifferent. It’s the nature of news organizations to cover new companies more than old companies, and thank goodness for Redfin and all the other new companies in the world that this is so. It’s also undeniable that Twitter’s popularity among the media is in part driven by Twitter’s usefulness to the media, especially now that every journalist feels compelled to build her own personal brand.
But even if Twitter’s importance among journalists is natural and even good, entrepreneurs may not want to accord it the same importance.
It’s natural for us to focus on the bright shiny company, too. We certainly have here at Redfin, discussing all sorts of features to encourage Redfin users to share data via our site using Twitter. But we also survey our users two or three times a year, and here’s what we found last week when we asked 450 consumers what social networks they use: that they prefer Facebook by a margin of nearly 5 to 1.
And meanwhile, we wondered: could our users’ preference for Facebook be because our demographic is different? Well actually if any group of consumers could skew toward Twitter, it would be Redfin’s user-base, big-time: according to the same survey, our users are mostly male, about a third high-tech, and young but not too young (none of the teenagers who prefer Facebook are likely to be looking for a house). It’s hard to imagine a business with a meaningful cross-section of consumers that would have a different result.
So journalists and bloggers should keep talking about Twitter. But entrepreneurs shouldn’t always listen, at least not yet.
Big news! We just announceda $10-million round of financing led by Greylock Partners’ James Slavet and his colleague David Thacker. Redfin’s group of existing investors — Madrona Venture Group, Vulcan Capital, DFJ, The Hillman Company — also pitched in on the round.
We couldn’t be happier about the team behind us. Like all the Greylock partners, James has deep operating experience, having run the gamut from founding a tiny Internet company to leading a multi-hundred-million-dollar business. And even though Greylock has every right to a bad-ass swagger, with probably more publicly traded companies under its belt than any other venture investor, the Greylock people you meet are somehow humble and funny and nerdy while still being terrifyingly impressive. Their first diligence request was a spreadsheet of in-depth Settlers of Catan statistics that we’d prepared for Greylock’s newest partner, the great Reid Hoffman.
We’re a good fit in ways beyond our affinity for Settlers. Time and again, Greylock has invested in cult businesses built with little or no marketing spending that have gone on to become household names — Facebook, Pandora, LinkedIn and, my favorite, ZipCar. Like our other investors, Greylock has the confidence to mentor the talented up-and-comers at Redfin into bigshots, to let Redfin grow as big as it can rather than selling at the first opportunity, to think different and to think big. And it has high expectations, not just that we can continue to be a nice little business, but that we can become a company that doubles and doubles again.
Already, we’ve got plenty of momentum. Here are some of the past year’s highlights that we included in our funding pitch:
Revenue exceeded a $20 million yearly run-rate and Redfin generated its first profits
Redfin shipped the highest-rated iPhone application for real estate
Site visits increased more than 200%
Total dollar-value of Redfin transactions since inception exceeded $2 billion
Redfin customer satisfaction remained at 97%
Now the challenge is to keep performing, taking on new risks rather than just consolidating existing gains. For a while now, we’ve been too scared to take many risks. We’ve been profitable since June, but didn’t have much money in the bank, and,as we explained this morning to John Cook, couldn’t think far beyond the month right in front us.
We’ll keep running the business out of the cash register — we worked too hard to get to profits to abandon that discipline now — but the new capital gives us a margin for error when making a few big bets: beyond real estate search, we still have to put the whole touring, offer and escrow process online, and we’ve got to build the systems and processes that allow us to deliver the same amazing service to 10,000 or 100,000 customers every month, not just 100 or 1,000.
For now, we just wanted to thank all the folks who helped us put the round together: Paul Goodrich, Steve Hall, Marc Singer, Emily Melton and Josh Stein on our board, as well as our excellent attorneys at Fenwick & West, Alan Smith and Matthew Forkner, and finally the folks at Redfin who crunched the numbers and made the pitch: Adam Wiener, Chris Roske, Sasha Aickin, Matt Goyer, Scott Nagel, Michael Young, Angela Cough, Bryan Selner and many others. Thanks to everyone for all your help, and to Greylock for leading the round.
We’re honored by your support, and we”ll work hard to make the most of the opportunity.
Redfin.com’s performance and stability problems, which began with Thursday morning’s upgrade and continued until this evening, seem to be over. All the photos and details of recently sold homes that became available with this upgrade had caused our database to fail under high user load . We resolved the problem by tuning the database and deploying additional databases, and now the website is once again fast and seems stable.
Redfin’s site is still sending out overdue listing alerts and tardily loading photos of listings but we hope that all those jobs run their course by Saturday morning. Until then, and probably for days to come, we will be carefully monitoring the whole Redfin system.
Next week, we may discuss here on this blog what went wrong and how we’re going to try to avoid the same problems in the future. For now, many thanks to all the engineers who worked ’round the clock since early Thursday to get us back online, and especially to the customers who patiently waited for that to happen. Thank you, thank you, thank you.
If you tried to check out the new Redfin yesterday without much success, please give it another shot now.
Unfortunately, our website was offline from about 6:40 AM PST until 9 AM PST and then intermittently until 2:20 PM PST because of the increase in the amount of data coupled with the load from the excitement of a new release.
We are deeply sorry about the inconvenience this outage has caused for the visitors of our website and our customers. We are also sorry for not communicating more clearly about the status of the outage and how it was impacting you.
While the website is now back up we are still working to resolve the root causes of the issue. Once we know what all went wrong we’ll update you by posting here on the blog.
Update: Friday, 9:00 AM PST As a result of yesterday’s outage we aren’t retrieving photos for new listings. We hope to start pulling listing photos later today. We’ll update this post when we do.
Update: Friday, 12:00 PM PST You may have noticed that the site, a few times today, has been unresponsive. We’re aware of the brownouts and are actively monitoring the situation and trying as quick as we can to get back to situation normal.
Update: Friday, 8:51 PM PST Good news! The site should be back to its old self and is running on full power, fast and stable. By tomorrow morning, we should have photos for all the new listings.
Update: Monday, November 16th Our CTO, Mike, has posted about lessons learned, One Week After The Outage.
First of all, a warning. If you’re browsing this post in a car, or while you’re listening to someone blather away on the phone, pull over, mute the line, buckle up, REMAIN CALM. We’ve got some good stuff to tell you about. Really good stuff.
Sometime in the wee hours of the night last night, Redfin upgraded our website to show photos, prices, and all the gory details on every property sold for the past two years, in almost every area we serve. So far, we’ve loaded up 9 million photos of 1.4 million recently sold properties, quadrupling the amount of real estate information we store.
And since we turned on our data slurpers full blast for new past-sales records, the data will keep piling up: within 15 minutes of an agent’s taking a property off the market, you can expect to see the pictures and the price on Redfin’s site. This investment in near-real-time sales history continues Redfin’s multi-year journey into Freakish Depth, which is our strategy for taking property data to ridiculous extremes of accuracy, freshness and depth. We meet our customers exclusively via our website, and if the site isn’t trustworthy, why would anyone expect the service to be?
Yes, OK, You Do Have to Register… The only hitch is that outside of the Seattle and Washington DC areas you need to register before going deep. OK, so requiring registration is not normally our style — we’re not looking to spam you or call you out of the blue — but there’s a reason for it. The Multiple Listing Services that share this data with us first want to make sure we’re not posting it everywhere willy-nilly, limiting it instead to the folks who are serious.
But It’s Worth It Once you’re registered, you can do all sorts of fun stuff, like checking out all the $1M+ homes that sold last week in Los Angeles, San Francisco or Boston. Or do your own search on recent past sales: visit our search page andlook underneath the Search Listings button for a More Options link.
Clicking that link opens a big search dialog where the options for searching past-sales records appear bottom left:
After you run a query on past sales, the map fills up with pretty baby-blue icons representing homes that recently sold. Just as with listings, pictures and basic details pop up to the right:
If you click through the thumbnail picture for more details, you get a staggering amount of detail on the property that just sold, usually all the information the seller’s agent provided when listing the house in the first place — which we then pair with parcel outlines, tax record, automated appraisals and all sorts of other goodies too numerous to include in the screenshot.
Before the upgrade, we only showed public records of recent sales: the most basic facts about the property’s bedrooms and bathrooms, the price, no pictures, all after waiting two to twelve weeks for the records first to get recorded by the county, then aggregated by a data-collection service and then syndicated out to sites like ours. What we have up today is a big improvement.
The Killer Application
But now that we’ve published a near-real-time feed of pictures and details of virtually every recent sale, there’s still the question of what you as a consumer can do with that data. And the first, most obvious application is a Comparative Market Analysis, or CMA. If you’re trying to price a property, you can usually establish a reasonable range by putting together a list of similar properties that sold in the area over the past month or two — use the photos to exclude all the dumps, unless you’re buying or selling a dump — with the same square footage plus or minus 10% — and usually the same number of bedrooms and bathrooms plus or minus one. Then take what each of the comparable properties cost per square foot and multiply it by the square footage of the property in question, sorting the resulting prices from high to low. This is the starting point for any real estate professional to think about a property’s price range.
Now you can take this on yourself, using the same data that agents have, even if later on you still want an agent’s help corroborating which comparables you picked and analyzing the results — Redfin agents put together CMAs every day, and don’t expect to stop any time soon. But even if you get a little help, it’s nice to be able to see for yourself what the agent can see, and to go as far as you like on your own.
The Other Big Feature… Trackbacks The other big new feature in this release is blog trackbacks. Any time a blogger links to a listing on our site, we now link back to the blogger, so consumers can easily see what everybody on the Internet is saying about a house. If a blogger reviews a condo in a new development, any link to that listing on Redfin will generate a reciprocal link from the listing on Redfin back to the reviewer’s site, along with a snippet of text from the review.
Tying together everything that’s being said about a property can, we hope, socialize the lonely, scary process of buying a home, and it will almost certainly boost the quality and quantity of online discussion. The same trackback technology that almost overnight created the blogosphere’s ecosystem of criss-crossing links can now nurture the growing number of real estate bloggers — many of them agents — who use Redfin and other brokerage sites as a reference for their real estate discussions.
For the industry, both of these features are a little bit daring. Real estate agents don’t like the idea of some crazy blogger trashing their listings, and most everywhere they have preserved the option for sellers to opt out of any type of blog integration or online commentary. We think opting out is a very bad move, just because social media drives traffic like nothing else to a listing — but we can’t argue with giving the sellers a choice.
Really, it’s impressive that we got this data at all. A long time ago and with plenty of the evidence to the contrary, we made a bet that the industry would become more open, that we could challenge the status quo as a broker without being squashed, that complying with local MLS rules would be worth the extra hassle so we could get information directly from other brokers. This turned out to be a very lucky bet.
You can argue that this version of Redfin would never have happened without last year’s Department of Justice settlement with the National Association of Realtors, which gave online brokers the right to share any data with our customers that an agent can divulge to a customer face to face. Both trackbacks and the newly available past-sales data would not have seen the light of day if not for this settlement. But the hole in that argument is that MLSs not even governed by the settlement nonetheless have agreed to many of the same terms.
We still have plenty of gripes, but the industry is changing for the better. So in addition to the thanks we owe to all the Redfin folks who worked on this gargantuan effort — hats off to the whole team — we also wanted to thank the other brokers for agreeing to a more open data-sharing policy. We’re excited to see what consumers think of the new policy and the new site.
Since launching our iPhone app two months ago we’ve been glued to the App Store compulsively checking our app’s rating and reading the reviews, and for good reason, our iPhone app is 10% of site traffic on weekends. Overwhelmingly the feedback has been positive; folks love the app. However, there were some folks bummed out that the app didn’t have all the search features that our website does.
Today we have a new version available that lets you search by address and MLS ID and adds the most requested search filters:
Year built
Lot size
Days on Redfin
Short sales
Under contract
We also made the app much faster. Our super star developer Navtej came up with a new way to group the house icons on the map, improving the maps load time performance seven fold.
Here I am, back in Washington DC, past midnight, in a hotel room with my favorite rubber giraffe and a snoring baby. I just got into bed but can’t sleep because Congress looks like it might extend the first-time home-buyer tax credit. The new Chris Dodd-sponsored deal has bipartisan support and a deal is at hand.
And it’s a big mistake.
The National Association of Realtors, The National Association of Home-Builders and The National Association of Mortgage Brokers have poured everything they’ve got into the extension of this credit, sometimes arguing that it’s good for consumers, at other times cravenly acknowledging that it’s also a sop to a beleaguered industry. As a broker ourselves, and a consumer advocate, Redfin has every reason to agree with the NAR’s position.
But the truth is that the credit won’t make much difference for consumers. It solves the wrong problem. It spends money we don’t have. And even if the credit is extended, enough home-buyers rallied for the original November 30 deadline that there will still be a December lull in demand.
It Won’t Make Much Difference
So first things first. The first-time home-buyer tax credit hasn’t been a major factor in the recovery. The Brookings Institute estimates that the credit increased demand among first-timers by only 15%, so that each incremental home sale has actually cost the government $43,000 or more. Our own experience suggest that this number is, if anything, low, as demand among first-timers has increased at Redfin only 11%. At least some of that increase is because, in the current market, 2nd-time home-buyers can’t afford to sell their first home.
The National Association of Realtors’ arguments in favor of the credit don’t make sense. When August sales volume slipped ever so slightly, the NAR was quick to blame the dip not on the seasonal tendency for many would-be home-buyers to hit the beach, but on the expiration of a credit that was still four months off. Even as the NAR warned that first-time home-buyers had begun to abandon the market, the same press release noted the percentage of first-time home-buyers had remained unchanged from July to August. A month later, when it was at least remotely conceivable that a September deal might not close before the November 30 deadline, the NAR reported that sales volume increased; that press release argued all the same for the extension of the credit.
It Solves the Wrong Problem And the problem isn’t that there aren’t enough buyers. Between 1994 and 2005, the percentage of Americans who owned homes rose by almost 10%. Even after two years of record rates of foreclosure, the U.S. home-ownership rate is at 67.4%, whereas it was at 64% before the bubble. The government can stave off a further decline by extending this one-time credit, but with unemployment above 10%, it may just encourage people to buy homes they later can’t afford.
This isn’t to say that Redfin begrudges the folks who have been able to take advantage of the credit so far; far from it. And we’re certainly not against home-ownership. Helping people get a home is, for us, very fulfilling; it is more fulfilling for me than anything I’ve ever done professionally.
But that doesn’t mean we tell every Tom, Dick and Harry to buy a home. We have a fiduciary obligation to advocate fiscal responsibility, even — as we emphasize to every new hire — to dissuade home-buyers from a rash purchase. In this era of responsibility that was supposed to have been inaugurated after the credit crunch, it seems inarguable that people shouldn’t buy a home unless they can afford it on their own.
The Problem is Inventory, Not Demand
And we worry that these one-time government incentives have already lost sight of that principle. The major destabilizing force in real estate today isn’t a dearth of buyers. Credit or no credit, buyers would still be out in force, primarily because prices and interest rates are relatively low. The problem is foreclosures, which don’t just affect the temporary gyrations of home prices but fundamentally lower the value of the underlying asset, American real estate.
Trust us on this one. Redfin tours a hundred foreclosed homes a day and most are absolute dumps. Ask any home-buyer what she worries about, and it isn’t that nobody will want to buy a house. It’s that delinquent loans are still piling up three times faster than banks can handle them. Nobody wants to buy a house only to find that foreclosures at fire-sale prices have ripped the bottom out of the local market again. The #1 way to stabilize the housing market is to limit the number of foreclosures being sold, not to increase the number of people who buy them.
A First-Time Home-Buyer Credit and The Time Machine
To that end, we have an alternate proposal. We still want to help first-timers, particularly those who don’t have a lot of money. But why not offer a first-time home-buyer tax credit to the real victims of the bubble, first-time buyers from 2006? The credit could be limited to help re-finance the predatory loans which overwhelmingly occurred in a one-year span between 2005 and 2006.
“What about moral hazard?” the suddenly Scroogey capitalists will argue. We say that these home-buyers have been through enough hazard. We treat the buyers of 2006 as if they deserve whatever misery the bank can inflict on them, yet we eagerly court a new generation with a fresh set of one-time incentives that will yield a new set of fees.
It seems particularly heartless that we in the real estate industry would focus all of our attention on new home-buyers, when the folks now facing foreclosure were our customers only a few years ago. Instead of making the system more efficient or compassionate, we just try to feed the bloated beast by keeping the number of transactions in the U.S. too high.
We Can’t Afford It
And we can’t afford to do this. The primary factor driving affordability is not an $8,000 one-time credit, but low interest rates. At some point, government spending drives interest rates up. If rates increase from 5.3% to 6.3%, the real cost of a typical home will be almost $100,000 higher, credit or no credit. More important, we will have closed the one exit that folks facing foreclosure have been able to avail themselves of, re-financing.
It’s scary to think what the world will look like if that happens: foreclosures will get much worse, and inventory will climb even as demand drops. In such a scenario, the market could suffer a second steep drop, and the government, having exhausted its credit, will have fewer levers to pull it back.
But for now it’s easier simply to feed the beast. Just this once, let’s not do it.
We sent our monthly market update out to 126,104 folks this afternoon, a 6% increase from last month. If you’d like to get the newsletter by email, just sign up.
Regards,
Glenn
Howdy Redfinnians!
The data’s in for October, so it’s time for our high-speed, comprehensive summary of real estate trends. And the news is very similar to last month: prices are up for the third straight month, competition is increasing and sales volume resumed its march upwards. On the other hand, foreclosure data is mixed but still scary while mortgage rates are beginning to rise.
And Redfin is doing well! We expect record revenues in October — normally our best month is July — and more profits. November also looks good, but after that we expect our holiday sales to be slow, as always: the number of new Redfin clients signing up to see homes has been declining all month.
To juice up our winter numbers, we’ve got a big new release of the website coming next Tuesday, probably our most important of the year, so come back next week to see what we have wrought. For now, let’s dive into the data.
Prices Increase for Third Straight Month
The Case-Shiller data came out this morning for August, and it shows sizable price increases across all the markets we serve except Seattle, which is still toodling along in the doldrums. Most markets have increased for three or even four months. The Shamu of month-over-month price increases was in the Bay Area, at 2.6%.
City
MoM Change
YoY Change
Date of Max
Change from Max
Prices Last at This Level in…
Consec. Mos. of Increase
Los Angeles
1.3%
-12.0%
Apr-06
-39.7%
Apr-03
3
San Diego
1.5%
-8.9%
Mar-06
-39.9%
Jan-02
3
Bay Area
2.6%
-12.6%
Feb-06
-40.2%
Aug-04
4
DC
1.2%
-7.9%
Mar-06
-29.8%
Feb-02
4
Chicago
1.2%
-12.7%
Feb-07
-23.3%
Mar-05
4
Boston
1.0%
-4.2%
Nov-05
-14.9%
Nov-04
4
New York
0.3%
-9.6%
May-06
-19.3%
Jan-03
4
Seattle
-0.2%
-14.7%
Jul-07
-22.5%
Aug-05
0
20-City
1.0%
-11.4%
May-06
-29.9%
Aug-03
3
As usual, we present Case-Shiller’s seasonally adjusted numbers to correct for the summer gains and winter losses that happen every year. Here’s a graph of how prices have gone up and down, starting in January 2000 when Standard & Poor’s baselines the Case-Shiller index for all markets at 100:
Competing Offers on the Rise
In our own little world, Redfin has started tracking the percentage of offers we handle every month that compete with other offers. This data set acts as a leading indicator of whether prices will go up or down on properties that won’t close for another 45 days. When more than one buyer is bidding on a property it usually sells for more than the asking price; when there’s only one buyer, it usually sells for less than the asking price. Sixty-one percent of the offers we worked on in September ended up facing competition, up from 52% in August.
Market
Jul-09
Aug-09
Sep-09
Southern California
78%
83%
73%
Bay Area
76%
78%
77%
DC
56%
43%
63%
Chicago
9%
6%
27%
Boston
52%
40%
48%
New York
75%
80%
64%
Seattle
27%
25%
42%
Grand Total
56%
52%
61%
The Bay Area was the most competitive market, particularly for homes under $500,000, where 92% of the offers we handled in September faced competition from at least one other offer. In Southern California, the numbers are very similar. The size of the sample for each market averages around 75 offers.
But Research Firm Says Bottom is Still Five Months Off
And the volume of home sales continues to increase. After crying a river last month over the depressing effects of waning government subsidies, the National Association of Realtors now reports that existing U.S. homes sales in September increased 9.4% year over year, with inventory falling 7.5%. The strongest growth in sales volume was in the West at 13%, and the weakest was in the Northeast at 4.4%. In just one month, September sales volume in California increased 1.0%, with the median price increasing 0.8%. Meanwhile new housing starts increased nationwide in September just a bit, at 0.5%, but building permits fell 1.2%.
Foreclosure Data Mixed, But Still Scary
What has been preventing any type of serious price recovery has been the seemingly bottomless pit of foreclosures. And the problem may be getting worse. Nationwide, foreclosure filings increased 5% in July – September as compared to April – June. But the most recent data is a little better, showing a 4% decrease in September from the month prior. Bank re-possessions increased 21% in the third quarter as compared to the second. It seems like the banks are getting more aggressive about clearing their books of bad loans, either by re-negotiating the loans or foreclosing.
In California, mortgage default notices declined for the second straight quarter, by 10.3%. The median month that a California loan in default first originated has only moved forward one month, from June 2006 to July 2006 — the worst loans came in mid 2006 — so the pig is moving pretty slowly through the python. There’s still a lot of bad inventory out there, and it seems like traditional home-owners are scared to compete with the banks. Distressed homes accounted for 29% of September transactions.
Mortgage Rates Fairly Low, Probably Headed Up a Bit
But enough about prices. A bottoming of prices — whether temporary or long-term — only accounts for part of the increase in demand. The other big factor is interest rates. After drifting down for six weeks, interest rates ticked up last week, with the average for a 30-year fixed-rate loan reaching 5.34%, still lower than the 5.36% we reported last month. For folks who don’t plan on staying more than five years in a property, adjustable rate mortgages were very low (4.69% average rate); but watch out for those — we still worry you could get trapped in a loan when rates take off.
55% of Bankrate’s panel of mortgage experts think that rates will go up, mostly because the federal government is losing its appetite for the mortgage-backed securities that banks use to unload risk.
That’s it! Another month is in the books. Any questions, just drop me a line. We love to hear from you, and we’re always thankful for your support.
Redfin's corporate blog is the place to read what Redfin employees have to say about Redfin, the real estate industry and other topics such as life at a startup or usability and web design.
