Events are defined as those occurrences that transpired during the calendar year 2007 that made headlines and captured the attention of the real estate industry. The Top 10 events are every year selected and published in the Swanepoel TRENDS Report and are based upon their potential future impact on the industry rather than only their 2007 impact.
10. Closing Down of Foxtons
Born in the Web 1.0 era, lasting through the crash and surviving with a name change from Your Home Direct (YHD) to Foxtons (foxtons.com), the discount real estate brokerage company filed for bankruptcy in 2007 listing $40.9 million in total liabilities and $488,000 in assets. For many this was an affirmation that the discount model isn’t viable yet, many others see it as just a precursor to a declining real estate market that will still claim the “lives” of many real estate companies, irrespective of the model. But further research uncovered the fact that the closing of Foxtons USA was prompted by the sale of Foxtons UK to BC Partners, a private equity firm, for around £370m ($751m). This transaction specifically excluded the non-profitable U.S. based operations and thus triggered its subsequent closing.
9. CBS’ 60 Minutes Debates Real Estate
The segment on 60 Minutes by Lesley Stahl titled Chipping Away at Realtors' Six Percent became one of the most controversial TV shows about real estate in recent times. She tagged Realtors® 6% commission as “sacrosanct” and gave new business model Redfin a huge amount of free publicity. It was surprising that after pursuing the story for so many months and even discussing the show with the National Association of Realtors® that CBS ended up with such an unbalanced program - even featuring an outdated clip on long-ago-defunct eRealty. However, further research uncovered that numerous hours of recorded interviews with NAR ended up on the editing floor.
8. Guthy-Renker Buys RealtyTrac
Established in 1988 Guthy-Renker, one of the world's largest direct response television companies with sales of more than $1.5 billion per year, surprised the real estate industry in early 2007 with the acquisition of RealtyTrac.com, the leading For Sale by Owner (FSBO) and foreclosure website. Since that date no significant major announcement or strategy has been made. Meanwhile RealtyTrac, already a very large website, continues to enjoy the spoils of the growing foreclosure and FSBO market and is often listed as one of the five largest real estate websites in the U.S.
7. Fidelity Reboots Cyberhomes
With Fidelity National Real Estate Solutions (FNRES) allocating $50 million to the establishment of a consumer portal through previously acquired Cyberhomes.com, it has become the first title company to reach out directly to serve home buyers and sellers. FNRES also announced in 2007 that it would replace Realtor.com in its longstanding relationship with AOL to become the exclusive listings content provider in AOL’s revamped home-valuation and real estate center.
6. MLS Consolidation Heats Up
Consolidation isn’t new but with the strong pressure toward larger and larger MLSs, the DOJ breathing heavily and the growing pressure and ability to create single seat sign-on access, consolidation discussions have multiplied exponentially as MLS talks about mergers and consolidations picked up momentum and statewide MLS systems became the flavor of the year.
5. DOJ Releases Study on Real Estate Brokerage
The industry is taking note as a report by the U.S. Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) stated that they have decided to participate in the transformation of the industry by deciding that certain existing laws, rules and regulations need to be repealed. Their feeling is that as commission fees “do not vary in proportion to changing home prices,” they are considered to be “relatively inflexible” and therefore have in real terms become too high. The FTC is recommending that state legislators and industry regulators should consider repealing existing laws, rules and regulations like minimum-service and anti-rebate provisions that limit choice and reduce the ability of new brokerage models to compete.
4. Google and WEB 2.0
The Web isn’t new to real estate, but after the crash of 2000 some wondered when it would return. Well, 2007 saw its reintroduction as it roared back with vengeance, renewed vigor, new VC funding, new ideas as well as retooled and rebranded pre-2000 companies. And the leader of the pack, Google, is the epitome of the quintessential personification of WEB 2.0. It has become the nexus of all information. With each Google search more data is refined and with each website more information is being stored. This time around the Web is more knowledge, more information and much more power and Google has its hand on the steering wheel. Some have labeled it an average garden variety monopoly while its vast network of servers, now an integral part of the Internet itself, is rapidly becoming a national security infrastructure. Being a techie or nerd is cool again as we are seduced with iPods, iPhones, online digital communities and wikis.
3. Revival of Better Homes & Gardens
Once a popular real estate franchise, this well established brand disappeared off the industry’s radar after being sold by former owner Meredith Corporation to GMAC in the 1997 and the subsequent required phasing out of the BH&G brand. In 2007 Realogy announced the re-introduction of the brand by signing a 50-year licensing agreement with Meredith, which apparently has reconsidered the use of its brand in real estate again; by a company it doesn’t own
2. The Break Up of Cendant and the Creation of Realogy
Now we know what the ballpark price tag could be should someone aspire to buy themselves a major chunk of the real estate brokerage industry. In a transaction valued at $7.75 billion, Realogy was created (as a spin off from Cendant) and sold to an affiliate of Apollo Management, L.P., a leading private equity and capital markets investor. If anyone is still in doubt, rest assured that real estate brokerage is officially on its way to become corporatized and is no longer the last remaining bastion of small entrepreneurship.
1. The Collapse of the Sub Prime Market
If anything dominated 2007 it was the velocity with which the mortgage market came to a grinding halt, pulling down everyone heavily involved with subprime lending. Few were spared with even the 10th largest mortgage lender, American Home Mortgage, filing bankruptcy. When the largest mortgage lender in the U.S., Countrywide, experienced severe cash flow problems it had to be bailed out by Bank of America to the tune of $2 billion. In addition, the company further agreed to refinance or modify up to $16 billion of its loans. The ripples continued throughout the year with companies like Bank of America themselves writing off $3 billion, Merrill Lynch & Co. writing down nearly $5.5 billion and Citibank posting losses of $11 billion.