“Looking at real estate online and contemplating moving across country became a national hobby during the pandemic,” Kelman says. “People had more time at home and weren’t spending money on commuting or travel and they learned they could live anywhere if they didn’t need to be in an office.”
When the pandemic started and the housing market briefly paused, Redfin furloughed 1,000 employees.
“Six months later we’re growing as fast as we can, adding more agents and entering new markets,” Kelman says. “We anticipate this hot market to continue throughout 2021 and to pick up even more speed when the vaccine arrives because more people will list their homes.”
A sticking point for many would-be sellers was concern about how many people might visit their home while it was listed for sale.
“Virtualization of real estate took off fast when the pandemic hit, but what’s interesting is that we still see about 10 percent of buyers buying from a virtual tour,” Kelman says. “This will likely continue with cross-country moves, but we also see people doing online tours to eliminate homes and then just visiting their three finalists in person.”
Race gap in homeownership
The pandemic wasn’t the only disruption to society in 2020. Americans faced up to a reckoning around racism that included an analysis of the widening gap between Black and White homeownership rates. Several housing advocacy organizations filed a lawsuit against Redfin, accusing the brokerage of discriminatory practices.
“I can’t pretend there’s nothing we can learn from the lawsuit, but I disagree with the premise of the lawsuit,” Kelman says. “Our mission at Redfin is to make the real estate transaction better for everyone. We face an economic challenge of how we can pay our agents and serve the broadest possible range of people, including people in rural communities and urban neighborhoods.”
Kelman says that paying agents a living wage and selling a home profitably for homeowners is more of a challenge in areas with lower-priced homes, which in some cases means a higher percentage of minority residents.
More broadly, Kelman suggests that narrowing the race gap for homeownership requires financing to be available to everyone, including higher risk individuals.
“I’m not talking about returning to subprime or predatory lending, which the government rightly regulated after the housing crisis,” Kelman says. “The issue is that there’s an asymmetrical impact of the availability of private lending, which tends to be limited to very low-risk borrowers. People with lower credit scores or lower incomes need an equal shot at getting a loan.”
Another issue in 2020 was an agreement between the National Association of Realtors and the Justice Department to publish buyer agent commissions as part of real estate listings and to stop the practice of buyer agents saying their services are free to buyers. Redfin was among the first real estate brokerages to list the buyer’s agent commission on all their listings on their website.
“Transparency around commissions is extremely important and I was glad to see that NAR decided not to turn the issue into a protracted legal battle,” Kelman says. “I think NAR recognizes that more of their members now use different models for selling real estate, including discounted commissions.”
Kelman says he thinks transparency around agent commissions will increase as more new homes are sold by builders and more homes are purchased by iBuyers, which refers to companies that make offers online to buy homes for a set price on a specific date rather than on the open market.
“I think we’ll see more pressure on commissions to come down and more companies will experiment with different commission structures in the next few years,” Kelman says.
Competition heating between real estate sites
CoStar, a commercial data analytics company, made news in 2020 by buying Homesnap, an app for residential real estate information for agents and consumers. The move is anticipated to heat up competition between listing sites.
“It’s like the movie ‘Thunderdome’ out there between us and Zillow and Compass and now CoStar,” Kelman says. “Every company has acquired other companies and is looking to acquire more. At Redfin, we have a mortgage company, a title company, our website and an iBuyer component. We’re looking for ways to make real estate transactions more efficient and faster for consumers, with less heartache.”
Kelman says he anticipates that consumers will appreciate this consolidation.
“It’s like when grocery stores got started and suddenly the butcher and the baker and the vegetable seller were all in one place,” Kelman says. “Hopefully, we’ll see more innovation as these companies come together and their products can be combined in ways that help consumers and save them money.”