Redfin says private listings available soon could increase inventory
Markets that enable pre-marketing strategies could see a 6 to 12 percent increase in listings each year, according to a new report from Redfin economists.
When Compass and Rocket announced a new partnership to display the brokerage’s private and upcoming listings on Redfin, the two companies came out of the woodwork, saying the deal would increase for-sale inventory in markets across the country.
That left two questions open: How would the partnership help increase inventory? And by how much?
Just over two weeks after the announcement, Redfin economists shared a report with Inman revealing that the portal believes inventory for sale could increase by an estimated 6 to 12 percent in markets that allow pre-marketing of listings.
“We’re just trying to say how many additional listings we could get in a year, or every year, if it were possible for sellers to have a lower risk of mispricing or just extra privacy,” Redfin senior economist Asad Khan said in an interview.
The partnership will prominently display Compass Coming Soon listings on Redfin before they are widely distributed through the multiple listing service. Other brokers’ offers coming soonincluding Redfin’s, are too actively displayed on the portal.
Industry insiders have generally seen the partnership as a meaningful shift in the ongoing battle between Compass and Zillow over that portal’s action against listings that are not distributed through the MLS and made available to Zillow itself.
The partnership was also seen as a way to circumvent MLSs, which have different rules and regulations governing how long quotes can be marketed without being distributed to all market participants.
Against that backdrop, the new Redfin report is a signal from the firm’s economists suggesting that off-MLS marketing strategies could open more homes for sale after years of lower inventory.
What does the report say?
The economists created a model based on the assumption that there is a group of homeowners who would consider selling their homes and moving in the not-too-distant future if they knew they could price-test the market for their homes.
Even the perception of the high cost and uncertainty associated with listing a home is enough to deter a percentage of owners from trying to sell and move, according to Redfin.
“Then you can say, ‘Well, what’s the reaction you would get when it comes to homeowners who are on the margins and choose to list now instead of later?’” Khan said. “That’s why we get that estimate from a variety of sources. But once you get that estimate, you can say, ‘Okay, these new additional listings are coming to market.'”
With improved price accuracy and greater privacy and convenience, Redfin economists wrote, markets that allow pre-marketing of listings without broad MLS distribution could see a 6 to 12 percent increase in annual listings.
A general lack of inventory is the result of many factors, from homeowners with interest rates well below current standards to a lack of inventory that is compounding itself and preventing potential sellers from buying and moving, the economists said.
The economists attach value to the pre-marketing strategy: “We estimate that these benefits are worth 1.2 to 2.4 euros. [percent] of the sales price of their home to sellers,” the economists wrote in the report.
Freeing up timid sellers to test a sale would trigger a multiplier effect on the market, the economists said.
“If you were to bring all this new inventory by reducing these barriers to listing and selling their homes, there will also be a chain effect,” Khan said. “A new seller comes onto the market and sells his house, but then there is a good chance that the buyer who bought that house will also put his house up for sale.”
“We estimate that somewhat conservatively as a multiplier of 1.6,” Khan added. “Every new entry that appears, you unlock an additional 0.6, right? Or every hundred that appears, you unlock another 60.”
Interest, supply and availability would likely vary by market, Khan continued, meaning the impact on inventory would vary. The volatility of the housing market and the complexity of the pricing of the home itself would also influence the actual effect.
Khan said the Redfin economists had been conservative in their methodology and assumptions for the report.
Meanwhile, Compass Coming Soon listings — along with upcoming listings from Redfin agents and those of other brokers — will be widely displayed on the portal in markets that allow it.
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