In 1984 Stewart Brand proclaimed these words to a roomful of hackers. In the 25 years since, the observation has become the justification for an entire internet economy. Everything’s Free! w00t!
What’s less known is that Brand was not referring to price nor to the value of information, but merely to mobility. That because digital data can move and replicate instantly, whole new worlds of understanding open up. This is critical and in the same sentence, he added “the right information at the right time can just change your life.” In other words, “Information wants to be free, but analysis wants money. Maybe lots of money.”
I bring this up because this week real estate information took a step towards Brand’s vision of free. The National Association of Realtors announced the Realtors Property Resource (in a dramatic leap of branding they named it “RPR”) where they’ll offer Fidelity’s LPS property data for basically all real estate in the US. For Realtors, this is data which previously they’d have had to purchase from LPS, now for “free” (if $12 million of realtor dues is considered free.) RPR will also consolidate data from MLSes into one place. NAR/RPR also acquired some assets of Fidelity’s Cyberhomes.com, the stealthily successful competitor to Zillow, and are launching Houselogic.com, a consumer website.
For good details about the whole announcement see this post by Brian Boero. Let’s talk about implications.
Run Altos Run!
The project is a TON of real estate data. Not surprisingly I suppose, since the announcement, literally dozens of people have asked me what this means for Altos Research. The loquacious Rob Hahn predicts doom. Others are more sanguine.
While I admit to a pang of fear when NAR CEO Dale Swinton first pre-announced RPR at the Real Estate Barcamp this summer in Chicago, I’ll now argue that relatively little changes for our humble firm. Nor does it change for any of our well-funded co-opetitors.
Surely some of the data applications unleashed by RPR will overlap with what Altos Research provides. My guess is that RPR won’t be concerned with personalizing local market reports for your brand, or building custom data to analyze your unique niche, or providing you with market data chart widgets, and lead conversion, and email marketing systems, or blogging tools and facebook applications, and on and on. The fact is we already worry every day that other applications, sites, alliances, products will attack our business. So we’re going to keep running as fast as we can to get you to the analysis and build the applications that let people actually use the information. (We have our latest product announcement coming this Thursday! Stay Tuned!)
RPR is a big player, going after big applications. Real Estate Data is a massive market with tons of niche applications inside.
Let’s look at some of those applications.
Bring on the NARstimate
In a shot across the bow of Zillow, NAR wants to add home valuation models that it wants to be the “gold standard”. But will the NARstimate be measurably better than say a Zestimate? The answer is no, and here’s why.
The math behind all the automated valuation models is called a “multi-variable regression” where you take oune property’s characteristics, and compare them to the characteristics and prices of all the other properties, mush them together and find out the probably value of your place. It’s pretty straightforward, you can do it in Excel. The output of that math is essentially a bell-curve of possible values for the house with the peak of the curve being the most likely value. (If it smells funny it’ll move left in the bell curve, a good paint job will move it to the right, etc.) Zillow’s marketing innovation was to publish the peak value, and call it the Zestimate – previous AVM companies were truer to the math and published the range of the bell curve.
To improve the output, you need more variables or better data on the homes. RPR sounds like it’ll work diligently to get both. Fabulous. But the improved results merely shift the bell curve a tiny bit or eliminate the occasional egregious error. It’s a lot of work for not a lot of gain. Your existing AVM, Zillow, or whatever, will have for practical purposes the same range as the NARstimate.
Here’s the other thing to note about why Zillow isn’t materially impacted here. These days, Zillow isn’t about the Zestimate, Zillow is about mortgages.
National MLS Data in a Local World
In some senses having one place for understanding all the active listings is very powerful. For Realtors, this is neither new, they already have access to their MLS data nor is it useful – a realtor in Miami doesn’t need Dallas MLS data. Maybe RPR will have better user interface than the local MLS can muster. Maybe not. (Consider local differences that MLSes need to handle: For example, Seattle “water-front” is an important variable about a property listing. In Tucson, having “water-front” as an option is laughable at best and credibility destroying at worst.)
Again, the prolix Mr. Hahn predicts doom. Civil War. If Rob is right, then it all falls apart and our teapot can go back to being tempestless. Frankly, I foresee lackadaisical compliance. “Sure, we’ll send data… Oh, yeah, it got buggered this week. We’ll update it as soon as we can…” But let’s assume successful integration with 900 local partners. With good execution on the part of RPR, there will be lots of useful applications for realtors. And lots more that RPR never gets around to working on.
The Wall Street crowd definitely wants to know about the current market conditions. It sounds like LPS will have the exclusive to resell all the MLS information to Wall Street, etc. Exclusive = expensive. Nuff said. LPS sells a ton of real estate data to Wall Street already and a nice complete data set will be good supplement to existing products.
Houselogic, Cyberhomes, websites et al.
From the consumer-web site standpoint, Houselogic adds a new player that basically supplants Cyberhomes, which already published all the property data. In essence then, HouseLogic is some cool new features on Cyberhomes which already quietly does well in the face of the Zillow juggernaut.
Potential upside: Marty Frame, who ran Cyberhomes, will be president of the new business unit. Marty understands the applications of the data arguably better than anyone from the NAR group did previously. That augers well for the new business unit.
Big Promises, Big Opportunity.
RPR’s promise is for the first time to bring it all together. He’s the rub: I’ve been selling real estate data to all levels of players in this industry and never has anyone said to me, “what I need is to have all the property data, with all the listings, CMAs, on a website with slider bars and maps and blah blah blah.”
No. What they ask is, “Mike, how can I get more listings?” or “Mike, are the home builders going to make their quarter?”
That, my friends, is the difference between information and value. The beauty is that there are infinite value questions that need to be answered. RPR, when well executed, will answers some. We’ll mix our unique brew of expertise and technology to answer others. Plenty others.