When prices rise for a period of time everyone begins to ask the question “Is there a real estate bubble?  The answer is yes, but perhaps not for the reason you might think.

Is there a real estate bubble
Is There a Real Estate Bubble?

Buyers and sellers worry about prices and supply and demand.  Realtors worry about marketing and finding buyers for their listings.  The real estate industry has changed in the past several years and newer agents relied on real estate portals like Zillow and Trulia to provide leads, for a fee.

This worked for agents who didn’t have a lot of listings or only worked with buyers as they were able to essentially purchase leads and hopefully go out and sell.  Agents didn’t count on sites like this diluting inventory by selling to many more agents leads in their zip code, and raising prices.

Agents who relied on this model complain how a certain zip code now is bought up by many more agents, and the cost per impression has skyrocketed.  Agents are beginning to say enough is enough, so we say there may be a real estate bubble for these large portals.

Our team purchases a certain amount of advertising on each to attain Premiere status.  Almost daily we’re getting calls that more inventory has opened up in key zip codes.  This either means they’re selling more impressions in that zip code or other agents are cancelling.  Rates have also fallen.  This tells me agents may be cancelling.

Furthermore the National Association of Realtors recently voted in some changes that will level the playing field, making agent websites more attractive against the likes of the big players mentioned above.

MLS’s will now be required to send out more data in its data feed for use by brokers. Section 7.79 of MLS policy did not spell out whether MLS’s must provide this extra data so brokers and agents could use AVM’s (Automated Valuation Models) in their own websites.

Zillow came to fame because of their Zestimate, which was an online AVM.  Never mind the fact the estimate was so far off in the beginning it didn’t resemble reality. It has gotten better, but consumers still complain about outdated and inaccurate data on their website.

Brokers on the other hand have access to today’s data, because it is the brokers who maintain the data to begin with.  Instead of going through a 3rd party who doesn’t always get it right, why not use a broker direct and get the accurate data?  So goes the argument at NAR, and this year they followed through.

The Ellis Team was one of the first brokers nationwide to put the MLS on our website, and we were one of the first to utilize an AVM on our website.  That’s right, at Topagent.com you can search the MLS and get an estimate of value for your home.  In the future, more agents and brokers will do the same, which brings me back to the point of this article.

We believe agents will either go back to traditional marketing to find buyers and sellers, or spend money promoting their own websites. Newspapers now have digital media divisions designed to manage an agent’s or broker’s online presence.  You don’t have to be an Internet expert like we are, you can hire it done.  In fact, even though we know what we’re doing, it makes sense to let someone else manage the online ads so we can do what we do best, which is sell real estate.

Instead of paying money to promote Zillow, why not pay money to promote your own site?  If you search anything real estate related you’ll notice they show up.  That’s because agents advertising dollars are promoting the portals. When agents stop advertising with them, their ability to buy up positions on Google, Yahoo, and Bing will dry up too. This is what we call an online Real Estate Bubble.

The big guys won’t go out of business, but their lofty valuations on Wall Street may take a hit. There is no way Zillow/Trulia is worth $3.5 Billion dollars when neither makes a profit. And if their revenue falls, they may not be worth anything.

Good luck, and Happy House Hunting!

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By Brett Ellis

RE/MAX Realty Group – Ellis Team

Fort Myers Real Estate Agent

7910 Summerlin Lakes Dr

Fort Myers, FL 33907

239-489-4042

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Is There a Real Estate Bubble?
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Is There a Real Estate Bubble?
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When prices rise for a period of time everyone begins to ask the question "Is there a real estate bubble? The answer is yes and not for reason you think.
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