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There’s always something to howl about

Catching up — for now . . .

I live in Safari, an exceptionally adept tabbed web browser. In consequence, I can pile up page after page of stuff, each crammed with semi-organized tabs, that I intend to deal with later. Well, fast is the new slow and later is now — at least for the moment.

How will the TruZillia APIs make money? Volume! Baron Briefs has a richer answer:

My initial thought on why each would do this: By opening up Zestimates and Zindices to the masses, Zillow is following in the foot steps of major players like Amazon and Google…build an API, let others innovate off the technology, and then acquire the best of breed. Remember, they recently picked up an extra $25 million to “broaden their product offering”. As far as TruliaMap, it’s likely an attempt to win over agents and brokers who haven’t warmed up to the idea of their website being crawled and scraped. Now, they get a cool widget for their website and Trulia gets access to more listings.

Galen Ward at Rain City Guide has more, including sightings of the Great Kong, the 900 pound gorilla that is Google. And: Will brokers embrace Trulia’s maps?:

In other news, Trulia is now letting you post their listings on your site. They say it’s for agents and brokers, but do agents and brokers really want to steer people away from their web sites? If a visitor clicks on More details… they are whisked to the listing agent’s website. I predict that it will mostly be used by bloggers and non-real estate people.

The Real Estate Newsblog takes exception, sotto voce, to to my criticisms of Zillow.com’s epistemology:

I guess a significant problem for Zillow at the moment is credibility. Some suggest that Zillow’s “Zestimates” are way off base, but since they’re still in beta, it’s probably slightly premature to be overly critical at this point, notwithstanding the near $60 million they’ve got in seed money.

In fact, for the reason I named, Zillow.com cannot ever produce a reliable evaluation of a house. This is not a matter of refinement, it’s a fundamental defect in the epistemological model they’re working from. If a real estate licensee quoted a guesstimated value on a home that had burned down, this would be constructive negligence at a minimum, and possibly actionable professional malfeasance. Despite it’s complete and irreparable inability to do what it promises to do, Zillow has a number of things going for it:

  • We like internet companies, so we forgive them when they’re painfully dumb
  • As with public schoolteachers, we’re especially forgiving of people we want to like
  • An epistemologically valid home evaluation is either irksome — from a Realtor — or expensive — from an appraiser
  • We want to believe what we want to believe regardless of the persistently intrusive facts

The idea of collective-error-masquerading-as-truth is baked into the Web 2.0 cake, so Zillow.com may yet have the last laugh: If enough contracts are based on inherently invalid Zestimates, Zestimation could become all that remains of property evaluation.

Real Estate Newsblog cites a ZDNet article that seems to argue that Zillow.com will somehow grow the total number of real estate transactions:

What Zillow is gambling on, and I think correctly, is the power of lowered barriers to transactions in the real estate markets. More transactions will happen with more information that makes buyers confident they are getting a better deal than the seller — the speculative and necessary (“we need a bigger place”) aspects of real estate can be accelerated by a few percentage points to create fairly huge increases. The long tail has always existed, especially in commodity markets. Network technology made it accessible for many more buyers and sellers. There is substantial value in connecting people to markets that were obscured by geography and distribution limitations or scarcity of information before.

In this case, most real estate sales are local, but a networked market with comparables easily accessible, like Zillow offers, the number of properties considered will almost always be greater. More choices and more buyers translates into increased average sales, not necessarily higher prices for property but somewhat more frequent sales. Ask a realtor if by increasing the number of transactions they handle in a year by two or five percent isn’t a windfall. In that extra activity, there’s enough profit to make Zillow or its competition a very nice profit if they do not first race to eliminate their margins.

Wow… If you sell beer in bottles and cans, you will sell more beer than you did when beer was only available on draft. The demand for beer is significantly — but not infinitely — elastic. Is the demand for housing sufficiently elastic to justify these claims? This seems very unlikely to me. There is a growing elasticity in the marketplace, but this mostly an artifact of Baby Boomers in the their peak earning years buying second homes, retirement getaways and investment properties. Moreover, there is certainly no dearth of Long Tail information available to home-buyers.

The Real Estate Bloggers cite what they think is an outstanding editorial in USA Today. Mostly it’s a rehash of the complaints raised in June’s rant by the Consumer Federation of America, a Ralph Nader-affiliated anti-business lobby. All of this is served up with The San Francisco Treat in a CNET news.com feature by Declan McCullagh, and all of it would have a great deal more merit if it were not so breathlessly over the top.

Believe it or not, there’s more, but while later might be now, now is by now much later and I’ve got work to do. I leave you with plenty of good stuff to read.

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  • 4 comments

    4 Comments so far

    1. Mitch Ratcliffe July 31st, 2006 2:54 pm

      I didn’t suggest that the market for real estate is infinitely elastic, only that the market with greater information–whether from Zillow or any other source–is more liquid. There will still be demographic and market trends that affect overall transaction volumes, but it seems to me that there will be more rather than fewer transactions due to the availability of more information and without geographic barriers, as has been the case in every other market. If the number of transactions is marginally higher at any point than it would be without this additional information, my argument stands up.

    2. Greg Swann July 31st, 2006 3:50 pm

      > If the number of transactions is marginally higher at any point than it would be without this additional information, my argument stands up.

      Post hoc, ergo propter hoc. It doesn’t mean your premise is wrong, but this argument is specious. If we credit it as valid, then the advent of RedTruZilliaFin start-ups has caused a decline in sales, since the events are coincident. I think your original argument was weak, but this defense of it is much weaker.

    3. Mitch Ratcliffe July 31st, 2006 4:01 pm

      I think I have history on my side with regards the increased volume of transactions through opening of markets by expanded access to information. However, I’m not pointing to any coincident events and saying it proves my point about Zillow, rather I am pointing to the increased liquidity in markets due to increased availability of information. You can measure my prediction against future activity, which is what I clearly meant.

      Your concern with Zillow’s accuracy is well-placed, but what I am writing about is the trend to contextualizing sales with information, which creates new buyers, whether they are arbitrage players or derivatives traders or just speculators looking further afield for properties they consider to be undervalued. The Zillow information is in competition with others, and it may not prevail, but that competition drives increased reliance on comparables data of one sort or another, which means more people can make “informed” judgments and act in the marketplace.

    4. Greg Swann July 31st, 2006 4:10 pm

      You’re making the same mistake as Real Esatte Newsblog, so I’ll share a comment I just posted there:

      > What Bloodhound fails to acknowledege is the rise in alternative markets such as single women, gays , hip-hop, Latino, senior citizens, etc. These markets have traditionally been underserved, and we feel that they – and others – perfectly fit into a long tail business model.

      Stipulating the point, this is a zero-sum game. If renters become buyers, the number of homes sold does not change. The buyers change from investors to owner-occupants, but the quantity of homes sold is exactly the same. An elasticity in demand would imply that some significant subset of the population were buying extra homes for their own use. It is reasonable to argue that transactions might be accelerated and costs might be reduced. It is reasonable to argue that some one Long Tail market niche could prosper at the expense of another — also a zero-sum game. But I don’t think it is reasonable to argue that Web 2.0/Long Tail technology will result in an increased demand for housing. If travel is cheaper and easier to arrange, you might travel more. If beer comes in convenient 12-packs of easy-open cans, you might drink more. But until you find a way for people to sleep in more than one home at once, most people will continue to own or rent only one residence, regardless of the information systems available to them.