Anyone on the hunt for their dream home lately knows Puget Sound home prices continue to shoot up. Now, many wonder whether an online discount broker could transform the industry.
Seattle-based company Redfin went public Friday, and by closing bell the stock had risen 44 percent, and the company’s new value was about $1.7 billion. Some experts are saying the site has no chance of overturning the well-established real estate market, while others say the IPO could be a game changer.
“The ‘Amazon of real estate’ -- they certainly could be if they expand to enough markets. They could be that go-to place to get that service,” said Jeremy Ross.
The Magnolia man was house hunting on Saturday, the day after he bought a few shares of Redfin.
Ross says after seven years of thinking about renovations, the ease of the real estate app helped sell him.
“This time we’re using exclusively Redfin. The app is easy to use. You can just find a house you want to see, select schedule a tour, and they'll respond to you almost immediately,” Ross said. "I think the people using the app are much more savvy and able to protect their own interests and maybe don't need to have their hand held as much."
Redfin declined to comment, citing the SEC quiet period in the days before and after initial public offerings.
The company’s main advantage is its prices: they charge about half the commissions traditional brokers do.
“I don’t think it’s a game changer at all,” Queen Anne Real Estate managing broker Sam Konswa said.
Konswa worked for Goldman Sachs before he went into real estate, and says Redfin raising $135 million is small compared to other IPOs.
He says housing prices are generally influenced by employment opportunities and the economy, and it is difficult to tell if technology or tech companies are influencing home prices directly.
“I don’t know if the technology is contributing to the pricing. I doubt it. But to the ease of doing business, perhaps,” Konswa said.
Plus, the online brokerage is up against a well-established personal service industry
“If somebody's offering a discount, there is a service that's going to be discounted as well,” Konswa said, explaining he has converted several Redfin clients after their homes sat on the market for months. “We sold it for $130,000 more and in just 11 days. So maybe they pay me $20,000 more in commission, but they get $130,000.”
Konswa says Amazon’s rumored entry into real estate could be a true game changer. He says the market is not likely to cool for about five more years unless there is a large-scale crisis.