When Compass and Rocket announced a new partnership to display the brokerage’s private and coming soon listings on Redfin, the two companies came out of the gate saying the deal would boost for-sale inventory in markets across the country.
That left open two questions: How would the partnership help increase inventory? And by how much?
Just over two weeks after the announcement, Redfin economists have shared a report with Inman that shows the portal believes for-sale inventory could climb by an estimated 6 to 12 percent in markets that allow for pre-marketing of listings.
“We’re just trying to say how many more listings can we end up with within a year, or every year, if it were possible for sellers to have some reduced risk of being mispriced or just having additional privacy,” Redfin senior economist Asad Khan said in an interview.
The partnership will prominently display Compass Coming Soon listings on Redfin before they’re widely distributed via the multiple listing service. Other brokerages’ coming soon listings, including Redfin’s, are also actively being displayed on the portal.
Industry insiders have generally understood the partnership to represent a meaningful shift in the ongoing battle between Compass and Zillow over that portal’s move against listings that aren’t distributed via the MLS and made available to Zillow itself.
The partnership was also perceived as a way to work around MLSs, which have varied rules and regulations governing how long listings can be marketed without being distributed to all market participants.
Against that backdrop, the new Redfin report is a signal from the company’s economists suggesting that off-MLS marketing strategies could unlock more homes for sale after years of lower inventory.
What’s in the report?
The economists created a model using a baseline assumption that there is a pool 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 high costs and uncertainty associated with listing a home is enough to dissuade a percentage of owners from trying to sell and move, according to Redfin.
“Then you can say, ‘Well, what is the response that you would get in terms of those at-the-margin homeowners choosing to list now versus later?’” Khan said. “We get that estimate from different sources for that. But once you have that estimate, you can go and say, ‘OK, these new additional listings come onto the market.’”
Through improved pricing accuracy and more privacy and convenience, the Redfin economists wrote, markets that allow for pre-marketing of listings without broad MLS distribution could see an increase of anywhere from 6 percent to 12 percent in annual listings.
A general lack of inventory overall is the result of many factors, from homeowners with interest rates well below today’s norms to a lack of inventory compounding on itself and preventing would-be sellers from buying and moving, the economists said.
The economists put a value on the pre-marketing strategy: “We estimate that these benefits are worth 1.2–2.4 [percent] of their home’s sale price to sellers,” the economists wrote in the report.
Freeing up timid sellers to test a sale would bring a multiplier effect to the market, the economists went on to say.
“If you brought all this new inventory through reducing these barriers to listing and selling their home, there’s also going to be the subsequent chain effect,” Khan said. “A new seller comes on the market, they sell their house, but then there’s a high likelihood that the buyer who bought that house also then lists their house for sale.”
“We kind of conservatively estimated that as a 1.6 multiplier,” Khan added. “Every new listing that comes on, you unlock an additional 0.6, right? Or every hundred that come on, unlock an additional 60.”
Interest, uptake 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 pricing the home itself would also influence the actual effect.
Khan said that the Redfin economists had been conservative in their methodology and assumptions for the report.
Meanwhile, Compass Coming Soon listings — along with coming-soon listings from Redfin agents and those with other brokerages — are being displayed widely on the portal in markets that allow them.
