Do you remember Netscape? We don’t either. Luckily, the company’s co-founder, Marc Andreessen now has a new claim to fame. Last month, Andreessen became the owner of the most expensive home sold in California. It cost him an eye-popping $177 million. So, let’s just say, we’ll all probably be “browsers” and not buyers. Step aside Bezos, there’s a new high roller in town. 

Today’s Blueprint:

• Even Zillow makes mistakes

• What “wood” you do about this problem?

• The American Dream is feeling the squeeze

Zillow got a little carried away

Zillow has officially shopped ‘til it dropped. After going on a major buying spree, the company admitted to picking up many of their flip homes at just the wrong time. Zillow over-purchased, under-delivered, and has now listed 66% of their homes at a loss. 

The real estate giant paid an average of $65,000 above asking on each home they claimed. That high premium, compounded by the shortage of labor and renovation materials, has made it hard to resell these homes for a profit in the short-term. Unfortunately, that quick flip strategy is what Zillow (and it’s stock price) had been banking on.

Our take

Some iBuyers like Zillow have been trying to take power—and profits—from buyers and sellers for years already. They pick up properties, slap on some paint, and immediately resell them. But that buy-and-sell model doesn’t work long-term. If you want to make big bucks flipping houses, add value through extensive renovation projects instead of quickie jobs.

Wood you look at these lumber prices

How much wood would a builder want if a builder could get wood? Turns out, a lot. But two factors are pushing lumber prices through the canopy for the second time this year. 

• There’s just not enough wood to go around. Lumber production in Canada has slowed down significantly. In the southern US, labor shortages are dampening domestic production. 

• Just to keep things interesting, the US is likely going to double the duty charged on Canadian softwood, hiking it from 9% to 18%. 

These high lumber prices tend to get passed straight onto homebuyers. The average new construction home price jumped $40,000 earlier this year due to high supply costs.

Our take

Higher lumber costs mean both building and extensive renovation projects will keep getting more expensive. If you’re working with a client already on a tight budget, make sure they know what they’re getting themselves into if they buy a fixer upper. Their actual costs will likely be much higher than the quotes they got a few months ago. 

For many buyers, pinching pennies still isn’t enough

As of August, housing affordability was down 16.6% YoY. This metric is calculated by looking at average income, home prices, and mortgage interest rates. Though average income actually went up a little this year, it was offset by the significant rise in home prices. Over the past year, nominal home prices have jumped 20.7% YoY.

While housing affordability is certainly strained right now, our market is far from the dark days of pre-bubble 2006. If you adjust for buying power, our home prices are still 37.5% lower than the peak prices of ‘06.

Our take

Sing it with us, you can’t always get what you want. When affordability is strained, tell your buyers to get really picky on their must-haves list. What’s a must and what’s just a must-not-be-that-important? 

FOUNDATION PLANS

Let’s talk lead generation. Love it or hate it, your business can’t live without a constant healthy flow of leads. 

This week, try leveraging one or more of these lead sourcing strategies:

• Network at a community event that interests you. When you meet potential clients while you’re doing something you both enjoy, you start the relationship off with automatic rapport. When they need an agent, guess who they’ll think of first? 

• Make a real estate themed Reel or TikTok. Use these apps to showcase both your exceptional listing and your exceptional self. Show what it would be like to work with you!

• Comb back through your leads list. If it’s been a while since you checked in with a past client or referral, touch base with them again. Pull a talking point or two from today’s Blueprint to get the conversation moving.

SCHEMATICS

• Ariana Grande says Thank U Next to her $14 million Cali mansion.  

• How to explain title insurance in 10 seconds. 

• If you love House Hunters, read this.

• Former Broncos coach Mike Shanahan breaks another record… for home sales. 

• This nearly windowless dorm begs the question: form, function, or f***ed up?

JUST IN CASE

Keep the latest industry data in your back pocket with today’s mortgage rates:

See you on Friday,

-James & David