Transparency is always the right strategy
Jonathan Miller standing on the rooftops overlooking Central Park in Manhattan.
Jonathan Miller
When the Covid-19 crisis began half way through March, the Manhattan housing market was placed on “pause,” as were many housing markets around the country. New York State “Shelter in Place” rules prevented the in person showing of a property by a real estate broker. That was the beginning of the problem this crisis posed for the industry that lives and dies on sales and rental transactions. Then a startup agent trade group (NYRAC), made up of some of the most productive agents in the market and includes many of my long-time industry friends, pushed to hide the days on market metric from the public for what turned out to be a self-serving reason. I love what they stand for, but this was a strategic error that I could not support.
While I have been a real estate appraiser and market analyst for 35 years, I dipped my toe into real estate as a sales agent in Chicagoland for six months in the mid-1980s.
Lesson learned
From my experience there it was clear to me that the accuracy of the information our office possessed was critical to all parties for the market to function. I still have my old monthly MLS books and remember logging on to the MLS from one ancient (even then) terminal in the office – talk about delayed market information!
Days on market during Covid-19
The days on market (DOM) metric is significant to sellers because they don’t want their home to be perceived as overpriced if it sits unsold too long. DOM can be measured in several ways, but the one I see used the most is the average number of days between the last price change, if any, and the contract date (or today’s date if it has not sold.) When a potential home buyer looks at a listing on a public-facing web site, they look at DOM as one way to determine whether the listing price is reasonable. The longer a listing sits on the market as compared to other listings, the more likely it is over-priced. Sellers look at DOM too and become concerned when their listing sits too long relative to the competition, typically blaming the agent for not marketing the property enough. However, the asking price is usually set by the seller who is slow to recalibrate their asking price if the market is weakening. I’ve found it takes one to two years for a typical seller to capitulate on price in a downturn and not feel like they left money on the table.
Hiding DOM as a marketing strategy
When the government ordered lockdown hit New York City, and real estate agents were not allowed to provide in-person showings, market activity immediately stalled. NYRAC pressured various platforms to hide DOM information from listings. They still wanted users to be able to drill down and uncover the details, but at first glance, the DOM information was to be hidden.
Streeteasy (owned by Zillow), the de-facto Manhattan multiple listing system in the eyes of the consumer, and the Real Estate Board of New York (REBNY), the leading real estate trade group with their own platform known as RLS, initially balked at the manipulation but eventually caved to NYRAC pressure. NYRAC made a strategic error that further damaged the long-term credibility of the real estate brokerage industry with the consumer. Not all brokers agreed with this strategy either, but this group placed enough pressure on these platforms to make the change happen.
Only sellers matter?
The incentive to “partially” hide DOM comes down to this:
1) Give the sellers a “break” after two years of softening price trends.
2) Address the sellers’ concerns about extended marketing times during the pandemic.
3) But the primary reason is that real estate brokers didn’t want to lose their listings if the sellers removed them from the market and returned to the market later with a new agent.
Why this effort was wrong
NYRAC and several real estate agents said to the effect, “the buyer or seller can still look at the listing history to know how long a listing has been on the market. That data was never removed.”
I always respond with “Then why hide it in the first place?” To brokers in favor of this temporary rule who wonder why I appear to be obsessing about a nuance I say, it is never appropriate to manipulate data, made even worse by the primary motivation behind this action.
Ignoring the buyers
This “solution” ignores the buyer’s position in a sales transaction and yet last time I checked, buyers are on the other side of every sale. Any effort to partially or fully hide DOM results or any other market metric conveys the wrong message and smacks of the old “information gatekeeper” mentality, no matter the state of the market.
Recently, the official word came down that all days between the shutdown and the reopening will count as “one day” for the DOM calculation presented to the public.
Going forward I have the following questions:
- Are we to anticipate a suspension of DOM anytime there is an unexpected external event that impacts the housing market (9/11, The Lehman Brothers bankruptcy, Super Storm Sandy)?
- Who makes the call to do this? A trade group, a regulatory body, a for-profit platform?
- Do we think that buyers and sellers of real estate are unaware of the 90+ day COVID-19 market shut down? Will a new listing added today as the market opens with 1 DOM will sell differently than an identical property with a 91 DOM listing that sat through the 90+ day COVID-19 lockdown?
The market doesn’t care what the brokerage community thinks (or what I think). The act of intentionally hiding or partially hiding data from the consumer is never justified in any scenario.