Think-Realty-Magazine-January-2018

COVER STORY

SVENJA GUDELL ZILLOW

kind of information has such a tremendous effect on a homeowner’s life,” she said. Six years after that initial project, Gudell is fully committed to Zillow’s stated mission of shedding light on the dark places in housing and helping homeowners, real estate investors, and housing professionals make informed decisions about their personal interests in real estate. “Everyone has an interest, whether they know it or not, in real estate. Everyone has to live somewhere. To me, the more and better access everyone has to information about real estate, the better the market will perform and the better off consumers will be,” she said. “As economists, we sometimes talk

about these things in ‘nerd fashion,’” she laughed, “but really, it’s so important to get as much information from as many reliable sources as you possibly can. Whether you’re buying a home or buying an investment property, a real estate purchase is likely one of the biggest purchases you are going to make. You shouldn’t just be crossing your fingers. You should know what you’re dealing with. Data, information, and analysis help you do that.”

2011, the company was well-established but not necessarily well-known. “When I applied for an economist position here, I actually thought, ‘Oh, what a funny name,’” she recalled. Today, the real estate data giant tracks the value of more than 110 million homes using its trademarked Zestimate and is ubiquitous in real estate circles, although some real estate professionals certainly utilize the website and its data more than others. For Gudell, however, the main point is not providing ammunition to a buyer or a seller, as is so often recounted with chagrin by those who are not necessarily avid fans of the company, but to shed light on all of the information and data available so that consumers, investors, and policy- makers have as much information as possible at their disposal when they are making decisions that affect their lives, their families, and their constituents. “Zillow is a great starting point for information, but it’s a starting point,” she emphasized. “For example, the human element is really important. I think pretty much everyone, homebuyers and investors alike, should be talking to their local agents. Not just talking about home values and how fast they can buy or sell, but also about what winning strategies might be working in a specific area.” She added, “In today’s market, it is so hard to buy a home. Never before have we seen such high levels of demand being met by such low levels of supply in the housing market. That is meaningful for everyone involved in a real estate transaction because if you do not do your due diligence, if you fail to conduct enough research into your market and your purchase, you will leave money on the table. “We are seeing so many problems in markets where people cannot make the math work anymore. They cannot ‘catch

the train’ and become a homeowner because home values are just racing away from them. The values are moving upward too fast, and incomes aren't keeping up.”

be expensive and not necessarily defined. These things can make a market function less smoothly and create an inefficiency that an investor can fill.” Gudell cited Detroit, Michigan, as one such market. According to the New York Times, Bank of America and JP Morgan Chase, both of which can trace their roots back to Detroit and financing its legendary auto industry, made a total of 24 home mortgage loans in Detroit in 2016. Quicken Loans, known for founder Dan Gilbert’s passionate support of the Motor City, made 170, more than any other lender. Detroit has a population of about 637,000. Analysts blame the massive lack of traditional mortgage lending in the city on

SVENJA GUDELL started at Zillow in 2011 with her first project of calculating negative equity, and she’s probably one of the few homeowners in the country who would tell you that the topic has “a special spot” in her heart. However, that special spot, such as it is, is one of the driving forces behind the Zillow chief economist’s passionate dedication to housing data, both the expansion of the available volume and its accurate, in-depth, accessible analysis. “It was shocking to me at that time to do that research and find out how many people were underwater at the height of the housing crisis and to then realize how many people were still underwater. That

OPPORTUNITIES IN INEFFICIENCY

Due to the rate at which many desirable housing markets are appreciating, Gudell said that real estate investors, whose primary strategies tend to rely heavily on the ability to buy at a discount, add value, or sell at a premium, will find the most opportunity in 2018 in markets with what she labeled “inefficiencies” in their housing markets. These inefficiencies create gaps in the buying and selling

DIGGING FOR DATA (AND DETAILS) When Gudell started at Zillow in

low home values, cash-poor buyers, and difficulty getting loans to fix up properties to habitable standards. “In Detroit, the appraisal process is not working. It’s hard enough to get the bank to cover the initial purchasing price which, realistically, is often probably not more than $30,000 for many homes, and then you need a construction loan for $200,000 on top of that to make the home livable,”

process, and can include inventory shortages, flawed appraisals, a lack of construction materials and labor, difficulties with financing, and homes that will require a great deal of work to make them livable. In any of these instances, Gudell

I ALWAYS WANTMORE INFORMATION AND BETTER ACCESS TO INFORMATION

NEGATIVE EQUITY: The debt or potential debt associated with a property when the value of the property falls below the outstanding value of the mortgage note on that property. For example, if the debt on a property is $120,000 and the property is valued at $80,000, then the property has negative equity of $40,000 or may be described as “$40,000 underwater.”

AND DATA.” - SVENJAGUDELL

said, investors may find an opportunity to place themselves in the gap thanks to specialized knowledge, unique connections, or access to resources that others simply lack. “There are a lot of markets that are unaffordable because of limited inventory, so an investor who can access or create inventory is filling a need, addressing an inefficiency in the market,” she said. “Obviously, in many markets with limited inventory they would be building more homes if they had cheaper access to labor and lumber or if they could get lower land prices. Sometimes the issue is also that the regulations around new construction may

Gudell explained. “That is the kind of friction the homebuyers need to be working their way through or around by getting all of the information that they can about a market, including how to get a loan creatively or conventionally, and that real estate investors need to be watching closely so that they can create solutions to these problems and build their businesses.” She concluded, “I always want more information and better access to information and data. We’re making big strides toward this all the time. Zillow is just one group pushing in that direction.

Svenja Gudell's first project with Zillow focused on negative equity. She has had a soft spot for the topic and the homeowners it affects ever since.

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