MIS 3090: IT for Financial Services Real Estate and IT August 27, 2015.
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Transcript of MIS 3090: IT for Financial Services Real Estate and IT August 27, 2015.
MIS 3090:MIS 3090:IT for Financial ServicesIT for Financial Services
Real Estate and IT
April 21, 2023
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Fannie MaeFannie Mae
Originally the Federal National Mortgage Association, founded by Congress in 1938
– part of FDR’s New Deal initiative Buy mortgage loans from banks and other
institutions and package them into mortgage-backed securities which they sell to investors
They independently provide mortgages to people with bad credit or mortgage with unusual criteria such as zero down payment or interest only loans
Traded on NYSE (Ticker: FNM)
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Freddie MacFreddie Mac
Federal Home Loan Mortgage Corporation Competes with Fannie Mae Also buys mortgages in the secondary market They also provide mortgages to people with
bad credit Traded on NYSE (Ticker: FRE)
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Industry BackgroundIndustry BackgroundReal Estate Industry GDP, 1991 and 2001 *
Note*: The real estate industry includes all economic activity of owners, lessors, lessees, buyers, sellers, agents, and developers of real estate. Companies engaged primarily in the construction of buildings for sale (operative builders) are classified under the construction industry.
Source: Bureau of Economic Analysis, U.S. Commerce Department
$689.1
$1,171.7
$0.0
$600.0
$1,200.0
1991 2001
Trillion
GDP, 1991 and 2001 Contribution to Total GDP
11.5% 11.6%
0.0%
7.0%
14.0%
1991 2001
PercentOf Total
+70%
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New Home SalesNew Home Sales
New Home Unit Sales, 1968 to 2002*
Source: U.S. Bureau of the Census, 2003
Thousands
Annual Change,1997 – 2002: 4.6%
0
600
1,200
68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02
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Existing Home SalesExisting Home Sales
Existing Home Unit Sales, 1968 to 2002*
Source: National Association of Realtors, 2003
Thousands
Annual Change,1997 – 2002: 4.7%
0
3,000
6,000
68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02
Approx 4 times the rate of new homes
11/37April 21, 2023
Declining Mortgage RatesDeclining Mortgage Rates
Source: Freddie Mac, 2003
Mortgage Rates, 1984 to 2003
2%
9%
16%
30-Year FRM
1-Year ARM
84 029286 88 90 94 96 98 00 03
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Supply of HomesSupply of Homes
Increased housing demand kept unsold home inventory at historically low levels.
Source: National Association of Realtors; U.S. Bureau of Census, 2003
Month’s Supply of Existing and New Homes, 1991 to 2001
3
6
9
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Existing Homes
New Homes
4.6
4.1
8.9
8.1
MonthsSupply
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Looking Forward …Looking Forward …
Future housing demand will also be influenced by the increased use of mortgage debt which was expected to continue to rise through 2010.
Source: Federal Reserve Board, 2003
Single Family Debt-to-Value Ratios, 1952 to 2010e
10%
35%
60%
2010e1952 2000199019801960 1970
MortgageHome Value
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U.S. ImmigrationU.S. Immigration
Source: Bureau of Citizenship and Immigration Services
Immigration to the U.S., 1950s – 1990s
2.53.3
4.4
7.3
9.3
0.0
5.0
10.0
1950-1960 1960-1970 1970-1980 1980-1990 1990-2000
Million
Immigration into the United States, which continued to grow, will have a significant impact on home ownership rates in the years to come ...
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Growth in Online UseGrowth in Online Use
Use of the Internet as an information source in buying a home increased significantly.
Source: “2001 Realtors & The Web,” National Association of Realtors; 2003 National Association of Realtors Profile of Home Buyers and Seller; Harris Interactive; Kannon Analysis
Penetration of Online Search in Home Purchases, 1995 - 2003 *
2%
41%
65%
0%
40%
80%
1995 2001 2003
Percentof Total
PC Users PC Users Online
50%
73% 75%
9%
69%64%
0%
50%
100%
1995 2001 2003
Homebuyers Searching OnlinePercentof Total
PC & Internet Penetration, U.S. Adults (18+)
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Sources of InformationSources of Information
Note(1): Only of those homebuyers who used each source.Note(2): Agents are licensed sales workers who provide their services to a real estate broker on a contractual basis. Brokers, on the other hand, are
licensed business people who sell real estate owned by others. Brokers manage their own brokerage company, advertise properties, and handle other matters related to the business. Brokers manage and supervise agents. The term Realtor is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors.
Source: 2003 National Association of Realtors Profile of Home Buyers and Sellers
Usefulness of Information Sources, 2003 (1)
(Top Box Response = Very Useful)
9%
15%
23%
30%
40%
45%
48%
57%
71%
0% 50% 100%
Television
Relocation Company
Home Book or Magazine
Newspaper Ad
Builder
Open House
Yard Sign
Internet
Real Estate Agent
Percent ofRespondents
(2)
Where do homebuyers find their information?
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Information Sought Information Sought OnlineOnline
When going online, the majority of home buyers searched primarily for information on properties for sale.
Source: 2003 National Association of Realtors Profile of Home Buyers and Seller
Type of Information Sought Online, 2003
93%
22%
6% 4%
0%
50%
100%
Properties ForSale
InformationAbout An Area
Real EstateCompany
Real EstateAgent
Percent ofRespondents
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Value of Online Features Value of Online Features
Features valued most highly by home buyers searching online were photos and detailed property information.
Source: 2003 National Association of Realtors Profile of Home Buyers and Seller
Value of Online Features, 2003
26%
32%
40%
47%
77%
78%
0% 50% 100%
Ral Estate Agent Contact
Neighborhood Information
Interactive Maps
Virtual Tours
Detailed Property Information
Photos
Percent ofRespondents
Enter Google Maps…
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Jay Burnham
123 Main Street
Coldwell Banker Coldwell Banker (Example)(Example)
Multiple Photos
Finance Tools
Easy ways to contact mefor more information
Extensive Details
Save to your profile
Coldwell BankerResidential Brokerage54 Dodge StreetBeverly, MA 01915
Call me direct: (978) 233-2828
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Websites UsedWebsites Used
Source: 2003 National Association of Realtors Profile of Home Buyers and Sellers
Websites Used As Information Source, 2003
9%
3%
5%
9%
19%
29%
38%
39%
53%
0% 30% 60%
Other Websites
MSN House & Home
Real Estate Magazine Website
HomeSeekers.com
Local Newspaper Website
Real Estate Agent Website
Real Estate Brokerage Website
Multiple Listing Service
Realtor.com
Percent ofRespondents
www.bostoncondos.com
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Key Online Competitors …Key Online Competitors …
Top Real Estate and Rental Sites, March 2003
Source: Nielsen/Net Ratings, 2003
Time Spent On Site
32 minutes
7 minutes
5 minutes
8 minutes
22 minutes
5 minutes
14 minutes
9 minutes
14 minutes
9 minutes
Unique Audience
4,583,000
3,611,000
1,175,000
1,091,000
979,000
767,000
730,000
688,000
567,000
469,000
Brand/Channel
Realtor.com
Homestore.com
HomeGain.com
Yahoo! Real Estate
Century 21
RE/MAX
Coldwell Banker
Apartments.com
Rent.com
ZipRealty
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Business Model Business Model (Homegain)(Homegain)
HomeGain charged Realtors $29.95 month to subscribe to the site. Members receive an average of 30 real-time buyer and seller leads per month.
Leads include such information as address of home for sale, number of bedrooms and bathrooms, approximate total square footage, property type (for example, single family detached), and desired selling price.
Realtors also pay a referral fee to HomeGain if the lead results in a closing. The referral fee is 25% of the gross commission.
Note*: Assumes two sides to the transaction and a total commission rate of 6%. Realtor’s commission is before any broker’s split of the commission, if applicable.
Source: Company articles and web site, 2003
Example of Referral Fee *For example, Realtor receives 3% gross commission on a
$150,000 sale Realtor’s gross commission ($150,000 x 3%) $4,500 Referral Fee to HomeGain ($4,500 x 25%) $1,125 Realtor's commission ($4,500 - $1,125) $3,375
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Real Estate Broker Real Estate Broker CommissionsCommissions
The Bureau of Economic Analysis estimated that real estate commissions reached over $67 billion in 2002. The average commission charged on home transactions dropped to 5.12% in 2002 from 5.48% in 2001
Estimate of Real Estate Sales Commissions, 1997 to 2002e*
Note*: Assumes a constant commission rate of 6%.Source: U.S. Bureau of Economic Analysis Estimates, 2003
$41.5$48.8
$53.9 $56.2$60.0
$67.3
$0.0
$40.0
$80.0
1997 1998 1999 2000 2001 2002e
In BillionsAnnual Change = 10%
30/37April 21, 2023
Disintermediation Disintermediation PotentialPotential
The potential disintermediation of newspapers is foreshadowed by brokers’ investments to build their presence online.
Internet Presence of Real Estate Brokers, 2000 and 2002
82%
87%
80%
85%
90%
2000 2002
Percent Of Brokers
Source: The 2001 National Association of Realtors Member Profile; The 2003 National Association of Realtors Member Profile
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Website ActivityWebsite Activity
52% of brokers with websites reported getting at least eleven online inquiries in 2002, but. 70% of then said that no more than 10% of their total business came from their websites.
Website Activity of Real Estate Brokers, 2002
13%
35%
25% 27%
0%
20%
40%
None 10 orLess
11-30 30+
Percent Of Brokers
Source: The 2003 National Association of Realtors Member Profile
Brokers by Website Inquires
Number ofInquiries
32%39%
16%12%
0%
25%
50%
None 10% orLess
11% -25%
26%+
Percent Of Brokers
Percent of Business From Website
Percent of BusinessGenerated by Website
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For Sale by OwnerFor Sale by Owner
The primary reason cited by sellers for selling direct or FSBO was their desire not to pay agents’ commissions, though a large number also knew their buyer directly.
Source: 2003 National Association of Realtors Profile of Home Buyers and Sellers
Most Important Reason For Selling Home As FSBO, 2003
FSBO14%
Real EstateAgent83%
Home-buying
Company1%
Other2%
Method Used to Sell HomeReasons for FSBO
3%
4%
4%
8%
10%
25%
46%
0% 25% 50%
Other
Seller has own license
Agent was unable to sell home
Did not want to deal with agent
Buyer contacted seller directly
Sold to relative, friend, or neighbor
Did not want to pay commission
Percent ofRespondents
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For Next Class…For Next Class… Guest speaker, Mr. Rick Burke from Commerce Bank Read
− Internet Customer Acquisition Strategy at Bankinter− Case questions will be posted shortly
36/37April 21, 2023
QUESTIONS?QUESTIONS?
???
37/37April 21, 2023
THANKS!!THANKS!!
GO CATS!!