What Is Weakening California’s Real Estate Market? How Inflation Is Changing California’s Market

The California housing market is one of the most dramatic in the country. Home prices are soaring, but at what cost? What's weakening this market, and how can you prepare for it? This episode will discuss what factors are weakening the state's real estate market, including high home prices and sales volume, and more.

Transactly organizes and coordinates the very messy and often chaotic closing of a real estate transaction. Whether you’re a real estate agent, broker, team, or an entire office, you can use our application or one of our Transactly Coordinators to organize and manage your home sale transactions. For More Information Visit- https://transactly.com/

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What Is Weakening California’s Real Estate Market? How Inflation Is Changing California’s Market

California, where?

More so in California.

I live in San Francisco, the Bay Area. We have one of the hottest markets in real estate. I don’t know what’s driving. Is it the SF hype that’s migrating towards the next hot place, which could be something like Austin or Miami or is it different forces at work? It’s nothing to do with the tech workers here. It’s something else. Is it the taxes? What is it?

It’s a good mix of a lot of those things for a lot of people. We’ll see what happens now that the pandemic is maybe winding down a little bit if people start forcing employees to come back into offices. A lot of talent in San Francisco was fed up with the house prices and found somewhere where maybe it was a little less costly to live if they didn’t have to come into the office.

Having said that, it’s not necessarily that the housing market is weakening in San Francisco. There’s inflation going on. House prices are increasing everywhere. It’s perhaps the disparity between the rental side and the sales side where the rents have declined. Although they’re climbing up slowly again, house prices haven’t budged as much. My opinion is this inflation.

Speaking of hot markets, another market is Blue Field Capital, which is a private equity fund. We buy real estate and we also invest in prop-tech startups. Salt Lake City, where some of our team is, is a hot market. It’s becoming more and more common now. You’ll get twenty offers on a home. People are waiving contingencies and starting to do what was happening in markets like San Francisco, buying unseen. That’s crazy, all cash offers. It’s interesting. To me, it’s scary.

I look at this example. I will scrutinize some of the smallest purchases like the book I’m going to buy next or an electronic gadget. I have a hard time spending a couple of $100 for a new pair of shoes. Whereas I have no problem buying a bunch of Bitcoin or betting on a home and doing things like that. It’s interesting human psychology. Somehow humans like the game and the transaction thrive on momentum. There’s an ancient concept we all know, and that’s buyer’s remorse. Sometimes, it’s seller’s remorse, too. That’s a play here.

People like to go with what is hot as well. We’re saying the same thing here. You see it in and you tend to gravitate towards those things. Salt Lake City is interesting. We’ve gone remote as a company. We found an incredible amount of talent coming out of Salt Lake, more than most other markets that were advertising job postings. We didn’t anticipate it. Is that because the markets are hot? Are there more people moving there? I don’t know. I haven’t dug into much.

People like to go with what is hot.

I’ve got an opinion on this. My opinion is that Silicon Valley, San Francisco was the place everyone wanted to be because of all the tech happening and people like the weather. Until you live in the city and you realize our summers are like winters, they’re a lot colder. A lot of people start to look at places like San Diego and LA because there are beaches and they like beaches, and Miami, Florida, because they like that, too.

There are people that love winter sports. Everyone I know who is in Salt Lake City loves the proximity. It’s easy to get from Salt Lake City to somewhere like Park City and go skiing and snowboarding versus here. Getting to Tahoe, when everyone else is going there, can be a 5 or 6-hour journey. You can be stuck on the highway. It’s a lifestyle choice for many people.

In the same way, a lot of people who are migrating to Oregon before. Places like Bend, Oregon, for example. They liked nature. Cities now are offering something as their differentiator. What Utah offers there perhaps are great winter sports and a lot of extreme weather. The extremity is big. Perhaps that’s one part of it, and that’s my opinion.

Maybe it’s a fluke. A lot of the talent loves winter sports. Who knows?

It could be. On the running of a company side, what advice do you have for founders? You’ve been growing Transactly. You guys are scaling pretty fast. Any lessons you’ve learned that you’d like to share?

This isn’t the first time I’ve done it. This one was the one where we’ve moved and grown incredibly fast. We stumbled across this tech-enabled service aspect. We provide transaction coordinators on top of a platform. For anyone else, we provide a platform where people can manage transactions themselves using our software, these are agents and teams, or they can hire tech-enabled coordinators and do it for them.

We originally launched being pure software. We thought, “Agents are going to sign up in droves because this is a technology that’s going to help them coordinate the transaction instead of using spreadsheets that they typically use.” It’ll help get all the other parties involved, ultimately delivering that client experience. We gained a lot of feedback quickly.

PTVC 125 | California Real Estate Market

If it’s anything, the advice is to get a ton of people in as quickly as you can, dig in, listen to them, and test that stuff. What we found is most agents, either their coordinator was using it or a lot of them were like, “It’s cool but I don’t want to use it. I don’t want more technology.” We did dig into that second cohort and it was like, “Who would do it? Who’s the first cohort was using it?”

There were a lot of other tests around the demand for that nationwide. This is not anything new. It’s a cliche pivot. It’s the process that you learn going through that of digging, listening, and trying to cram something down someone’s throat. We see that a lot in the industry. A lot of people are trying to push new things into the market without listening.

Bryan, to be clear, when you’re talking about getting people in as fast as you can, you don’t mean hiring people for the sake of hiring people. You mean customers.

Customers and users. We took an interesting approach to get potential customers. It was time-consuming. We built a ton of content around home buyers and sellers. The idea was if you’re going to get an agent’s attention, give them a lead or business. When we launched, it was like, “Agents, we have leads for you.”

We built a ton of content. We’re able to get buyer and seller leads and we’re looking for agents in their area. We delivered leads to the agents and we said, “Here’s the catch, we give you the lead but you’ve got to use the software and the application and give us feedback.” It worked tremendously in getting a lot of feedback quickly.

This is an example of understanding your customer and what motivates them. As an entrepreneur, you can sit there and build the most sophisticated technology platform in the world, expect to launch it and droves to come and use it. Why wouldn’t they use it? It’s beautiful. It improves their workflow. The hard thing about an entrepreneur is you have to speak them in their language.

If an agent’s going out and they want leads and sales, you downright need to go and do that for them. You then bring your platform in as part of that. I built an advertising platform and we were targeting game developers. It’s one thing to email a developer and say, “Integrate my technology. Run ads. Advertise on my platform.”

A lot of people are trying to just push new things into the market without actually listening.

I was obsessed. I played these games non-stop until I’d be in the top ten for some of my favorite games. I message them with a bunch of feedback. Every founder wants to hear feedback from a consumer. It means a lot to them. I’d say, “By the way, I also think you have an opportunity to make money putting ads in your app. Here’s our platform.” That was not a scalable way to try to be a top ten gamer. It was probably healthy procrastination on my part.

You have to do that stuff to start. You have to do those things that don’t scale, like talking to every single one of those people. Now, we’re at a stage where it’s becoming hard to do that. You would do it in a more skilled capacity. Our success team does it. You then get to the point of data. How do we glean these things from data? I would keep that as long as you possibly can talking to those customers at those early stages. Even now, there are still a number of early customers that I still reach out to on a regular basis. As things have changed in our company, our product has changed for their feedback. I have to have it.

It’s one of those lessons where some people learn through advice, and other people learn through making their own mistakes. Sometimes, this isn’t a mistake like I tripped over, got up, and realized not to step. I launched a company and I failed many years past. I launched another company and failed many years past.

Now, I learned I need to go talk to customers. It’s that wisdom that you may hear on a podcast and you may think, “I go talk to customers.” It’s not until someone like you and I have run companies appreciate. This is like a religion. You have to talk to customers, bring them in, and do that as fast as possible.

It’s a hard job, though. I’m sure you can relate because you can’t get defensive. You’ve got to listen. You have to take some of it with a grain of salt. It’s fleshing out whatever the common denominator is across many conversations, not just 1 or 2.

There’s inertia here because this is an emotional process and you’ve got to run it in the most logical way possible and not emotional. You’re right, you’ve got an idea and you’re sure it’s going to work. The last thing you want is someone telling you, “It’s not going to work.” I appreciate that, especially if it’s a friend or whoever else.

It’s dangerous to get advice from people like that because they’re not the end-user. You build this and you put so much energy into it. A customer comes in and asks for a small change. That small change could be a massive change on the technology side, like rewriting the whole platform and changing the value proposition.

People don’t see it under the covers.

This is advice that I stress for any entrepreneur. It’s the thing that matters. I speak to a lot of founders. At the beginning of that journey, you might give them feedback and they have every right to ignore your feedback. You might also give them ideas and they’re receptive to ideas, “That’s an interesting idea.”

Now, those same entrepreneurs, after a couple of failures, you talk to them, and they’re like, “That’s a good idea but I need to get advice on that. I need to go talk to some customers.” “Sure, but how will I know customers will use this?” The whole language changes. It’s not like, “That can make a lot of money.” It’s, “How do I find the right customer?” It’s about execution. It’s fantastic advice. I appreciate you coming to this show. How can people reach you? What’s your pitch to the audience here for how they might use Transactly?

Even though we get involved with everyone from the buyer and seller to title companies and lenders, our primary customers are agents, real estate teams, and brokerages. They use us to be more productive. We save them a significant amount of time. The value prop for them is if they don’t have to do these facilitative tasks and coordinate a lot of these things, they can go out and gain more business. That’s what we free them up to do. I’m not sure if your audience is agents and teams.

They’re mixed, everything from people in the real estate industry like agents themselves, property managers, CEOs, executives of real estate companies, investors, and students. You’ve got other VCs and entrepreneurs, the whole wide world, 7 billion people tuning in. It’s not quite but a small fraction of that but still.

Anyone can reach out to me by email. I have no problem sharing. It’s Bryan@Transactly.com.

It was great having you on the show. Thank you so much.

I appreciate it. Thank you. It’s a pleasure.

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Understanding the Real Estate and Property Management

https://www.youtube.com/watch?v=pfU0K-CXEcs

The Role Of A Property Management Agent

https://www.youtube.com/watch?v=VAWgmWc3lrg

Pros and Cons of Being a Real Estate Agent

https://www.youtube.com/watch?v=IoUy4l7BZv8

About Zain Jaffer

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as “Forbes 30 Under 30”, “Inc. Magazine’s 35 Under 35,” and the “SF Business Times Tech & Innovation Award.” He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.