2004 was another year of record success in real estate. But perhaps more importantly, online real estate made a big comeback. The public debut of ZipRealty and HouseValues, along with real estate heavyweight Cendant entering the online lead business, and a major lawsuit victory for online real estate advertiser ForSaleByOwner.com were among the highlights for this sector in 2004. Along with the triumphs, several controversies also surrounded the industry, topping off the list of this year’s biggest real estate news stories.

Here’s a list of our picks for 2004’s real estate highlights:

Federal agency to probe online real estate. In November, House Financial Services Committee Chairman Michael Oxley (R-Ohio) shook the real estate industry with his request that the federal government study restrictions placed on Multiple Listing Services and their impact on home buyers. Oxley asked the General Accounting Office to assess and report on four main areas of the Web and real estate, paying particular attention to the role of MLSs, as well as the legal and practical effects of the National Association of Realtors’ rules for online home listings display.

Cendant gets into online lead business. Real estate giant Cendant in November joined the growing number of companies entering the online lead business with the purchase of the LeadRouter system. With LeadRouter, Web data entered by a consumer is immediately converted to an automated phone call to an agent, and a digitized voice reads relevant information about the nature of the query and the consumer’s contact information. All of the brokers in Cendant’s five real estate brands – Century 21, Coldwell Banker, ERA, Sotheby’s and Coldwell Banker Commercial – can choose to implement the system.

Realtor.com partners with MSN. In early January, Homestore announced that Realtor.com would become the exclusive provider of integrated home listings and Realtor directory content to MSN’s House & Home real estate Web portal. The 4 million-plus unique visitors that go to MSN House & Home each month now have access to more than 2 million property listings from Realtor.com. By expanding on its relationship with MSN, Homestore was aiming to build the largest online audience for Realtors and their listings.

Online real estate scores big win in ForSaleByOwner.com ruling. Ending a three-year dispute in California, a federal judge in November ruled that Web publisher ForSaleByOwner.com does not need a real estate broker’s license to publish real estate advertising and information online. The court found that there is no distinction between newspapers and online advertising sites like ForSaleByOwner, and that forcing advertisers to obtain a broker’s license is in violation of the First Amendment.

LendingTree buys a lender. Online lending and real estate exchange LendingTree became a lender itself earlier this year with the purchase of HomeLoanCenter.com, an Internet-based direct mortgage lender. Some lenders in the company’s referral network questioned the impact the acquisition would have on the quantity and quality of leads they receive from LendingTree. But the company said HomeLoanCenter.com would be taken off its referral network once the deal closed so it would not compete with the company’s other lender partners.

Prudential partners with Yahoo!. Prudential Real Estate Affiliates gained a powerful marketing and sales channel for its brokers when it teamed up with Yahoo!. Now visitors to Yahoo!’s real estate pages can access detailed real estate listing information from a Prudential broker in their selected market area.

Online real estate goes public. Two online real estate companies had successful IPOs this year, HouseValues and ZipRealty, creating nearly $800 million in investor value. HouseValues, which generates online leads for real estate agents, generated revenues of $33.3 million for the first nine months of 2004. ZipRealty, an online real estate brokerage, generated revenues of $44.7 million in the first nine months of the year. Many say the successful IPOs validate the online real estate space, proving the Internet has caused significant changes within the industry.

Barry Diller makes first real estate appearance. Inman News welcomed media mogul Barry Diller to the Real Estate Connect 2004 conference in San Francisco in July. Diller, CEO of media conglomerate InterActiveCorp, caused a stir when he entered real estate last year with the company’s purchase of LendingTree. Since then, the company has added several other real estate pieces to its business, including ServiceMagic, RealEstate.com, Domania, GetSmart and iNest.

Fed goes on short-term rate hike binge. For the first time in four years, the Federal Reserve’s Open Market Committee raised its target for the federal funds rate at the end of June. That 25 basis point hike was followed by four more 25 basis point increases, bringing the target rate 2.25 percent by the end of this year. Mortgage rates have not followed suit yet, and home sales have remained brisk. Most economists, however, are predicting mortgage rates will rise slowly throughout 2005 as the Fed continues its march toward a neutral monetary policy.

HUD dumps RESPA reform proposal. The Department of Housing and Urban Development in March withdrew its controversial proposal for changes to the federal Real Estate Settlement Procedures Act. The original proposal–which would’ve changed the disclosure requirements for mortgage broker fees, simplified the good faith estimate form, and permitted the sale of guaranteed-price bundled packages–sparked much opposition from within the real estate industry. Many argued that such changes could seriously impact the competitive dynamics of the industry and cooperation among companies. HUD’s withdrawal silenced the issue temporarily, but most industry officials believe RESPA reform is not dead.

Fannie Mae gets caught up in accounting scandal. Fannie Mae’s federal regulator, the Office of Federal Housing Enterprise Oversight, in September released a report outlining accounting problems in which the mortgage giant was not following Generally Accepted Accounting Principles. The report led to several shareholder lawsuits, a Congressional hearing and a formal investigation by the Securities and Exchange Commission. The SEC recently advised Fannie Mae to restate its earnings for past years; Fannie Mae reported that such a correction would mean the company might have to record $9 billion in previously unreported losses. The ongoing scandal has led the company’s board of directors to meet for discussions on the future of its top executives.

Online home listings remains in spotlight. The Justice Department continued its investigation this year of the National Association of Realtors’ policies for online display of home listings. The NAR’s latest policy, which passed in May 2003, is the subject of the ongoing probe. The trade group has held off on implementation of the policy until July 2005.

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