All week, Inman is taking a Deep Dive into eXp Realty. We’re talking to key executives, unpacking the company’s strategic moves and reporting on the EXPCON event — taking place this week in Las Vegas. Stay tuned in the coming days for more on the tech-focused brokerage, and for future Inman Deep Dives into other top companies.
It’s a big week for eXp Realty.
Though eXp is famous for being a virtual brokerage, the company has also long gathered together periodically for in-person events. These events grew into a core part of the firm’s DNA, and they eventually included thousands of attendees.
Then COVID-19 struck, and like many companies in real estate, eXp stopped holding in-person gatherings.
However, this week eXp is once again gathering together for EXPCON, a recurring event that this time around is taking place in Las Vegas. Thousands of eXp agents, along with celebrity speakers and company executives, will be on the ground for the event, which spans three days.
To get a sense of what the event will be like, as well as what’s in store for eXp and the housing market, Inman caught up with company founder and CEO of parent firm eXp World Holdings Glenn Sanford.
The conversation touched on everything from possible bubbles to the metaverse, and the takeaway was that Sanford is upbeat both about eXp specifically, and the industry generally.
What follows is a version of Inman’s conversation that has been edited for length and clarity.
To begin I wanted to ask about the metaverse push from Facebook. When I saw this news, the first thing that went through my mind was that Facebook is becoming eXp. But what was your impression and do you guys talk to Facebook at all?
We do talk to Facebook occasionally because of VirBELA.
Where we’ve always gone is to the 2D version of the 3D immersive experience. Meaning we do it from the desktop, from the laptop. Now from our phones. Through FrameVR.io, we’re able to actually hook together multiple spaces.
We’ve been doing a lot of this stuff that Facebook is getting ready to do. It’s not clear exactly what it is that they are planning to do. I’ve seen some really unique walk throughs. A lot of the stuff looks very similar to what Second Life was doing in 2007, 2008, 2009 — but with richer graphics.
So then the challenge is what exactly do you do in a metaverse? What we recognized in 2009 was by having a virtual campus that was dedicated to residential real estate, everybody on campus had something in common. That for us was a big catalyst for actual usage.
I think what Second Life found out is that if you just randomly put people together, yeah it’s intriguing for a little while but there aren’t enough serendipitous collisions to make it meaningful. So that’s why their population went down.
Talk to me about your latest earnings report. You just had another successful quarter. A number of other companies have published successful reports lately too, but the degree of eXp’s results has been notable. Why have you been able to pull ahead in some regards?
There are a couple of reasons. Obviously, the way we innovated around agent compensation has been a big driver of our growth. But just as importantly, we operate with such a low cost that it allows us to run a comp model where agents get generally better compensation than they would at a brick-and-mortar counterpart.
So that makes it work better and that’s the future. At CEO Connect I mentioned that over the next five years, 20 to 25 percent of agents — and this is just me doing some back of the napkin math — will be working for basically brick-and-mortar-light or cloud-based brokerage operations. And we believe that we’ll be the primary company doing that.
You mentioned agent compensation, which raises the issue of stock prices. Yours has been on the rise for months. But also, eXp’s share price hasn’t recovered to the highs it was at in February — which of course is also true of a lot of real estate companies right now. Why, with strong earnings reports and other success, don’t investors have as high an appetite for real estate stocks as they did a few months ago?
If you go back say, 18 months, to June of 2020, our stock was effectively an average of about $6 to $12 per share. It hit an all-time high at that point of what would have been about $9 to $10 on a post-split basis. Pre-split, $19 a share. And now were at $46, $47 a share. So we’re still four to five times the highest price we were up through mid last year.
What ended up happening was a couple of things.
One, obviously we were putting up good numbers. But two, there were a number of people who had made big short bets against us. So I think a lot of people jumped on the short bandwagon and the big spike was the short covering when they found out their bet was wrong.
I think some of it was not fundamentals going to $90, it was the fact that we had a bunch of short covering. So I think actually we’re in a fairly good range now.
My whole mission is to make sure our agents are able to get something meaningful over time. It’s not healthy in my opinion to have the stock sitting at $90 when it’s technically maybe worth $48 or $50. So for us, we don’t really think about stock price other than it should reflect our fundamentals.
You also mentioned in the earnings report “new verticals.” What are these new verticals? Where are you generally going?
Certainly mortgage is a big one. Success Lending and our partnership with Kind Lending and Glenn Sterns. That’s going to be, I think, a big one.
That’s probably going to be the biggest one that we’re going to be working on, really the affiliated services stack: mortgage, title and escrow, moving services, utilities — all the things that consumers are going to look for.
We’re talking to some of our partners about how to create an experience that allows consumers to plug into those more easily.
Let’s segue into EXPCON. What’s the gathering going to be like and what are you excited about?
To some extent, it’s education training. But it’s also a celebration of what we’ve been building together.
We’ve got a bunch of keynotes with a lot of pretty high profile folks. Obviously we’ve got a relationship with Grant Cardone. Glenn and Mindy Sterns will be there. We’ve got Venus Williams who will be speaking. Mario Lopez will be doing stuff for our awards gala.
We’ve got a really unique mix of celebrities, plus we’ve got a lot of agent-led sessions helping agents do more business.
Is there a theme or thesis for this year’s event?
We haven’t really themed this out other than it’s great to get together again after two years. That’s probably the biggest thing.
It’s really about the world opening up again, so let’s take advantage of it.
Talk to me about the world opening up again. How do you see the next six months in housing and real estate playing out?
I think we will see some more normalized seasonality. That’s partially driven by the idea that maybe our 30-year fixed mortgage rates are going up. The Fed is tapering on their bond purchases, which will probably drive up interest rates a bit. So I think that that makes a more normal market.
I think that none of us expected to see the market that we saw in the last basically 17, 16 months. It’s just been the busiest market. It was busier than 2006, 2007 in terms of just the amount of activity that was going on. But for different reasons. A lot of people were moving because they were working from a home office.
But I think it all comes down to interest rates and what the Fed is doing. Since 2008, 2009, we’ve been in very much a stimulated housing market. And I don’t know how the Fed fully gets out from that business of stimulating the market. I think that’s a longer ordeal because there’s so much investing in keeping the economy going.
So for the next six months I think we’re okay but after that I’m not sure how it plays out.
You mentioned 2007-09. But the big story from that time was that there was a bubble that popped. Are we going to see that happen again?
We’ve never had the same bubble twice. So you think about dot com, you think about the different bubbles that have taken place, we just had the housing bubble.
There may be a slow deflation of the balloon. But unless there’s something else that’s systemic in the economy, like if the stock market had a big issue, that could spill over into the housing market. But I think the housing market in general is going to be on a soft landing rather than what we saw in 2008.
Every 10 years there’s something that happens. This time it was COVID. Who predicted COVID? Prior to that it was the housing market. Before that it was the dot com collapse. You can go back and every 10 years or so there was something that happened to the market.
Could something happen one and a half years after the last one? Maybe, but there’s usually a longer time frame between these sort of big impacts to the market place.
Finally, last question: What’s your takeaway from the Zillow Offers news?
One, my hat’s off to Zillow for innovating and trying to see what they could do and getting into that space. We’re doing something similar with Express Offers.
I think Zillow is going to continue to innovate. They’re going to continue to push the envelop. Pay attention to what they’re going to do next because I’m sure it will keep all of us on our toes.
Do you think it says anything about iBuying in general?
IBuying is pretty easy to do when the market is going up. If the market actually moderates or we see a little bit of a correction, that’s when we’ll really find out if iBuying is sustainable.
I don’t think iBuying is sustainable in all markets. I think it’s good in an opportunistic market. The last six to eight years or so it’s been a very opportunistic market because you just hold onto property for six months and even if you bought it wrong, you can get out of it.
But I think right now we’re seeing that if you’re buying at the top of the market, overpaying isn’t as good a strategy anymore.