While many experts are guessing the FED will pump the brakes on rate hikes, the real estate market is still recovering. 

As of March, a 30-year fixed mortgage came attached with a 7% interest rate. 

Combine historically high interest rates with rising inflation, and you get a large group of consumers with little purchasing power.

With the real estate market in flux, how are industry advertisers responding?

In a few words: real estate ad spending is mirroring the volatility of the market. 

Advertisers Started the Year with Good Intentions

In 2022, 11.9k real estate advertisers spent more than $2.3b on ads, representing decreases of 15% and 23% YoY, respectively—and if it wasn’t for jumps in Q1 (19% YoY) and Q2 (2%), those numbers would be higher. 

Overall, spending in the year’s first half increased by 10% YoY to $1.3b as the market maintained a pace that brought home sales to their highest mark since 2007.

In Q1 2022, house prices climbed by 18.7%, according to the Federal Housing Finance Agency House Price Index (FHFA HPI®).

William Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics, said, “High appreciation rates continued across housing markets during the first quarter of 2022.” He continued, “Strong demand coupled with tight supply have kept prices climbing. Through the end of March, higher mortgage rates have not yet translated into slower price gains, but new home sales have dropped during the last few months, with a significant falloff in April.​”

A decrease in ad spending followed.

In Q3, spending from real estate advertisers fell by 21% YoY, followed by a 45% decrease in Q4.

Overall, real estate spending dropped by 34% in H2, which makes sense given that July served as a launchpad for rising mortgage interest rates.

Real Estate Website Advertisers Continue to Spend

Advertisers in three corners of the real estate market—realtors, real estate websites, and mortgage lending—accounted for 75% ($1.8b) of the industry’s investment last year. 

Advertisers for realtors, including those from Apollo Global Management Group (Better Homes and Gardens Real Estate, Coldwell Banker Real Estate, etc.), Compass, and Lead & Prosper (Ideal Agent), spent a combined $1b.

Meanwhile, mortgage lending advertisers such as American Financing Corp, New Day Financial, and Rock Holdings (Quicken Loans and Rocket Mortgage) spent $232mm.

Advertisers in those corners saw their budgets decrease; realtors by 7% YoY and mortgage lenders by 53% YoY.

However, real estate website advertisers—like Apartments.com, HomeLight, and Zillow—experienced the opposite. In 2022, their ad spending increased by 16% YoY to $475mm.

For the advertisers at Apartments.com, spending came in tandem with the company’s heightened focus on the rental market.

In April, Apartments.com launched a campaign as many renters prepared for their first big move in the post-pandemic world.

Patrick Dodson, Vice President of Marketing at Apartments.com, said, “The past two years have changed how many people work, live, socialize, and even parent. With our 2022 marketing campaign, we’ve evolved our brand to reflect the changing behavior of renters across the country.”

The campaign ran across several channels near and dear to the hearts of renters, including TikTok, Instagram, Snapchat, YouTube, and Facebook.

It also included TV spots and OTT ads on HBO Max, Paramount+, and Hulu. Advertisers even allocated dollars to audio ads on Spotify, Pandora and other popular platforms that are taking advantage of the rise of audio advertising; Statista projects digital audio advertising to reach $8.95b in 2023.

What’s in Store for Real Estate Advertisers in 2023?

Inflation reached a 40-year high in 2022. Meanwhile, in February 2023, mortgage interest rates reached their highest level since the end of the year.
 

Now, the collapse of Silicon Valley Bank is causing ripple effects that’ll continue to impact not only homebuyers but advertisers as well.

“With the Fed committed to monetary tightening until inflation is decidedly moving toward 2%, borrowing costs will remain elevated, keeping housing affordability at the top of the year’s list of challenges,” said George Ratiu, Realtor.com’s Director of Economic Research, in an emailed statement.

For homebuyers, this means they’ll pay more to borrow the funds necessary to secure their next home—and this doesn’t even consider the general financial anxiety many of them are experiencing.

The debt ceiling is also unsettling.

“[A] looming debt limit standoff could push rates back up,” said Orphe Divounguy, a senior macroeconomist at Zillow Home Loans. “This could raise borrowing costs, including mortgage rates, thus hampering an already cold housing market.”

The real estate market seems to be in more flux than ever before, but that hasn’t stopped advertisers from spending $245mm through February 2023.

Real estate advertisers were responsible for 63% ($155mm) of that investment, while real estate websites and lending companies chipped in 24% ($58mm) and $31mm (13%), respectively.

Here’s where those ad dollars went: 

Traditional ads

Advertisers, including Apollo Global Management, Carolwood Partners, and Compass, spent almost $78mm on ads in national newspapers; the above names spent 42% of the investment in newspapers.

At the same time, cable TV advertising reached nearly $35mm, thanks to investments by advertisers at HomeLight, OpenDoor Labs, and Redfin, who collectively spent $13.8mm.

Advertisers worked general print ads into their strategies, too. For example, Coldwell Banker Real Estate (Apollo Global Management) increased print advertising by 17% YoY between March 2022 and February 2023. 

Paid social

Real estate advertisers invested almost $30mm in paid social advertising through February; nearly 75% came from advertisers promoting real estate websites, including CoStar Group (Apartments.com and Homesnap), Noho Solutions (Orchard), and Zillow.

Apartments.com, in particular, spent heavily inside social’s walls, with Facebook and Instagram receiving almost all of that budget (94%).

There’s no denying the real estate market is in a strange spot, and advertisers are feeling it. 

That said, some experts anticipate a course correction that will impact advertising strategies throughout the rest of the year.

Edward Seiler, Associate Vice President at Mortgage Bankers Association, said the growth of home prices should “soften, which, along with cooling inflation, should help bring more prospective buyers into the market during the spring homebuying season.”

If—and when—that happens, real estate advertisers will return to their spending ways.

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“It’s becoming clear that record-high price growth and an enduring shortage of available homes are beginning to hinder would-be homebuyers,” said Matthew Speakman, an economist at Zillow. “Sales volume continues to struggle to regain the momentum it built late last year.”

Residential homeowners and politicians are pointing fingers at investment firms, but data points to other culprits. At the same time, commercial real estate won’t fully rebound for another couple of years. 

How does that stack up for ad sales opportunities?

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It’s a bizarre market out there… with rising prices and Wall Street boogeymen

Due to short housing supply, soaring lumber prices, and historically low mortgage rates, home prices continue climbing. 

The median price of a new home increased 11.4% between March and April. And with this jump, asking prices became increasingly unreasonable to buyers: new home sales fell 6%.

“Soaring home prices are taking a toll on sales … and we expect the pace of sales to moderate further over the rest of 2021,” said Nancy Vanden Houten, lead U.S. economist for Oxford Economics.

It makes sense that buyers are choosing to wait it out until the market calms down. But they aren’t happy about it. 

People on the left and right are eager to blame investment firms like Blackrock for buying up homes. Per this viral Twitter thread, people believe Blackrock is going after “every single family house they can find … and outbidding normal home buyers.”

As memories from the Great Recession linger with us collectively, it’s easy to jump to conclusions. Wall Street landlords must be the enemy here, right? But the reality is that institutional investors only account for an estimated 2% of single-family rentals.

Instead of accusing the “faceless Wall Street Goliath,” Derek Thompson at The Atlantic argues that we should take an honest look in the mirror. The bigger problem lies in the prevention of new housing development. 

“From New York to California, deep-blue cities and states have amassed a pitiful record of blocking housing construction and failing to meet rising demand with adequate supply,” he writes. 

Resolving this issue will not happen fast. It requires political and economic changes that increase housing supply. 

As an important aside, the commercial real estate industry doesn’t face the same difficulties as consumer housing. There isn’t a shortage of existing buildings. And as a result, rising materials costs aren’t a big challenge right now. However, leaders still expect the rebound to take another two to three years. 

MediaRadar Insights

Key Takeaways From Q2 2021

Note: Final June numbers are projected.

• In Q2 of 2020, B2B commercial real estate saw 97 companies spending $604k. This increased 11% in 2021, in which 106 companies spent $670k in Q2. 
• In consumer real estate, Q2 of 2021 experienced a 62% decrease in ad spend from 2020, where 7.7k companies spent $262.3mm. 

The drop in spend in 2021 can be directly attributed to the rising prices in the housing market. With more demand than supply, real estate marketers don’t need to advertise heavily to attract more business.

Other brands to consider are companies that build and sell raw material. While there is not much pressure on commercial companies to build real estate right now (there’s an excess of empty offices due to the pandemic), more home buyers are seeking to build their own house.

• Consumer-facing architectural services, contracting services, and building material brands spent $168.7mm in Q2 of 2021.
• This is up 5% from Q2 2020, in which 5.8k companies spent $161mm. This small amount of growth YoY would normally point to a market that is seeing little growth. However, we know this is not the case.

Investment firms aren’t strengthening their grip on the real estate market. But nonetheless, consumer-facing real estate companies can’t keep up with demand. While B2B real estate spending is increasing, consumer real estate spending is significantly down. 

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Many aspects of the real estate landscape changed as the pandemic ran its course. Read more to learn about these changes and how this impacted advertising.

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

The 2020 Real Estate Scene Responds to Stay-At-Home Life

As families adjusted to staying at home most of their days, life started to feel squished. Online classes, Zoom meetings, and chasing restless kids around small spaces pushed parents to the limits. Many families started looking for more rooms and outside space.

“The home sales are quite remarkable, given that we are still in the midst of the global pandemic,” says Lawrence Yun, chief economist for the National Association of Realtors. Despite the economic difficulties for Americans, many families say that they’ve sped up their timeline for buying a home based on the family’s changing needs.

“Where are you going to take your Zoom calls where you don’t interfere with one another?” said Kevin Tidwell, an agent with Rodeo Realty, sharing the thoughts of families who are struggling to balance childcare and distance learning while working from home.

The draw to newer homes with more space is so strong that the pace of home sales has increased by 9% year over year, and the sales rates in June, July, and August broke previously‐held records. 

This rapid increase in home sales results in two major trends: a higher demand for homes than there is a supply and a widening gap of homeownership between socioeconomic classes.

Low Mortgage Rates Drive High Demand, But COVID Means Low Supply

Mortgage application rates are higher now than any year since 2008, and it’s no surprise—the average national mortgage rate dropped from 3.75% to 3% in a matter of weeks after COVID‐19 arrived in the US.

“A 0.75 percentage point drop may not seem like a lot, but it’s like handing $40,000 to a buyer of a $475,000 home,” said Taylor Marr, senior economist at Redfin. This means that there’s no time like the present for buyers, who may find interest rates affordable right when they need it.

Unfortunately, the supply hasn’t risen to meet the demand. 

“We have had houses with 40 to 50 offers,” said Syd Leibovitch, president of Rodeo Realty. “It’s just bizarre.”

Other sources report homes selling for prices far above the asking price, with the high volume of buyers driving intense pricing competition. 

Sellers, on the other hand, are few and far between as they wait for a safer environment in which to let strangers into their homes. The number of homes for sale is decreasing faster than it has since 1963.

Changes In Residential Real Estate Disproportionately Affecting Lower Socioeconomic Classes

Even with lower mortgages, buying houses during the pandemic isn’t for everyone. 

“When you look at how prices have gone up, that creates a big barrier for down payments because you still have to put down 20%, if you’re going with a conventional loan,” said Daryl Fairweather, chief economist at Redfin. 

Those who have the financial ability to buy their own homes have, in general, been less likely to lose their jobs. Those who fall in lower socioeconomic brackets are more often renters and more likely to have lost their jobs, putting them at high risk of eviction.

In May, the average home price rose 4.2% nationally compared to the previous year. However, the prices for the cheapest third of available homes—those most likely to be accessible to former renters and others in low socioeconomic classes—rose 6.2%. This placed affordable housing even farther out of reach for those in lower income brackets.

MediaRadar Insights: Advertising Trends In Real Estate

Methodology

We analyzed retail ad spend from the beginning of June through the first week of September (September 3rd) in an attempt to see how these real estate trends have affected real estate advertising. This analysis includes data from TV, digital, and print ad spend.

Our Findings

Since June, residential real estate ad spend has increased by 30% on average. This growth is largely due to large spend weeks in July and August, where ad spend increased by as much as 134% (mostly digital and television campaigns). 

Ad spend in residential real estate reached $4.5 million in the last eight weeks, which is a 28% increase over the same period in 2019. Levels in the last two weeks are more consistent with levels in 2019.

Overall, ad spend in residential real estate is down 11% YoY. The largest deficit of 61% occurred at the end of April. This is likely because realtors are faced with a shortage of homes for sale. 

Home prices are projected to fall slightly through the remainder of 2020. For now, potential buyers have few options to choose from and are placing competing bids. This competition inflates prices, which is easiest to see in the Midwest and California.

Real estate, like most industries, has seen its fair share of changes as the country responds to COVID‐19. As the pandemic dies down, we’ll continue to track advertising spending and trends across all of these industries as we finish out 2020.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.