Speaker 1 (00:01):
No matter where your business is today or where you want to take it, you'll get there faster and more profitably with an operating system. Welcome to Team Os, your guide to Starting, growing and optimizing Real Estate team. Here's your host, Ethan Butte.

Speaker 2 (00:16):
This episode of Team Os features Mike Simonson, founder and president of Altos Research. We recorded this together at fcon, which we both attended live just a few weeks ago, and in this conversation, Mike answers the pressing question, when will we get more inventory? More importantly, he tells a clear and compelling story in giving that answer and providing that response. He also shares insights into expressing our love for the people we work with and the benefits of doing so as well as serving our clients more effectively with real-time active market data instead of trailing data and mainstream headlines. Now my conversation with Mike Simonson, so to get us going, Mike, what is a must have characteristic of a high performing team?

Speaker 3 (01:05):
Well, so Altos research is all about market data and about not just the data, but helping professionals communicate about the housing market to their prospects and clients and former clients. And so the high performing teams, my observation is it's not just an ability to talk about the market, but it is like an honesty about the market. It's a, right now, the market's slowing down and lesser agents are afraid of that message, but the strong ones are like, this is what is happening and why that matters to you and maybe that's why you want to act now or maybe you don't want to act now, but now you're my client for life. And so the real strong agents are and teams are those that not only understand the market, but understand how to talk about the market in a powerful way with their clients.

Speaker 2 (02:16):
Yeah, I hear a number of things in there that I really appreciate and one of them of course is honesty. Honesty with yourself about what's going on and honesty with other people so we can make an informed decision together. There's an integrity piece in there too, but then there's also this, I need to be up to speed on what's actually going on and we'll get there what you help a lot of people with. But before we do talk about leadership for yourself. I mean, you founded Altos 20 ish years ago, 17 years ago, 17, almost 20 years ago, and sorry to push it to another milestone by the way. Congratulations in advance on 20 years at Altos Research.

Speaker 3 (02:52):
Thank

Speaker 2 (02:52):
You. How has your role as CEO and how has your leadership style changed over that time? Because there's obviously a period of growth, recent partnership with hw, and so talk about some of the inflection points along your journey.

Speaker 3 (03:12):
It has been now the bulk of my career has been running Altos research, and so the bulk of my personal development has happened while I've been running this company and I have grown, this might surprise you, but I have grown in my ability to express love to my employees and my customers and that I think has been a powerful driver of our growth, of my personal satisfaction with the work every day, of resilience of our retention, all of those things. And it was a real learning process for me. I had to go through the typical entrepreneur times highs and very lows and had to learn about the power of being able to use the positive intern internal chemical reactions that happen when we do things like express love in our environment. And when we think about the difficult times in running the company customers and things and reminding yourself that, wow, I've grown real affection for the people that I get to work with, that is a powerful, powerful resilience strength, and I think that's a big curve that I went through.

Speaker 2 (04:41):
Yeah, that's wonderful. I love off the top that you paired personal development with your leadership style. You can't separate the two, but somehow we kind of pretend to. And then also this idea of just being honest with yourself and with other people, and I think there's something super powerful, and this goes to my decade of practicing and teaching video messaging essentially in place of typed out messaging. There's something really power and I'm offering this to you to react to and add to. There's something really powerful for you and for the other person to have you express these things with your whole self. And by that I mean with your voice, with your breath, with your energy, with your sincerity, to have it breathed into real life. And I know I sound a little woo here, but it's real, this idea of you expressing it but not intellectually understanding it and pecking it into a keyboard or verbally dictating it, although that's a step in the right direction. What resonated with me about what you offered is that there's just something powerful in it, and it's not just for the other person to hear that appreciation or to hear that care or to hear that concern and all the other forms that love takes. By the way, it's very multidimensional, but what connects with you on that?

Speaker 3 (05:56):
Yeah, the opportunity to benefit from that frame of mind and that communication style is what I've learned is that my internal internal motivation changes and as a leader, it's so much of the time is like I've got to make sure I bring the right energy to the room and I do my creative output that guides so much of the work we do, but if my internal motivation falls, that creative output falls. And so then doing things like being there present and interested, those things are both the internal benefit as well as external benefit.

Speaker 2 (06:45):
Talk a little bit about Altos High level for folks that aren't super familiar and original data, valuable data productized into a storytelling platform. Just give a quick drive by on and then we can kind of press into some of the details as we kind of push into a direction I think everyone wants to hear, which is when we're getting more inventory.

Speaker 3 (07:05):
So Altos Research at Altos, we track every home for sale in the country every week and we do all the pricing, all the supply and demand, all the changes in that data, and we bubble up those analytics every week for every zip code in the country for people who care about such things. So half of our business is with the realtors and brokers and teams, people who need to communicate about the market to their clients every day, and we do that via market reports and branded white label branded for you to reach your clients with your market report for your part of town. And market data is always fresh, is always a story in it. People care, everybody has an opinion, and so the emails get really high open rates like that kind of thing. And the other half of our business actually an enterprise data license business, so big companies that do things like AVMs or rental valuations, they use our data or home builders use our data to understand if you have exposure to the real estate market in the US, you might buy big data files from us. So both of those constituents care about what's happening in the market right now, and sometimes we just package it up as big data files and sometimes we do it as individual, it's email marketing, it's putting Ethan's market report in their inbox every Monday while we have your house listed. I'm going to put this in your inbox every Monday, and I want you to keep your eye on one number so that we know if your house is still listed and the market's changing, that kind of power is what we go for.

Speaker 2 (08:48):
Awesome. Now my question, when are we getting more inventory?

Speaker 3 (08:53):
So inventory is the big question, and so what's fascinating is it's now late September when we're recording this and inventory is climbing the last few weeks as interest rates have climbed and the market is kind of slowing on the demand side. And so we have been getting a one and a half to 2% inventory increase in late September, which is very unusual. Usually inventory peaks end of August or earlier in August. And so the rule of thumb, the Altos rule I've been calling it is there's a conventional wisdom that as soon as mortgage interest rates fall, we'll get more listings people, they're locked in. And the conventional wisdom is that when rates fall, we'd get more listings. However, the data shows the opposite is true, that it's actually higher rates leads to greater inventory and lower rates leads to less inventory. So if rates fall where it 7.5% right now, if they fall next year into the sixes, we can expect that inventory is going to fall again as well.

Speaker 3 (10:16):
And it boils down to holding costs. If it's more expensive to hold real estate, I sell it more often and I hold less. If rates fall, it's cheaper to hold my properties, so I'm going to hold more and hoard more in 2020. Rates fell dramatically and inventory fell dramatically. Last year, rates spiked dramatically, inventory spiked dramatically. Right now, rates are climbing and inventory is climbing over the next few years, rates stay higher for longer. You can expect inventory to build up some, if rates fall back down, we're going to go back into that tight, tight inventory environment. If economy slows, the economy slows and we get people lose their jobs, then eventually will see some distressed inventory. I lose my job, I can't make my mortgage payment, but that's probably 2025 inventory. If the job loss recession starts now and if it doesn't, we're still really high full employment. If it doesn't start now, then it's still much further out before we see things like that. And there is some hypothesis that maybe investors or Airbnb hosts would be selling properties. Maybe they're panicking because the Airbnbs aren't making as much money, much money. We haven't seen any sign of that inventory anywhere in the market. It's a hypothesis maybe that it comes, but so far in general, investors aren't selling Airbnb hosts aren't selling it is pretty much across the board. We're still holding up

Speaker 2 (12:01):
And thank you for that. By the way. One of the reasons I wanted to ask is of course, it's a question people probably want to ask you or have been wanting to ask recently in that particular form I asked it, but also as an illustration of storytelling with the numbers, right? No one cares about the number. Well kind of they do, but not nearly as much as what does the number mean. So how would you advise, I feel like obviously you've been doing this for 17 years, you were driven by personal passion to develop this data for yourself. It's a fascinating story, but the average agent I feel like should be basically able to do not with the same clarity or the same speed or even the same conviction as you were able to do there, but have you seen agents get successful at storytelling beyond your product delivering for them? I just feel like this would be really useful for a lot of people and for the markets in general, for more people to be able to speak approximately in that way and probably even in a more local manner. Talk about any successes you've seen in that direction.

Speaker 3 (13:17):
Yeah, first of all, I think when agents are starting with the data and they're thinking about telling the story with the data communicating every week or maybe once a month about the data, I think one of the hurdles is that we think about what's the big message, what's it telling? And of course if I don't see it now, I'm afraid to tell the story. It gets hard. And so one of the lessons is you can literally start by reading the data. There are 49 house single family homes for sale in town right now that's down four from last week. The story kind of emerges. You don't have to offer opinions except that maybe you go, man, I was hoping it would climb by now. But it ticked down because there are more buyers than sellers, and so you don't have to do big conclusions. It is a compelling story to read the numbers and tell people what's there.

Speaker 3 (14:25):
Home prices are here that ticked up from last week. The days on market is still lower than it has been anytime except during the pandemic craziness at 24 days or whatever the mix mixes. So one of the great ways to start doing is just to read the numbers and it can be very powerful, and you can actually do that in the script when you're on the phone with a client like you, I don't know if you know this, but there's only 14 homes for sale right now. And you just work it right into the conversation and it's a point of expertise, it is a point of clarity and it's a value add and all of those things. And somebody says, wow, I didn't know that. Or I hear inventories climbing or the market's tanking. You say, well, actually prices changed last year, but this year prices have been holding up because there's so little supply, those kind of things that you can come in.

Speaker 3 (15:25):
I have other specifics too. Lee Brown is an agent in Charlotte and she has this wonderful technique where she takes a market report into the listing presentation and she says, are you a big geek or a little geek? If you're a big geek, I'm going to put this report in your inbox every Monday and you're going to look out, you're going to look at all the numbers and you're going to geek out it. But even if you're just a little geek, I'm going to put this in your inbox and I just want you to look at one number. You don't have to worry about medians and means, and I want you to look at one number. And so in that case, what Lee's doing is saying, I'm the expert. I'm the resource that has it, and the data is going to tell the story to you. The market is going to tell you what's going on, not me. And Lee doesn't have to interpret it. Then Lee gets a call going, Hey Lee, I've been looking at this report every Monday. My house is listed and this number's falling. Maybe we need to do a price reduction.

Speaker 3 (16:23):
And she hasn't had to. She's seeded that expertise and let the seller make their own decision. So that's a really powerful, are you a big geek or a little geek?

Speaker 2 (16:34):
Yeah, really good. And it also, yeah, just look right here. This is what you need to know and we'll speak to it from there. I feel like I also appreciate your, you don't need to have a take. You don't need to have an opinion, and you definitely don't need to have a hot take. And this is all trends. None of this stuff turns on a dime. I mean, I think when rates shot up, I don't remember how long ago that was now, several months, a year. I don't know. It's like a year and a half ago.

Speaker 3 (17:03):
So yeah, rates jumped up a year and a half ago and then again in September of last year, and they jumped from six and a half to seven to seven and a half, and the market turned very quickly at that point. And you can see it in some of the numbers in the Altos reports, for example, we could see in late September last year, inventory went from starting to decline to started climbing in one week or price reductions started ticking up. And so if you are doing market report videos every week, you could say, we saw an increase in inventory this week. We saw an increase in price reductions. It's still in the normal range, but it's ticking up. So that means if you're a buyer, here's what that means.

Speaker 2 (17:50):
Yeah, I love that practice as an accountability habit to yourself to pay attention to what, that's it. How do we make this a habit so that I'm learning what to add to the story? Because an ongoing story, it doesn't started before you were in the business, it's going to continue after you're in the business. It's an ongoing story. So how do we tell that in a consistent manner so that we are always in touch with it? I think that's a great accountability piece. Talk about really quickly the value of real time data. I think that's a unique, I don't know that it's wholly unique to what you're doing, but in general, it's a distinguishing feature of what you're doing. And you mentioned a little bit off the top, but I think it's worth kind of doubling down on, I think a lot of the data that we look at is what happened and what happened some period of time ago, and that's not useful, but there's something distinctly useful about real-time data. So I'd love for you to give a quick go at that. Yeah,

Speaker 3 (18:45):
Traditional real estate data is released monthly, and if you're thinking about sales data, it might be several months old by the time it gets to you. And so houses on the market now in so September, it gets an offer in October, it closes in November or December, and you start hearing about that in December or January. But I can tell you right now what's going on. And that's actually why at Altos we focus on the active market. We focus on the asking prices and the active inventory and which ones are doing price reductions because there is so much signal in that and your buyers and sellers are watching the headlines, which are months old. And so it happened at the beginning of this year, the fourth quarter of last year was ice cold. Everybody knew it, transactions stopped. And then all of a sudden in January, people started buying again.

Speaker 3 (19:41):
And by late January, middle of February, we're like inventory is falling every week. It has not started increasing yet. Sometimes it's very common in normal years for inventory to start increasing between the second and third week of January, it's now end of February, it's into March, inventory was still falling. We had more buyers and sellers. But if you're watching the headlines, you're still getting fourth quarter data and it's Armageddon. And so watching that real time data is really important now. Right now it's kind of shifting the other way. And so your buyers and sellers may be making decisions based on previous data. And so we can see rates are climbing and they've climbed now to multi-decade highs as we speak right now. And so that is, we can see that the impact that it's happening in some of those places. And so having that right now is what's really the powerful conversation.

Speaker 2 (20:46):
You also highlighted an interesting thing for a lot of folks too. I know this is a challenge for team leaders and for agents is how do we speak to the mainstream media and the mainstream headlines, which are based on trailing data? And I think there's something to be learned by following both and being able to speak about the gap between those. And in fact, there's something about studying the gap between those all the time that will allow you probably to look forward with a little bit more confidence and a little bit more, it's a better informed projection.

Speaker 3 (21:17):
And your buyers and sellers or your prospects, they're not wrong. And so it's not about making them wrong, but it's like, yes, that's what happened a few months ago and right, yes. And this is what's happening right now and we can see, and if you want to make an offer, you want to buy a house, we are looking at the highest demand segment of the market. So yes, homes are taking longer to sell, but in your price range, they're moving in 21 days. If you want this house, we need to make an offer.

Speaker 2 (21:55):
Yeah. Awesome. Mike, this has been an absolute pleasure. I appreciate you making time for it. And before I let you go, I would love for you to share either your favorite team besides the Altos team or the best team you've ever been a member of besides the Altos team.

Speaker 3 (22:11):
That's a great question. When you ask, I think about when I came to Silicon Valley when I was 29 years old, 28, 29 years old. It was 19 98, 2 bubbles ago. And Silicon Valley was a rocket ship at that time, early internet. And I had the opportunity to work for a startup led by this guy by the name of Jim Gatz. And Jim was maybe the best leader I've seen, and he was technically competent and he was powerful in front of customers, and he was the team, the startup team. And when a venture funded startup is working, right, it's magical. And it was working right under Jim. And Jim subsequently went on to for a while, is the number one venture capitalist in the world. He was the only investor in WhatsApp, and he is the real deal. And I watched people just, he is would go fund a company and there would be a whole bunch of the world's best engineers would go, okay, I'll go work there. And so I got an opportunity to work for Jim and that company for two years, and it was random luck. A friend said, you should come get on this rocket ship. And I got on and I learned about leadership and I learned about shipping technology products, and I learned about teamwork and all of the things, and it was, I just lucked into

Speaker 2 (23:39):
It. Yeah. That's awesome. Appreciate you sharing that, Mike. Thank you so much. Hope you have a great rest of your, and I appreciate you sharing this perspective with us. Thanks, Ethan.

Speaker 1 (23:49):
Thanks for checking out this episode of Team Os. For email exclusive insights every week, sign up@realestateteamos.com.