Redfin Creates Echo Chamber for Fake News on Cash Purchases

Last week I wrote Zillow, which publishes plenty of nonsense, has perfected a system of getting other news organizations to promote their nonsense through a detailed and structured system of mutual back-scratching. This week, Redfin does the same thing by creating an echo chamber of false information about the real estate market.

But before we get into that, lets start by reviewing the data as to where we are today.

Mortgage rates have moved back down BELOW 7% this week, after spending last week above the 7% level. This reflects a reduction in tension in the market.

Inventory continues at record lows for periods other than during the pandemic and has declined below rates of 2021. As I have repeatedly said, as long as inventory is low, prices cannot go down much.

Locally, in Los Angeles, the market grew slightly in the direction of a seller's market to a market action index of 44, about the same as last month.

This week the award for misleading real estate news is shared by Redfin and Yahoo and Business Insider. The tool Redfin uses, the same as Zillow, is the echo chamber system, where they put out "research" and then let their news paertners quote them but add misleading headlines.

In this latest example, Redfin puts out that the percentage of cash buyers rose to 33.4% in April, up from 30.7%.

A few things make this "research" of limited value.

First, note that the data is from April, yet released now in June. Why? Doesn't Redfin collect data every month? Why would they not be releasing the May numbers now?

Second, not their graph is so misleading.

You'll notice that this trend they are announcing, the increase in cash purchases, is so slight in the past few moths as to be hard to even notice. You may also notice that this number falls into line with numbers from before 2014, which might suggest the last 9 years was an aberration. The most glaring issue I have, however, is how they exaggerate the change by limited the graph from 15-40% of the market, meaning they are squeezing the data in an area one-fourth of the full market, exaggerating the change by 4 times. 

So, now that they have presented this piece of data which is both late and of limited value, they give it to their advertising partners. Now, these partners need to juice it up, as anyone can take the data and write an article, so there is a race to the bottom for the most misleading use of the data to get readers.

So when you search Google News, for example, for all-cash homebuyers Redfin, you will see Redfin at the top of the search, of course, but the next is Business Insider with their headline: "All-cash homebuyers are becoming 'disruptive' to the housing market."

So, where did the fact that this is "disruptive" come from? Not from Redfin's data, but from a quote that Business Insider put into the article from one mortgage lender. And, let's analyze this, is it true that cash offers clash with financed offers? In my experience, I often get offers with financing on properties that are not financeable, and I have to explain to the loan officer why they cannot lend on the property. Most likely, their inexperienced real estate agent did not review the condition of the property either in the MLS or in person and did not know either. So, there are some needless hard feelings, but, in reality, financed offers are almost always higher than cash offers.

Interesting, Yahoo has the exact same headline, as they are running the exact same article from the same writer. 

And thus the echo.

To the point that smaller players have to create more stressful headlines. Here, Newsbreak.com, creates a newsletter focused on Ohio wit the headline "Ohio home buyers are paying for homes with cash to avoid high mortgage rates, especially in this city."

Again, the false tension created is that buyers are "avoiding high mortgages" by paying cash, which is not the case. I have never had a buyer choose between financing and cash, almost always they either have cash and want to use it or need to finance their home. Yet, this false tension creates buyers who are stressed, and maybe click more or read more on their internet site.

That's how the echo chamber works.
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.

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