Statistics drive Peter Murphy.
The chief executive officer and co-founder of Tampa's Home Encounter, a real estate brokerage and research firm, isn't the typical broker. He doesn't care about paint schemes or granite countertops. Although 80 percent of the firm's income comes from managing 1,200 rental units, his passion is dissecting data on the Tampa Bay housing market.
Murphy, 32, produces monthly reports, and his analyses are getting recognized nationally. With Florida at the center of the woeful housing market, he is often asked to provide insight to the national media on Tampa Bay.
To help further that passion and to attract customers, the company recently launched homesalesstats.com. The free site culls data from the Multiple Listing Service, allowing buyers or sellers to find information beyond sale listings. Users can track price and sale trends and foreclosure rates in their own neighborhoods.
The analyses and reports don't produce much income, but 20 percent of the firm's profits come from consulting to real estate investors. He hopes to expand his analyses, which he calls "knowledge-based real estate," to include other markets.
Murphy holds degrees in business and economics from the University of South Florida and bought and managed properties while attending graduate school. During one class, he and a classmate, Chase Clark, shared the same problem: While buying and managing rental properties, both men couldn't find reliable data on the local market. They wanted statistics to help determine where to invest. They took action and formed Home Encounter in late 2006 — just before the housing market imploded.
Why do you call your analyses "knowledge-based real estate"?
Economists and Realtors are always telling us that a real estate market is local. But really, it's super-local. What's going on in your neighborhood may look completely different than what's going on in Tampa. Tampa prices may be down 10 percent, but in your neighborhood prices are increasing 1 percent. That's the beauty and complexity of the housing market. Economic data released by Realtors doesn't reflect this.
There were no people who could actually tell us how values trended in an area or how values of properties related to rent prices. We were noticing a great lack of concrete or empirical information. We thought we should set up that business.
Integrity is very important to us. We're young. The (real estate industry) has a professional challenge. The (Realtors) haven't immersed themselves in what they're doing to truly understand the numbers behind home sales or to really understand how home values and jobs relate to the demand of clients. Realtors are good at going into houses to say it's a beautiful home; they're not good at understanding the value behind real estate.
What makes Home Encounter different from other real estate firms?
We sell our business on the basis of data and analytics. We can really help someone understand what is going on with a property in a way that most agents cannot. We truly believe our backgrounds in economics and finance provide an advantage.
We don't sell our services by telling someone we sold 30 or 40 homes last year. We can tell you how to make your real estate property profitable. In this market, where values are dumping, helping someone stabilize their assets is a real advantage. We play to our strengths.
The investors don't really care about the wrong colors on walls. They want to know what the value is going to be in five years. And that's not being fairly answered by our competitors. We dance a careful dance and are kind of the anti-Realtor. We are true knowledge-based real estate. We want to be seen as an accurate source of information on real estate.
How important is data analysis to real estate investing?
We believe whether you own a condo or house in the suburbs, it is a substantial investment that impacts your net worth. People need data to best understand how to manage that investment. That's what we needed when we were buying. We couldn't find it in a source that we could trust. We view it as much more of an investment than the average broker.
Economists don't have the ability to look at sales data on a granular level. They get their data from Realtors, and it's usually high-level. Realtors have all this data on a micro level, but most don't have the skills required for this kind of analytics. So we end up getting the macro and often misleading story from economists.
How can homesalesstats.com help buyers?
It's not a tool that says what your home is worth. You can follow what is happening in your neighborhood. Follow the trend line and have an educated opinion about where prices are going. Are foreclosures on the rise? Are they falling? Look at how long it takes to sell a home. Look at the prices. A person with a single property needs that info when they sell or buy again. It might sound like it's just information for professionals, but it's not.
Did the business have rocky times?
In one period between 2008 and 2009, when you're working 80 hours a week, you know you could close and go to another company. We decided to give it another three months. The industry was in doldrums and looked like nobody would ever buy real estate again. But it took us three years to get to where we were comfortable.
Property management is a pennies business. The revenues are extremely small. It mandates volume. The time between (managing) 100 units and 1,000 units was tough. The last year is when our growth really took off. Our profit margins are 8 percent on revenues, compared to an industry average of 3 percent. We experienced revenue growth of 5 percent per month in 2010, and profits are up 40 percent year over year (April 2010 to April 2011).
Mark Puente can be reached at firstname.lastname@example.org or (727) 893-8459. Follow him on Twitter at twitter.com/markapuente.