The Impact of E-commerce on the Real Estate Industry: Baen and Guttery Revisited Executive Summary. One widely reported prediction is that the emergence of the web as an open medium for commerce threatens the role of the real estate agent as a market intermediary. In their 1997 article, for example, Baen and Guttery predicted that the increased use of the Internet and information technology would lead to a downsizing of the entire industry. However, recent Bu-reau of Labor Statistics data show that the real estate industry, like most of the economy in the United States, experienced steady growth during the last few years. This article revisits the issue of disintermediation in the con-text of the real estate industry. It discusses—from a the- oretical and conceptual perspective—several reasons why the predicted downsizing did not occur. The analysis sug-gests that the Internet, though clearly a very powerful tool with strategic implications, may not be as disruptive a technology as originally predicted. * Ohio State University, Columbus, OH 43210-1144 or [email protected] * Ohio State University, Columbus, OH 43210-1144 or [email protected] by Waleed A. Muhanna* James R. Wolf ** Introduction In The Coming Downsizing of Real Estate: The Im- plications of Technology , Baen and Guttery (1997) examine the potential impact of the Internet and other information technology on the residential real estate industry. They predicted a continued rise in that the number of buyers and sellers using the Internet to find real estate-related information. A recent study by the National Association of Real-tors (NAR) (1999) confirms these predictions: 37% of all potential homebuyers searched for a home online in 1999, up from just 2% in 1995. Baen and Guttery also correctly anticipated that the Inter-net will give users access to an unprecedented array of information traditionally held by sales agents. Today, websites such as Yahoo!Real Estate, MSN’s HomeAdvisor.com, HomeSeekers. com, Homestore.com, the NAR’s official website Realtor.com and several others provide visitors with a breadth of information, including data on recent house sales and prices of comparable houses, information on neighborhoods, schools, taxes, costs of living, and maps and tools for locating, buying, financing and insuring a home. Using a transaction cost argument, however, Baen and Guttery (1997) predicted that increased use of the Internet and information technology would have a dramatic and negative impact on the real estate industry in terms of both income and em-ployment levels. They argued that buyers and sellers with access to information available via the Internet will have no need for traditional ‘‘in- fomediaries’’ and that several other players in real Journal of Real Estate Portfolio Management 141
Waleed A. Muhanna, James R. Wolf estate support positions will also be disinterme-diated by the Internet. The authors predicted job losses in sectors directly related to real estate, in-cluding sales agents and developers, as well as sec-tors involved in the support of real estate trans-action such as legal services and banking.
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