Report: Online Real Estate Ad Spend Will Overtake Declining Newspapers Within Three Years

By: E&P Staff Within three years, real estate advertisers will be spending more on online media than newspaper pages, a new report predicts.

In "Real Estate Outlook: 2007-2012," Borrell Associates says overall real estate advertising will continue to decrease, but online's share will grow at newspaper's expense.

"After two full years of depressed home sales, the internal advertising pendulums have begun to swing for real estate," the report's executive summary states. "Agents, who initially tried to appease home sellers by advertising more on traditional channels, this year systematically cut their print budgets and pushed more money into the Web. The result has been a slingshot effect for online advertising."

Total real estate ad spend fell 3% in 2007, while online spending soared 25.8%. Borrell estimates online is getting $2.6 billion in real estate ad spending this year.

That online growth rate is going to slow by more than half, to 12.4%, in a climate of decreased real estate spending.

"The outlook is bleak for those in the business of making money off classified listings," Borrell says. An uncertain economy, falling housing prices, and rising interest rates are combining to depress both the volume of listing, and overall real estate ad spending, it adds.

"For newspapers, the situation is worse," Borrell says. "We project that coming off last year's high of almost $5.2 billion in print advertising, there will be a 6.8% decline this year, almost the same again in 2008, followed by a stunning 16% fall in 2009 and 13%in 2010. By then, real estate marketers will be spending more on online media than on newspapers or local homes magazines."

Borrell notes that some 2 million adjustable-rate mortgages are due to be re-priced over the next 24 months, and it suggests as many as 25% may go into default.

"After average annual increases of approximately 9% in total real estate advertising between 2001 and 2005, the market essentially flat-lined in 2006 and is forecast to fall by 3.3% this year," the report states. "This trend will continue for at least the next two years."

However, newspapers will be in the game in 2008 as a result of the "converging triumvirate" of Yahoo, Zillow.com and a consortium of 11 newspaper companies, the report states. It notes that Yahoo in just the last year has gone from the eighth most-trafficked real estate site -- to the second, behind Realtor.com.