Here in the states, the single family housing market is on fire. Since the onset of the lockdown, America is noticing a greater migration to the suburbs and record low interest rates. Not only is there a large swing in single family home demand, but also in the acquisition, financing, and push for companies tackling single family home buying and selling. This article will examine these elements, focusing on their recent impact within the single family home sector.
This past summer, I worked at Morty, a proptech company that simplifies the process of obtaining a mortgage. I was exposed to the complexities of the mortgage process and how tech and great customer service can work to simplify it. While working at Morty, I was responsible for coordinating with the insurance and title companies. One thing was clear- whether it was Spruce for title work or Lemonade for homeowners insurance, I found it easiest and most enjoyable to work with new, tech-focused companies. As all of these tech companies integrate within the ecosystem, the home buying process will become more transparent and easier to navigate. This isn’t a major claim, recently, we have seen Compass acquire Modus to expand into the title and escrow part of the home buying process- an industry move I expect to occur more frequently over time. As brokers look to gain an edge over one another, having a platform that allows more of the home buying process to happen on one platform, will create a process far superior to the fragmented one in place today.
The iBuying revolution is another space bound for continued growth and more competition. The premise of iBuying is that a homeowner sells their home for a slight discount to what it would trade for on the market, in exchange for effectively closing on the transaction in a much shorter time frame. Opendoor, one of the pioneers in the space, is going public through a SPAC (special purpose acquisition company) to raise over a billion dollars to continue expanding. Similarly, Zillow’s Zillow Offers, another player in the iBuying space, launched their own brokerage to expand their iBuying platform. Even Redfin, a broker integrated MLS, is beginning to participate in the iBuying space. The convenience and emergence of iBuying will benefit from other proptech companies handling the multitude of aspects in home improvement and buying/selling.
Let’s run through an example of how Opendoor could utilize proptech companies once they buy a home. For starters, Opendoor could utilize the service of Skipp, a tech-powered kitchen renovation company that saves homeowners up to 40%, to renovate the kitchen. Then, they could stage the house using Furnishr, a tech-enabled interior designing and installation company. To add that extra homey feeling, they could use tailored art from Alpha’A, a company that helps make gallery quality art accessible for any project. Finally, once the house is ready to go on the market, Opendoor could use Matterport to set up a 3D tour of the space and upload the listing into the MLS. All of these different proptech companies bring a valuable component to the renovation and make the home buying and selling process faster and less costly. However, while iBuying allows big companies to enjoy the financial benefits of single family homes, there’s an up and coming wave of startups geared towards democratizing the industry.
The last component of single family homes this article will touch on is the individual investing process. Roofstock, a marketplace for investing in single-family rental homes is developing their model to make buying these investment properties in the U.S. easier for beginning investors. Recently, they teamed up with one of the power house builders of single family homes in the United States, Lennar, to allow investors to purchase great quality new builds to rent out. Furthermore, Doorvest, a company chasing a similar market but with more involvement in the buying and leasing process, just raised a pre-seed round to expand their business. Single family home investing is not limited to just long term rentals, but also includes secondary homes. Recently, an ex-Zillow executive developed a platform called Pacaso, which will allow investors to buy equity into a secondary home. Single family rentals might seem like an unordinary investment, but Wall Street is no newbie in the space, as they jumped into the sector ever since the 2008 recession. Furthermore, JP Morgan just put together a $700 million dollar fund, a portion of which will target single family rentals. Additionally, the largest single family rental home owner in America, Invitation Homes, is teaming up with Rockpoint Group, to deploy more than $1 billion dollars into the single family rental market.
Through the effects of the pandemic, the single family home market has built great momentum. With record low rates, the market will likely continue showing growth. While uncertainty lies which companies will benefit from this societal demand, I am confident iBuying and online investing platforms as it pertains to single family homes is a sector that will come out on top. Proptech companies and platforms alike will make buying and selling homes extremely easy, stress free, more profitable, and allow more individuals to participate in the investment side of single family homes.
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