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Housing Investment Adapts to Rapid Digitalization

According to a new blog post by David Luberoff for the Joint Center for Housing Studies at Harvard University, rapid digitalization and remote management are changing ways the ways Big Data are buying and selling single-family homes and turning them into rental units. 

According to Luberoff, the impacts of these changes—particularly whether they are expanding opportunities for renters and homebuyers, or in fact are crowding out first-time buyers and increasing prices for renters—will be the topic of a future JCHS symposium. 

The surge, almost predictably, is being led by a surge in venture capital funding which went from $2 billion in 2016 to $19 billion in 2021. 

“Real estate portals (such as Zillow, Trulia, Redfin, and realtor.com), which first emerged almost two decades ago, have changed how people search for homes but, in the end, they typically still rely on traditional brokers to handle those sales,” Luberoff wrote. “That model was challenged in the middle of the last decade, with the emergence iBuyers (such as Opendoor, Offerpad, and, for a time, Zillow), which aimed to displace brokers by offering homeowners speed, certainty, and simplicity of offers based on automated valuations.” 

“These were followed by “power buyers” (such as Homeward, Knock, Flyhomes, Ribbon, and Orchard), which also sought to displace brokers but did so by offering loans and guaranteed purchase agreements to cash-strapped homeowners who want to move but don’t have the cash needed to buy a new home. While both iBuyers and power buyers raised substantial VC funding, they have yet to secure a significant share of the market, largely because, unlike other transactions now done online, buying and selling a house is “a unique—and very personal—process.”” 

Seeing this problem, some entrepreneurs and investors have shifted their focus to building “tech-enabled brokerages” (such as Compass and eXp Realty). And while their strategies differ, portals, iBuyers, power buyers, and tech-enabled brokerages are all increasingly focused not only on transaction-related revenues (such as charging for leads, commissions on sales, or profits from reselling homes) but also on using their connections with sellers and buyers to monetize all aspects of the house purchase process, including providing mortgages and title insurance. 

Click here to see what else the JCHS included in their blog post. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected]
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