Thread by @eriktorenberg

Some thoughts on real-estate tech:

- Housing & income mobility
- Real-estate agents misaligned incentives
- How tech can play a role
- Redefining what it means to own

Mostly a summary of this great talk:

Zooming out:

One way of reducing income inequality was having people move from low productivity regions to high productivity regions

Now, for the first time, the opposite is happening: People are moving from high productivity to low productivity regions b/c rising housing costs

"As the income gap widens, housing is getting prohibitively expensive for large swaths of the population.

Annual GDP might be 50 percent higher—that’s $9.5 trillion higher—if people were moving to productive areas, as they did in the past."

a16z.com/2019/11/20/hou…

Zoning and NIMBY-ism make this hard, but tech can play a role in two ways:

1/ transactional efficiency: making it easier to buy & sell homes.

2/ construction productivity. The labor cost to build a home is actually higher today than it was in the 1960s.

In California, just transactional efficiency isn't enough. Why? It actually raises price.

You also need construction productivity.

In particular, there've been promising advances in two areas: modular housing and so-called tiny homes.

Real estate agents have a bit of a racket going

If you're selling a house, it's 3%. If you're buying a house, it's 3%. They legally can't take less, regardless of work needed

Weirdly, they're incentivized for you to pay more for a house, rather than less. Should be the opposite

Why does it currently suck to buy a house?

Among other reasons, if you're taking out a mortgage, you have to get approved, which can take 45 days.

Which means you can lose out on the house to someone who can pay right away, even if you were willing to pay more for it.

Companies will buy & sell homes on behalf of ppl

Flyhomes buys the house *for* you. Perfect for supply constrained markets. (Seattle)

Opendoor buys the house *from* you. Perfect for demand constrained markets. (Phoenix)

Real estate agents can't b/c they don't have the cash.

Other companies are changing what it means to own a home.

Divvy for example, buys homes on behalf of aspiring home-owners and rents it to them for 3 years, and enables their rent payments to convert in equity positions in the home

Side effect: "No one pays to wash a rental car"

Point allows you to sell a percentage of your house and use it to pay off all your high interest credit card debt, which improves your credit score, which lets you get a better credit card.

Residential real estate is 100 billion dollar market. Just off commissions.

eBay, which sells everything, is only makes ~9.5 billion dollars a year.

Real Estate 1.0:

Zillow & Trulia aggregated demand & then became lead-gen businesses for real estate agents. Was sustaining, not disruptive, innovation

Factors leading to more disruptive companies (Zillow change included!)

1- New tech
2- More capital
3- On-demand expectations

One reason real-estate hasn't been optimized to date, unlike, say, ride-sharing w/ Lyft & Uber, is that people buy houses every ten years, vs taking Lyft/Uber multiple times a day.

But it's also the single most important & costly transaction in most people's lives.

To bring this back full-circle, many people struggle to move move b/c they can't buy a new house until they sell their old house out of cash constraints.

The easier we make it to sell & buy homes, the more we can reduce artificial barriers to income mobility.

/FIN

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