Emerging Trends: The Future of Real Estate

One of the largest markets in the world is real estate and like everywhere else in our economy startups are innovating and disrupting it, albeit at a much slower pace than other sectors. So called iBuyer companies like OpenDoor and Offerpad have raised huge sums of capital to digitize, and speed up the home buying and selling process using algorithms so that buying a home becomes like buying any product on Amazon.

These trends have gotten me thinking more about what software eating real estate will mean for the market. There are a number of parallels here with public equities and how they digitized over the last 40 years.

The most obvious is that real estate will become a more efficient asset class, and a more liquid one. Home prices will fluctuate up and down in value faster as deals are able to close more quickly and comps update faster. To use a public equity term, price discovery will become faster and more accurate. Most home closings take 4-6 weeks. I could see that dropping to an average of 2-3 weeks as everything from the financing approval to title searches, etc. become more automated. As real estate becomes more liquid there will likely be a premium in prices as people are easily able to trade in and out of homes faster and with less friction.

Another change we are likely to see is transaction costs will steadily decrease. Buying and selling a home is expensive in this day and age. Everything from closing attorney fees to especially agent commissions drop as pieces of the transaction are more automated and less reliant on people. The real estate agent profession will become a lot less lucrative in the coming years and we are already starting to see that with both buyer and seller agents lowering their fees in many markets.

All of this won’t happen in the short term but over the next 2 decades buying and selling a home will become a lot easier for the consumer.