The Rose Garden Massacre
New technologies are driving down costs for consumers and businesses across finance, energy, and healthcare.
The transactional costs (friction) of buying or selling a home have been a pain point for a long time. It’s an area that’s ripe for disruption. However, these frictional costs are a goldmine for the real estate industry that has remained by the incumbent players.
Real estate agents, mortgage brokers, and title insurers simply have no incentive to drive down costs for the consumer, but capitalism and new business models will move in where there is an opportunity for margin arbitrage.
By harnessing technology across their online real estate platforms, vertically-integrated fintech companies are learning to monetize hundreds of millions of captive monthly active users, helping consumers simplify the real estate process from start to finish while driving down the frictional costs associated with housing transactions.
With $100+ billion in net transaction fees in 2020 going to agents, brokers, and insurers, online real estate platforms stand to benefit as they eat into these transactional sales by lowering costs and taking market share.
By 2024, FMT estimates that real estate transactions will scale to $175+ billion in total net transaction fees.
Vertically-integrated online real estate platforms could capture $200+ billion in market value should they continue to take market share.
Online real estate companies appear undervalued compared to software-as-a-service (SaaS) business models or other Internet platforms. Most online real estate platforms sell at a fraction of the public market multiples to these areas.
The future simply looks stellar for online real estate companies harnessing the power of technology and driving down costs for the consumer. Knowledge workers are continuing to shift to working from anywhere and political and tax migrations continue unabated.
Meanwhile, the Federal Reserve has interest rates back to zero-bound, where they will have to try to keep them for eternity while they also monetize U.S. deficits.
Housing is an okay place to try to beat the rapid monetary inflation that has been underway, providing another catalyst for online real estate platforms in the years ahead.
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