5 reasons why home buying will go online
Can you imagine being able to buy a house online?
Today, it seems like all forms of buying and selling have moved online. We have seen that the current pandemic has accelerated the use of online mediums and marketplaces.
While geared mainly towards distressed properties, sites like auction.com and hubzu.com allow you to buy a property in an auction style format and complete much of the home transaction online. Although these sites are geared towards flip investors, the process and technology can be applied to the consumer home buyer.
In 2019, Amazon launched TurnKey in partnership with Realogy, who own household brokerage name brands like Coldwell Banker, Gibson Sotheby’s and Century 21. With TurnKey, Amazon and Realogy hoped to match potential home buyers with local agents using the Amazon portal. Customers who purchased a home with that agent would receive up to $5,000 in Amazon Home Services gift cards and smart home products like Amazon's Echo Dot, Ring Doorbells, Fire TV along with installation services. Due to covid-19 reasons, this program was discontinued in early 2020. Given Amazon’s 215 million monthly visitors (Statista), it could position itself to be one of the largest lead sources out there.
Today, other companies like Zillow, Redfin and Opendoor allow you to start the home buying and selling process online and are investing heavily to simplify the entire experience. Opendoor recently announced plans to go SPAC IPO, further validating their investments in improving the overall experience to consumers.
Today, online home buying accounts for <1% of the total market in the U.S. So, for the average consumer, home buying remains to be how our parents and grandparents bought a home.
Here are 5 reasons why home buying will go online:
1. Consumers demand less complexity; they just want to push a button
Many have been conditioned to getting what's needed on-demand. This has become ubiquitous with apps like Uber to hail rides when they need to go somewhere and Grubhub to order food when hunger hits. We see that consumers want things to happen conveniently and fast. Real estate however has been slow to adopt this behavioral shift. Today's home buying experience is offline, slow, and inconvenient and not in tune with what consumers want.
2. Buyers are starting their search online
Today 9 out of 10 home buyers start their search online. Zillow and others have made it really simple to search and find homes. Once a buyer finds a home, they can easily schedule tours or connect with a local agent online. More interestingly, we see 7 out of 10 home buyers finding the home they want to buy through their own search efforts. Home buyers are self-serving now more than ever.
3. Next generation of home buyers: Millennials
Today, the largest buyer cohort is made of millennials. This is roughly 50% of buyers in the U.S. (National Association of Realtors). That's 75 million digitally-native Americans entering the housing market everyday. This group of individuals is starting families or entering new life stages. They will indeed require convenience and speed, which is lacking in the home buying experience today.
4. Inefficiency and incentives misaligned
With so many hand-offs and silos in the traditional home buying process, the process is more in place for all the third parties involved than the buyer themselves. No one is truly working on behalf of the consumer. This has led to incentive misalignments which in turn has led to additional costs of which the consumer has unfortunately had to bear.
5. Liquidity and shorter turn arounds
According to Realtor.com, in September 2020, the nation-wide average for a home to sell is