All the ingredients are there for a major shift in how new homes are marketed, constructed and sold.
A huge market ($1.5T+, roughly 3x total ecommerce market!), a broken customer experience, and legacy operations that share more with the paper and telephone 1980s than today’s world of instant digital communication and automation. Digital technology is coming for residential real estate.
The venture capital industry knows this. Global proptech funding has grown from under $250M in 2012 to more than $5B in 2018. Just in July of 2019, $2B of new funding was announced in proptech ventures.
Global Venture Capital Investment in Proptech
$ in Billions
Source: CBinsights, PWC
Much of that is concentrated in big bets in the resale sector – Opendoor, Compass (both at $1B+ in funding). These are just two companies challenging some fundamental orthodoxies of how homes should be bought, sold, and discovered (and who makes money…). There are hundreds of others.
The message is striking. There is massive opportunity to change how an antiquated industry works. And all that investment is a (well-informed) bet that customers are going to follow these innovations with dollars.
A Wake-up Call for New Homes
Few of those investments (yet) have focused on changing how the world of developers and production homebuilders works. And people still build new homes every day. Where’s the urgency for homebuilders and developers?
The urgency should be coming from two directions: 1) a sober look at the customer experience, and 2) how developers and production home builders operate.
Frankly, the customer experience is broken. Between the labyrinth of websites you have to navigate to simply find a community and home, the immense number of stock emails you are bound to receive after filling out 10+ paper comment cards (most of them with a misspelled name), and the long, intimidating, and crushingly complex buying process, the fact that people still build homes is more of a testament to people’s endurance than anything the industry is doing right.
Operations aren’t much better (and, in fact, drive much of that experience). From paper maps glued to walls, to manual scheduling, to data collection and management that is 30 years behind, much of the industry is leaving time, money, and focus on the table.
These are the openings that technology can exploit – a radically rethought customer experience, enabled by modern operations. Change is coming – either by new players or existing stakeholders. And the opportunity is even bigger than better margin or faster sales cycle or happier customers – it’s a fundamental shift in the size of the industry and how people live.
How Digital Technology is Changing the New Home Industry
Digital Technology is coming for real estate and is going to upend every part of the new home and master planned community industry. We think about the opportunity in three major areas:
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- Customer Experience – simplify, streamline, digitize. Change how customers interact and buy, and improve how they live in communities.
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- Core Operations – data, automation, culture. Disrupt legacy ways of operating, automate repetitive tasks, and use data to guide decision making.
- Business Models – beyond the buy. Enable new ways of making money beyond selling homes and lots and extend the impact beyond the initial plan and build.