I guess when it comes to residential real estate, I’ve always been a Jeffersonian of sorts.
I idealize a market of yeoman practitioners — small, neighborhood farmers, if you will — who keep real estate gloriously fragmented
The ideal is partly reality. Our industry remains something of a holdout in this way, a place slightly beyond the reach of the Hamiltonian vision to which our country and economy have hewed.
Residential real estate has been mom-and-pop territory, and also, less admirably, an old boys club.
That began to change (the mom-and-pop part, at least) in the 1990s, when private equity money found an opportunity in stitching together some of the franchise brands that emerged in the 1970s.
But that was child’s play relative to the kind of money being thrown around today.
I think we’ve become a little numb to this. The announcements just keep coming. A hundred million here, two hundred million there.
Just this week:
Ribbon, one of several “cash offer” startups, raised another $150 million.
Pacaso, the second home co-ownership company that went from idea to “unicorn” status in just 5 months, raised another $125 million.
It almost makes you forget about the $250 million that went into Reali the week before, or the $363 million raised by HomeLight the week before that.
A river of cash is spreading across the real estate landscape at the very same time the yeoman farmers are enjoying a once-in-a-century bumper crop.
Everyone’s fat, happy… and not feeling the full effect of what’s happening.
When the market turns, and it will, the force of the change already underway will register its impact.
Scarcity has a way of concentrating the mind.
At this inflection point, the foundation for rapid change will have already been laid, and a new kind of industry will be framed up quickly — an industry with fewer yeomen and more money men.
Is this a good thing?
You might expect me to say no, it is not; that VCs deploying the wealth of institutions and the ultra-rich should not shape real estate; that the little guys and gals should be a goal unto themselves; that the concentration of power in the business of homes is evil.
Institutional investors turning single-family homes into rentals? Yeah, I think that’s gross.
But big money being used as a catalyst for change in the way ordinary people buy and sell homes? I think it’s a net positive.
Because, look, my “Jeffersonian” real estate ideal is just that, an ideal. Or maybe, more accurately, a myth. One that played out a long time ago. 1.6 million little farmers tilling the soil have exhausted it.
A reset will be healthy.
None of this is zero-sum anyway. A good portion of the investment dollars going into the change-making companies (including all those mentioned above), rely, and will continue to rely, on partnerships with real estate agents and brokers.
Some of them.
So let the river of cash run.
Some will get swept out to sea.
Those who remain will stand on more fertile ground.