Housing: A tale of two markets
Red-hot housing exposes a growing divide between buyers and builders.
Technology has given buyers access to listing information as never before. Zillow, Houzer and a host of broker portals enable house hunters to use their phones and laptops to scope out properties across the country, complete with room-by-room views, detailed neighborhood/school district information, pricing data and, on some sites, the ability to place an offer. Also, thanks to online financing, buyers can be pre-approved for a mortgage loan in a matter of days. The process has become so simple and abundantly supported by data and artificial intelligence that institutional investors have joined the surge, taking advantage of price inefficiencies in desirable and up-and-coming areas to snap up undervalued properties. So, what was once a static process that required making appointments and visiting homes, one-by-one, has evolved into a convenient, virtual experience that enables buyers to take hundreds of home tours, compare prices and place offers—all in single day.
It’s a different story on the supply side. Homebuilders have made progress in productivity over the years but nothing close to what technology has done for buyers. Building homes remains labor intensive, with volatile supply chains, unpredictable material prices and long lead times, not to mention ever-changing local zoning laws and building code requirements. All these factors have exacerbated the disparity between buyers and builders.
There is a silver lining and one that has held true throughout history: Growing shortages and price increases eventually incentivize new productivity innovations. That process is well underway in home building. From prefabricated modular frames and bricks made of construction debris to engineered wood products and foam core structure sandwich panels for walls and roofs, the construction industry continues to develop materials and processes that are cheaper, stronger, labor-saving and much more energy efficient. This year, a New York home builder put the first 3D-printed home in the U.S. on the market. The company is rapidly expanding with the goal to build homes in half the time and for half the price.
Once again, it’s a case of a technological disruption—in this case online home buying—that will be solved by technology. It’s only a matter of time.