The evolution of home ownership is happening. The question is, are builders ready to show up and compete in the changing landscape?
A lot of high-level trends are being incorporated in builder communities, which isn’t a new occurrence. However, the technology piece benefiting the consumer and how startups are disrupting the industry does need to be discussed and in greater depth.
Builders that rely on outdated selling methods won’t have the innovation arm required to compete with nimble and heavily-backed PropTech startups. But that’s okay. Builders don’t need to compete per se, but they should leverage this technology to maintain or grow market share; acquire customers, service those customers in a modern way, reduce the build timeline and increase profit margins and to remain competitive.
Technology Threats to Home Builders
The new home building industry has not changed much in decades. While that means builders maintain the status quo, it isn’t necessarily good for business in the Internet of Things (IoT) era. Technology has infiltrated most other industries, but real estate is one of the last to innovate, consolidate systems, modernize processes and provide the customer with new ways of transacting that have less friction.
The biggest threat for builders is that innovation is coming from the outside. Because the building and selling processes within the new construction industry haven’t evolved much in decades, it’s a prime industry to be innovated by outside technology. The acceleration of PropTech startups and investor spending in the last few years indicates real estate has been targeted as the next industry for technology disruption.
Venture Capital firm Andreessen Horowitz (a16z) has an investment thesis that tech companies can conquer existing processes faster than established insiders can see and adopt technological opportunities. It’s a logical hypothesis based on what’s happened in other industries:
- Tesla and Google are poised to beat GM in autonomous cars.
- Amazon beat out Barnes and Noble along with other retailers in the online bookselling space.
- Netflix streaming service effectively ended Blockbuster.
Real estate tech is expanding at an unprecedented pace. There are new opportunities for homebuyers to obtain homeownership with companies such as Flyhomes, Point, Divvy and others who understand consumer needs and have made the real estate industry much more nimble.
Tech companies scale quickly and can leapfrog those with decades of industry experience because they have tunnel vision. Builders who are unable to see this run the risk of being replaced by outside companies that are changing the way the industry operates.
Technology Opportunities for Home Builders
When a threat is felt, avoidance is one strategy. In the case of PropTech, that’s a huge mistake for builders. It’s a mistake because the opportunities outweigh the threat.
One of the largest, most immediate opportunities lie in visualization technology, namely virtual reality (VR) and augmented reality (AR). In the new home industry and in resale, conversations about using visual technologies are now mainstream. These technologies give buyers an immersive experience while they consider and design the right home for their lifestyle. More immersion and a more accurate depiction of what finished designs look like eliminates the disconnect many buyers feel.
Visualization technology is destined to dramatically change and streamline new construction builds by eliminating hours upon hours in the sales cycle and time spent in design centers. This is a great time-saving step forward for builders and the technology should be embraced wholeheartedly.
Smart homes aren’t just a benefit for the people who live in them. Architects, developers and builders are beginning to realize the potential of data collection from smart features. The data provides valuable information for how homes can be built to be even more efficient than they already are. There’s even talk of AR making maintenance easier and faster than ever.
Advancing construction technologies are another gamechanger. Prefab is taking on a new meaning thanks to innovative building techniques. Not only is there software that allows everyone involved to track the prefab process, the use of prefab construction aids in streamlining the build process.
At one time 3D printing was conceived on a small scale, but that’s not the case today. Companies like ICON in Austin, TX recently proved that a 600-800-sqft home can be 3D printed and built for less than $4,000 in developing countries.
Investment is happening in real estate to make home sales increasingly frictionless, expedite closings and produce software with the intelligence to help consumers make better buying and selling decisions. These are all tools that can be used by developers and builders to make new home builds more desirable.
Like it or not, technology is updating and changing the cost of producing homes, which can be a benefit or the undoing of developers.
Technology Obligations of Home Builders
Today builders are obligated to embrace new technology to remain relevant. Why? Because it’s what their buyers want and have come to expect.
Earlier this year a16z’s general partner, Alex Rampell, gave a presentation that addressed this very topic. He explained why consumers have become accustomed to less friction and more transparency in many other industries thanks to new technology and software. Real estate isn’t one of those industries, but it will be soon. Software programs are being developed that are going to disrupt the buying process to give home buyers what they want—an easier, less time-intensive experience where they have more control.
Buyers that want a new home will still need a builder. But how they go about discovering and exploring plans, builders and communities, and personalizing and purchasing a home will change. Builders that understand this can place themselves at the forefront of the change to capture a larger share of the market and improve the experience for their clients.
PropTech insiders like Matt Clementson, the Global Portfolio Manager for Visualisation Services at IBI Group, believe some innovations such as VR will soon become the norm for consumers. In just a year or two, builders are likely to hear more buyers requesting VR experiences. Already over 14% of buyers have used augmented reality during a home search. That means builders should begin incorporating the technology and building platforms now to meet the client demand that’s growing stronger.
Consumer behavior is also changing in terms of expecting on demand actions and personalization. This not only applies to purchasing low-cost products like shoes, but to cars and homes. More and more buyers are open to the idea of designing and purchasing homes directly online from anywhere.
Unless builders leverage technology to foster new ways to connect, transact, create and update the sales processes, they’ll lose consumers who are increasingly more tech-savvy. Any company that wants to compete and remain viable in the future will have to not only embrace technology, but completely adjust the culture of their company to include innovation, change and continuous education.
PropTech is in an accelerated cycle of development and growth. Some of it aims to aid real estate professionals, but some companies aspire to displace incumbents. New, tech-focused leaders will rise and the old guard will fall. This should shake builders into action.
As new innovations and startups disrupt the real estate industry’s traditions and norms, the consumer will reap the benefits with easier access to data, information and buying power while saving time. Builders who are adapting and transitioning with technology will get stronger by gaining greater market share.
To survive and thrive, builders will need to create strategic technology partnerships outside of their own companies to stay relevant, meet consumers technology needs and further advance their businesses. myHouseby is working towards transforming new home construction in the same way Google, Uber, Lyft and Tesla are transforming transportation. With this research and development, transitioning into a technologically innovative builder is more intuitive and less disruptive.