Tech for Real Estate Gets Investor Dollars
The idea that consumers are changing is not new. Other industries have been “disrupted” by technology, which has led to major shifts in consumer behavior. What is different for builders, however, is the way in which consumers are changing along with property technology (PropTech) offerings.
When we talk about consumer behavior in new construction, the conversation is often associated with interior design trends, materials or floor plan layouts. Rarely does the discussion involve the buying and selling process and how the outdated process is out of touch with consumer behavior and expectations today.
It’s time to have that conversation.
One way to gauge the growth of an industry or business sector is to look at recent investments. Investors always go where they think the money is or believe there’s an opportunity. Right now, tech for real estate is a significant focus for investors as the industry has been left largely unchanged for decades in a rapidly changing and fast-paced technological world.
Changing Consumer Behavior is Streamlining the New Build Transaction Process
As technology brings more things online, consumer behaviors are changing to anticipate and expect easier, faster digital solutions. For some time, consumers have accepted time-consuming real estate transactions because there was no other option, but that doesn’t mean they liked it. Now that new innovative platforms like myHouseby exist, consumer demand has turned towards a frictionless, single marketplace where buyers can discover, personalize and transact to purchase a home.
The success of PropTech companies like Opendoor is proof that consumer preference is shifting in favor of this simplified model. From here on out, builders can expect that consumers will play an increasingly influential role in consolidating transactions into a single technology platform.
That’s not to say technology is a replacement for the humans involved in the transaction process. Instead, it should be seen as a tool that can be used to accelerate and enhance transactions. These streamlined platforms can connect builders with more buyers while lightening the workload for staff. The consumer is given more control in the early phases so that less direct involvement is needed. By the time the builder or developer is interacting with a buyer, they have a firm idea of what they want in a home and are ready to move forward with the purchase.
Pre-launch startup myHouseby recently tested these consumer behaviors in the new home construction industry. To test their initial concept, the myHouseby team built a temporary prototype site offering 14 new construction homes using a single platform. The platform allowed homebuyers to select their floor plan, personalize their home and submit their plans for building. All 14 homes sold using this test platform, and buyers prepared their home designs between 1 to 14 days, minimizing the plan and design selection time. This prototype test validated that the use of technology to streamline the transaction process is beneficial for both consumers and builders.
Consumer Behavior is Changing How Homes Are Purchased
New home builders aren’t the only ones bracing themselves for tech disruption. Lending institutions, another industry closely tied to construction, is also in the midst of significant change.
Technologically advanced financial products have already affected consumer behavior in profound ways. Today, consumers rarely visit a bank or carry around cash. Instead, they’re managing their credit, savings and checking accounts online using tools rather than a bank teller.
Consumers have become comfortable with online banking to the point that an increasing number of people are venturing into cloud-based lending. Lender products such as Blend, Roostify and Encompass Consumer Connect are evidence that consumers are fully engaged and prefer the ease of online management.
Forward-thinking lenders aren’t resistant to the change. They’ve quickly learned there are significant benefits to tech-powered online financial products. One of those benefits is advanced analytics that can be used to identify and bridge gaps between businesses and consumers. Many companies are getting much better at understanding customers through analytics and are using data-derived insights to design and improve the customer experience.
Such capabilities help lenders improve their value proposition despite disruption. The expertise of loan officers is still in demand, but technology is helping lenders understand how to connect with consumers and deliver information more efficiently.
Many lending industry insiders see this as an essential step for continued existence within the changing transaction process. And more changes are sure to come now that tech giants like Zillow have moved into the lending sphere by purchasing their own mortgage companies. PropTech startups are also perpetuating the iBuyer movement, which has caught the attention of national brokerages like Coldwell Banker. Right now iBuyer programs are offered in a limited number of markets, but they’re expanding rapidly because sellers like the idea of a simple closing within a matter of days, not months.
Changing the Mindset of the Home Construction Industry
As a home construction company the most important question to ask in terms of new technology is, how does this affect the consumer?
If it affects the consumer in a positive way, be it time saved, more convenience or lower cost, then the industry must adapt to incorporate the technology. Those who don’t embrace and adopt technology run the risk of being out of business in the not too distant future – just as Kodak or Blockbuster who lost their hold in industries they once innovated.
Looking at PropTech and changing consumer behavior solely as a risk factor means builders will miss the opportunities that exist. Industry leaders that adopt new technology, focus on customer first experiences and move quickly have the greatest opportunity to take market share from their lagging competitors who move too slowly or don’t move at all.
Those advanced, forward-thinking builders and companies who anticipate and embrace these changes will most likely endure as the industry evolves. Consumer-led growth leaders will find ways to take advantage of the opportunity that comes from disruption. They won’t be inactive bystanders. They’ll take on a mindset attuned to perpetual change that allows them to shape the industry’s long-term direction.
Any home building 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 companies to include innovation and continuous education. The organization has to be agile and respond to change rapidly through acquisitions and investments. Creating a corporate mindset that’s aware of and open to technological change isn’t easy, but it is necessary.
These industry-wide changes are needed because consumer preferences have changed. Disruption will push many companies out of their comfort zone, but ultimately those that adapt will play a role in reshaping the new construction industry rather than getting phased out.